31st May 2005 09:23
Sierra Leone Diamond Company Ld31 May 2005 For immediate release 31 May 2005 SIERRA LEONE DIAMOND COMPANY LIMITED ( "SLDC" or the "Company" ) Quarterly Results For the period ended 31 March 2005 And Operational Review Sierra Leone Diamond Company Limited (AIM: SLD) is pleased to provide itsquarterly results for the period ending 31 March 2005. Highlights for the period ended 31 March 2005 are: • US$ 37.2 million raised through an initial public offering in London. • Company admitted to the AIM market of the London Stock Exchange • Cash in hand US$ 32.3 million, which is budgeted to cover exploration and corporate expenses to 31 December 2006. • Ilmenite soil anomaly identified in the Kamakwie area in the Northwest Block as a result of the HRAM surveys, subsequent geochemical surveys and auger drilling that could represent a bedrock source of diamonds. • Diamonds recovered from sample pits associated with the closely spaced reverse circulation drilling of paleo-channels in alluvial gravels in the Sewa River Block are similar to those recovered elsewhere in Sierra Leone. • Exploration costs of US$ 2.5 million incurred during Q1 2005. • HRAM surveys have now been completed over 85% of the licence areas. • Regional geochemical sampling and geological/prospecting activities are proceeding as scheduled. • A modern Geographic Information System has been established to record all historic and modern data as received. • Net loss for the quarter is recorded as US$ 0.9 million (2004: US$ 0.3 million). David Gadd-Claxton, President and Chief Executive Officer, commented that: "On arecent visit to Sierra Leone, I was able to confirm that the long-term regionalexploration program is making excellent progress, and we expect to see resultson time and within budget. A review of the program shows that good results arebeing obtained, and that our budget to the end of 2006 is on track." "Results to date in the Kamkawie area are very encouraging, and we will continueour extensive exploration on our other licences to develop further hard rockdiamond targets." "The Company's shorter term strategy is to develop a cash positive operationfrom its alluvial licences on the Sewa River. Diamonds are being recovered fromsample pits associated with the reverse circulation drill samples, similar tothose recovered from other areas in Sierra Leone. This gives me confidence thatthe potential of these areas is excellent. We look forward to being able totreat larger samples using the DMS plant in the near future." "With 36,364 km2 of licence areas (representing over 50% of the total area ofSierra Leone), and with a well-funded program, SLDC is well placed to achieveits objectives. I am delighted with the progress being made in Sierra Leone,and with the quality and commitment of our exploration team." For further information please contact: Sierra Leone Diamond Company Limited 44 (0)20 7917 6245David Gadd-Claxton, PresidentAllan Dolan, Vice-ChairmanMartin Dunham, Chief Financial Officer Buchanan Communications 44 (0)20 7466 5000Bobby MorseBenn Willey SLDC is a diamond exploration company wholly focused on Sierra Leone. It holdstwenty exploration and prospecting licences over 36,364 km2. The primary targetis diamond-bearing kimberlite pipes. Secondary objectives include alluvialdiamond production, as well as exploration for gold, iron ore, bauxite, rutile,rare earths and other minerals. SLDC is exploring the mineral potential of thelicence areas through a long-term, systematic exploration programme beingcarried out by a dedicated team of geologists and support staff. Operational Review Exploration Activities The Kamakwie area is located in the Company's Northwest Block and contains therecently discovered diamond fields where several thousand artisinal miners areat work recovering diamonds. The Company's systematic exploration program hassuccessfully located and identified a discrete, linear ilmenite soil anomaly inclose proximity to the alluvial diamond mining activity. Recent shallow augerdrilling by SLDC has intersected very weathered material that containssignificant quantities of unweathered, angular picro-ilmenite. This is the first indication of a potential bedrock source of diamonds for thealluvial mining in an area with no previous record of primary kimberlites. These results are very encouraging, and the next phase of exploration will aimat extending the strike length of the ilmenite soil anomaly; pitting to test theareas with anomalous ilmenite outlined in the auger drilling; to be followed upby test drilling of this exciting target. Sewa Block Alluvial Prospecting Closely spaced reverse circulation drilling is being used to explorepaleo-channels in the alluvial gravel deposits along the Sewa River. This workcontinues to build a better understanding of the sedimentary processes that haveled to diamond deposition. The drilling program is designed to demarcatealluvial