25th Feb 2020 11:22
(Alliance News) - Shares in Firestone Diamonds PLC slumped Tuesday as the miner said it will be leaving the London Stock Exchange to try to cut costs.
Firestone has convened a meeting of shareholders, to be held on March 13 in London, to vote on the de-listing. Firestone, which has been on the London market since 1998, needs over 75% of voting shareholders to approve the motion for it to go ahead.
The shares were down 69% in London on Tuesday morning at 0.29 pence each. A year ago, they were at 2.63p, and in late 2016 shares were above 50p.
The company began mining at the Liqhobong diamond mine in Lesotho in 2016, but in 2017 "it became clear" it was not going to achieve the anticipated average value per carat.
As a result, the 75%-owned subsidiary operating the mine ran into problems paying back debt to South Africa's Absa Bank Ltd. A fundraise and debt restructuring occurred in 2017, including a standstill agreement lasting until mid-2019 during which Firestone's subsidiary only paid back interest on debt.
However, a weakening market for smaller diamonds meant the subsidiary ran into further problems paying the debt towards the end of 2019.
"The board still believes the diamond market has the potential to improve but that it will take longer than had been previously anticipated, and therefore everything possible needs to be done to ensure the company can survive the current downturn using its existing cash resources," said Firestone.
"In order to do so all costs and expenses have been reviewed critically including the costs associated with being listed. The directors have conducted a review of the benefits and challenges of maintaining the company's listing on AIM and after careful consideration, have concluded that it is no longer in the best interests of the company and its shareholders," it continued.
Firestone said the costs of being listed provide "minimal" benefit and can be better used elsewhere. Further, there is a lack of liquidity of shares due to bondholders owning 65% of its stock, and then two other shareholders owning another 18% combined.
In a separate statement, the company reported diamond recoveries of 138,000 carats in its financial second quarter ended December, down 31% from the first quarter. The grade was unchanged at 21 carats per hundred tonnes of ore.
Firestone sold USD9.7 million worth of diamonds during the quarter in two sales, down 8.5% quarterly. The average price in the second-quarter sales was 14% lower than the first quarter.
Firestone's operations were hit by power disruptions, which led to the processing plant being shut down for most of October. It then ran on generator power until the start of December, at a marginally lower capacity.
As a result of the lower second-quarter production, Firestone has cut guidance for its year ending June to recoveries between 720,000 carats and 750,000 carats, from 820,000 carats to 870,000 carats before. In financial 2019, recoveries were 829,458 carats.
Chief Executive Paul Bosma commented: "The unexpected power disruption had a devastating impact on production and revenue generation. The team however, did well to salvage the situation by procuring and installing generators from South Africa in record time to allow for operations to recommence.
"As a result of the power disruption, we have reduced our guidance for the year in respect of diamond recoveries and ore tonnes treated."
By George Collard; [email protected]
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