Aim-listed ldiamond producer BlueRock Diamonds’ good performance during the first quarter of 2020 has been overshadowed by the ongoing Covid-19 pandemic which has halted operations.
The group, which owns and operates the Kareevlei diamond mine, in Kimberley, sold 3 267 ct during the first three months of the year, a surge of 77% compared with the 1 847 ct sold in the comparative quarter last year.
The average price per carat, however, decreased 12% from $371/ct in the first quarter of 2019 to $327/ct in the quarter under review.
“Diamond prices up to mid-February were in line with expectations given the lack of high-value diamonds in the period. The company continued to recover high quality 1 ct to 5 ct diamonds,” said BlueRock executive chairperson Mike Houston.
The mine produced 2 503 ct during the first quarter, up 76% from the prior comparative period, while tons sorted in the first quarter increased 78% to 74 011 t.
"This update is overshadowed by the impact of the Covid-19 pandemic that has been sweeping the world and, as announced on March 24, has resulted in the temporary closure of Kareevlei,” he added.
“Before we were faced with the pandemic, BlueRock was performing well, with the results for the first quarter significantly better than the previous year, despite having over 18 inches of rainfall and the loss of eight days production owing to the South African lockdown.”
The operations will remain on care and maintenance until the market recovers sufficiently for them to be cashflow positive on a monthly basis.
A small essential team has been retained on site to ensure that the plant and machinery is kept in working order and can be brought into production at short notice, while agreements with suppliers have been deferred or are in discussion to defer, expansion plans have been put on hold, and executive and nonexecutive fees and salaries are reduced by an aggregate 35%.
In line with this, BlueRock has suspended its 2020 and 2021 financial year production guidance until the company is in a better position to quantify the full impact.
During the quarter under review, important mining was done on the development of the KV1 and KV2 combined pit, which required the movement of lower-grade near-surface material critical to the longer term mine plans.
“Additionally, our expansion project was progressing well, which started after our successful capital raise in February. This included the securing of key skills, design and planning, and the moving of the new Numovista plant to our site,” Houston said.
However, amid the uncertainty, both operationally and in the market, BlueRock has postponed any further work regarding these expansion plans.
There was a cash outflow in the first quarter of 2020 owing to capital investment in the expansion project and a working capital outflow caused by the lack of sales since February 2020.
“Despite best efforts to conserve cash, there will inevitably be a cost to the company for the period in which the operations are on care and maintenance,” Houston warned.
This is likely to have an impact on the speed at which the company can implement the expansion plans outlined in the announcement in February.
“We will endeavour to conserve as much of our cash resources as possible in order to restart operations strongly once the market has returned,” he assured.
As at March 31, the company had a cash balance of about £480 000 and a further £804 000 to be received in accordance with the terms of the Teichmann subscription.
Kareevlei has an on-surface stockpile of 30 000 t of run-of-mine and crushed material, which equates to about 15 days production, that will be used to enable a swift return to target production levels once the environment allows.
Further, it had 1 295 ct on hand as at March 24.
The company aims to put in place an arrangement to sell its diamonds through international tender houses, which it believes may start operating earlier than those in South Africa.
“The precise impact will not be known until after the restrictions imposed as a result of Covid-19 are lifted and the market starts to return to normal.
“The situation is extremely fluid at present and the board will continue to update the market as the situation develops,” he concluded.