mineral deposits from which larger samples can be taken for testing ina Dense Media Separation diamond recovery plant that will be commissioned by theend of June 2005. Sierra Leone Diamond Company Limited Consolidated Balance Sheet As at 31 March 2005 (Stated in United States Dollars) March 31, 2005 December 31, 2004 (Unaudited) (Audited) AssetsCurrent assetsCash and cash equivalents $ 33,449,481 $ 2,692,087Accounts receivable 122,563 83,651Due from related parties (note 6) 101,029 98,995Prepaid expenses 18,666 4,000Note receivable (note 3) 21,000 30,000 33,712,739 2,908,733Deferred costs - 739,047Property and equipment (note 4) 3,237,482 2,929,859Mineral properties (note 5) 11,445,962 8,992,420 $ 48,396,183 $ 15,570,059 Liabilities and Shareholders' EquityCurrent liabilitiesAccounts payable and accrued liabilities $ 1,221,049 $ 1,390,645Due to related parties (note 6) 212,558 325,044 1,443,607 1,715,689 Shareholders' equityShare capital (note 7) 55,274,655 22,018,821Warrants (note 8) 586,804 186,804Contributed surplus (note 9) 472,760 147,297Cumulative translation adjustment (311,744) (311,744)Deficit (9,059,899) (8,186,808) 46,963,576 13,854,370 Commitments (note 5) $ 48,396,183 $ 15,570,059 On behalf of the Board: M Dunham Director A Dolan Director Sierra Leone Diamond Company Limited Consolidated Statement of Loss and Deficit (Stated in United States Dollars) Three months ended March 31 2005 2004 Revenue Interest $ 152,087 $ - ExpensesGeneral and administrative 284,487 129,198Professional and other 130,708 89,943Travel 71,886 52,654Depreciation 167,393 15,768Unrealized gain on foreign exchange 45,241 -Stock-based compensation (note 9) 325,463 - 1,024,178 287,563 Net loss for the period (873,091) (287,563)Deficit, beginning of period (8,186,808) (800,098)Deficit, end of period $ (9,059,899) $ (1,087,661) Loss per shareBasic and diluted (note 7) (0.01) (0.01) Sierra Leone Diamond Company Limited Consolidated Statements of Cash Flows (Stated in United States Dollars) Three months ended March 31 2005 2004 Cash provided by (used in)Operating activities:Net loss for the period $ (873,091) $ (287,563)Items not involving cashDepreciation 167,393 15,768Unrealized foreign exchange gain 45,241 -Stock-based compensation 325,463 - (334,994) (271,795) Changes in non-cash working capital (note 10) 30,983 12,257 (304,011) (259,538) Financing activities:Proceeds on note receivable 3,000 -(Repayment to) advance from related parties (108,520) 1,863,100Issuance of share capital 37,230,480 -Share issue costs (2,835,599) -Changes in non-cash working capital (note 10) (364,884) - 33,924,477 1,863,100 Investing activities: Purchase of capital assets (475,016) (941,617)Mineral property expenditures (2,453,542) (532,693)Changes in non-cash working capital (note 10) 110,727 - (2,817,831) (1,474,310) Unrealized foreign exchange gain (45,241) -Increase in cash 30,757,394 129,252Cash, beginning of period 2,692,087 4,529Cash, end of period $ 33,449,481 $ 133,781 Supplemental cash flow information Interest paid $ - $ - Sierra Leone Diamond Company Limited Notes to Consolidated Financial Statements (Stated in United States Dollars) 1. Future operations: Sierra Leone Diamond Company Limited (the "Company"), is engaged in the businessof exploring for, and if successful, ultimately producing, diamonds from itsmineral properties located in Sierra Leone. The Company's interests are comprised of 20 mineral licenses. A period of civilunrest in Sierra Leone from 1997 to 2003 impaired the Company's ability to carryon its exploration activities in the past. The Company recommenced operationsin Sierra Leone in January 2003. All of the Company's mineral licenses are atthe exploration stage. 2. Basis of Presentation: These unaudited interim consolidated financial statements have been prepared bymanagement in accordance with Canadian generally accepted accounting principlesand on a basis consistent with the audited December 31, 2004 consolidatedfinancial statements except certain disclosures have been condensed or omitted.Accordingly, these interim consolidated financial statements should be read inconjunction with the notes contained in the Company's audited December 31, 2004consolidated financial statements. Because a precise determination of manyassets and liabilities is dependent upon future events, the preparation ofperiodic financial statements necessarily involves the use of estimates andapproximations. Accordingly, actual results could differ from those estimates.The financial statements have, in management's opinion, been properly preparedusing careful judgment within reasonable limits of materiality and within theframework of the significant accounting policies. These consolidated financial statements include the accounts of the Company andits wholly owned subsidiaries Sierra Leone Diamond Company Ltd., SLDC ManagementLimited and SLDC Exploration Limited. The operating results for the three months ended March 31, 2005 may not beindicative of the results for the year ended December 31, 2005. Prior period comparative figures have been reclassified to conform to thepresentation used in the current period. 