23rd Jun 2015 07:14
LONDON (Alliance News) - Firestone Diamonds PLC Tuesday said the Liqhobong mine development project will not begin producing on schedule and will cost more due to adverse weather and "increased overburden".
The Liqhobong mine in Lesotho was originally expected to begin production at the end of the first half, but this has now been pushed back to the fourth quarter of 2015. The project costs have also increased to around ZAR156 million due to "increased overburden and adverse weather conditions," however, the company said this is still within the budget of ZAR185.4 million.
The increased costs at Liqhobong will be funded from the project's surplus cash generated from realised foreign exchange gains, savings achieved on the grid power project and utilisation of the project's contingency reserves, it said in a statement.
At the end of May, a total of around ZAR830 million had been spent on the project.
"Despite adverse weather, increased overburden and the larger rocks encountered at site, the project continues to make good progress. We are also pleased to announce the grid power agreement with Storm Mountain Diamonds who have agreed to contribute half of the expenditure of the power project," said Chief Executive Stuart Brown.
The grid power agreement has significantly reduced Firestone's costs for Liqhobong. Under the agreement, Storm Mountain, which owns the neighbouring Kao mine, will share the power with Firestone.
As a result, the cost of the grid power project at Liqhobong has risen to ZAR189 million from ZAR165 million, but Storm Mountain will now contribute half of the total costs under the new agreement, saving Firestone around ZAR70.5 million in total, it said.
Firestone shares were down 2.2% to 33.50 pence per share on Tuesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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