3. Note receivable: In December 2004, the Company advanced $30,000 to an employee by way of apromissory note. The principal amount of the note is repayable in equal monthlyinstallments of $3,000 beginning January 31, 2005. Interest is accrued at 5%per annum and is due on the final repayment date of October 31, 2005. The noteis secured by 55,000 common shares and 150,000 options of the Company registeredin the name of the borrower. 4. Property and equipment: March 31, 2005 Cost Accumulated Net depreciation Furniture and fixtures $ 107,703 $ 25,457 $ 82,246Leasehold improvements 371,778 9,562 362,216Computers and communication equipment 198,222 33,174 165,048Vehicles and heavy equipment 1,293,710 219,003 1,074,707 Exploration equipment 1,515,219 251,405 1,263,814Other equipment 330,850 41,399 289,451 $ 3,817,482 $ 580,000 $ 3,237,482 December 31, 2004 Cost Accumulated Net depreciation Furniture and fixtures $ 95,688 $ 21,444 $ 74,244Leasehold improvements 354,209 5,902 348,307 Computers and communication equipment 146,043 21,906 124,137Vehicles and heavy equipment 1,071,370 147,806 923,564 Exploration equipment 1,399,104 187,943 1,211,161 Other equipment 276,052 27,606 248,446 $ 3,342,466 $ 412,607 $ 2,929,859 5. Mineral properties: As at March 31, 2005, the Company held 20 exploration and prospecting licensesin Sierra Leone. Pursuant to the terms of all licenses, the Company is requiredto pay total annual license fees of approximately $440,980. In addition, thelicenses require the Company to meet certain conditions including incurringexploration expenditures in accordance with agreed budgets. All licenses may beextended at the discretion of the Ministry of Mineral Resources of Sierra Leoneto extend the time frame to perform the commitments, if required, to effectivelycomplete the proposed work programs. With respect to 12 of the licenses, the Company is required to incur qualifyingexpenditures totaling $10,610,000 prior to various dates between Feb 1, 2005 andJune 1 2005. Based on the outcome of previous expenditures, the Company mayelect to proceed with the remaining exploration expenditures in accordance withthe agreed budgets. As at March 31, 2005, the Company had incurredapproximately $7,237,428 of qualifying expenditures on these 12 licenses. With respect to seven of the licenses, the Company is required to incur Phase 1qualifying expenditures of $1,442,000 prior to various dates between March 23,2005 and May 19, 2005 and additional qualifying expenditures of $565,000 priorto various dates between March 23, 2006 and May 19, 2006. As at March 31, 2005,the Company had incurred approximately $1,700,410 of Phase I qualifyingexpenditures on the seven new licenses. With respect to the remaining license, the Company is required to incurqualifying expenditures of $1,660,000 prior to October 8, 2005 and additionalqualifying expenditures of $325,000 prior to October 8, 2006. As at March 31,2005, the Company had incurred approximately $719,868 of qualifying expenditureson the new license. The Company's mineral licenses are as follows: December 31 Additions March 31 (Allocations) 2004 2005North East BlockAcquisition costs $ 835,576 $ 57,878 $ 893,454Exploration costs 5,125,418 1,617,341 6,742,759Sewa River Block Acquisition costs 385,682 67,622 453,304Exploration costs 641,376 366,648 1,008,024North West Block Acquisition costs 99,644 - 99,644Exploration costs 935,896 81,581 1,017,477Gori Hills Block Acquisition costs 51,633 31,492 83,125Exploration costs 80,607 178,971 259,578Coastal BlockAcquisition costs 94,183 - 94,183Exploration costs 682,920 36,948 719,868Joint Venture PropertiesAcquisition costs 59,485 - 59,485Exploration costs - 15,061 15,061 $ 8,992,420 $ 2,453,542 $ 11,445,962 6. Due to related parties: (a) As at March 31, 2005, the Company had a receivable from a company (the "related company") related to an officer and director of the Company in theamount of $101,029 (December 31, 2004 - $98,995). These advances arenon-interest bearing and have no fixed terms of repayment. (b) As at March 31, 2005, the Company had amounts due to other relatedparties in the amount of $212,559 (December 31, 2004 - $325,044). These relatedparties consist of shareholders, officers and directors of the Company andcompanies controlled or significantly influenced by shareholders and officers ofthe Company. The amounts are non-interest bearing, unsecured and have no fixedterms of repayment. 7. Share capital: a) Issued: Common Shares Number Amount of SharesBalance, December 31, 2004 70,063,242 $ 22,018,821Private placement for cash (i) 26,700,000 37,230,480Share issue costs - (3,974,646)Balance, December 31, 2004 96,763,242 $ 55,274,655 (i) On February 10, 2005, the Company completed an equity issue of26,700,000 common shares at U.S.$1.39 (75 pence) for total gross proceeds ofU.S.$37,230,480 (£20,025,000). 1,335,000 broker's warrants were issued ascommission on the equity issue and have been included in share issue costs at anascribed value of $400,000 (see note 8). The warrants are exercisable at U.S.$1.41 (75 pence, converted at the March 31, 2005 exchange rate) and expire inAugust 2006. b) Options On February 10, 2005, the Company granted 250,000 share purchase optionsexercisable in U.K. pence to an employee at an exercise price of U.S.$1.41 (75pence) per share, expiring December 2009. The options vest upon certainperformance milestones being met, none of which had been met as at March 31,2005. The fair value of these options has not been estimated as the vestingperiod is not determinable. On March 30, 2005, the Company granted 2,000,000 share purchase optionsexercisable in U.K. pence to two employees at an exercise price of U.S.$1.41 (75pence) per share, expiring March 2010. The options vest as to one-third on thefirst, second and third year anniversaries of the grant date. The fair value ofthese options has been estimated at $624,580. The related stock-basedcompensation expense for the three months ended March 31, 2005, is notsignificant and as a result, has not been recorded. The fair value of options granted during the period was estimated using theBlack-Scholes fair value pricing model with the following significantassumptions: Expected life (years) 5.0 Risk-free interest rate 3.5% Volatility 40% Weighted average fair value per option $0.31 For the purposes of recording stock-based compensation, the estimated fair valueof the options is recognized over the vesting period of the option. 7. Share capital (continued): b) Options (continued): The following summarizes information about stock options outstanding as at March31, 2005: Number of Weighted-Average Options Exercise Price U.S.$ Pence Opening 6,975,000 0.94 (1) 52Forfeited (150,000) 0.94 50Granted 2,250,000 1.41 75Closing 9,075,000 1.04 58 (1) As the options are exercisable in Pence, the opening U.S.$ price has beenupdated to reflect the conversion to U.S.$ using the exchange rate as at theMarch 31, 2005 balance sheet date. Exercise price Number of options Weighted average Number exercise price Weighted average remaining contractual U.S.$ Pence outstanding life (years) U.S.$ Pence exercisable 0.94 50 6,325,000 4.07 0.94 50 - 1.41 75 2,750,000 4.93 1.41 75 - 9,075,000 4.33 1.04 58 - c) Per share amounts Per common share calculations are based on 84,599,909 (2004 - 23,162,912) basicweighted- average number of common shares outstanding during the year. Incomputing diluted per share amounts, all of the Company's outstanding optionsand warrants have been excluded as they are anti-dilutive. 8. Warrants: The following tables summarize information about common share purchase warrantsexercisable as at March 31, 2005: Weighted Average Exercise Price Number U.S. CAD Pence Fair value Balance, December 31, 2004 13,200,001 $ 0.91 (1) $ 1.10 - $ 186,804Issued February 2005 1,335,000 1.41 - 75 400,000Balance, March 31, 2005 14,535,001 $ 0.95 $ 1.10 75 $ 586,804 (1) As the opening balance of options is exercisable in Canadian dollars, theopening U.S.$ price has been updated to reflect the conversion to U.S.$ usingthe exchange rate as at the March 31, 2005 balance sheet date. 8. Warrants (continued): The fair value of warrants issued, measured on the date of issue, was determinedusing the Black-Scholes fair value pricing model with the following weightedaverage assumptions: Expected life (years) 1.5 Risk-free interest rate 3.5% Volatility 40% Weighted average fair value per warrant $0.30 The following summarizes information about common share purchase warrantsoutstanding as at March 31, 2005: Exercise Price Number Weighted Average Weighted Average Remaining Exercise Price CAD Pence Outstanding and Contractual Life U.S. CAD Pence Exercisable (years) U.S. $ 1.03 $ 1.25 9,250,001 0.84 $ 1.03 1.25 - $ 0.62 $ 0.75 3,950,000 1.25 0.62 0.75 - $1.41 - 75 1,335,000 1.36 1.41 - 75 14,535,001 1.00 $ 0.95 1.10 75 9. Contributed surplus: Contributed surplus relates to the estimated fair value of options recognized asstock-based compensation over the vesting period of each option grant. March 31 2005 Opening $ 147,297Options granted in 2004 327,052Forfeiture of options granted in 2003 (1,589) $ 472,760 10. Changes in non-cash working capital: Three months ended March 31 2005 2004 Accounts receivable $ (38,912) $ 2,203Prepaid expenses (14,666) -Accounts payable and accrued liabilities (169,596) 10,054 $ (223,174) $ 12,257 10. Changes in non-cash working capital (continued): The change in non-cash working capital relates to the following activities: Three months ended March 31 2005 2004 Operating $ 30,983 $ 12,257Financing (364,884) -Investing 110,727 - $ (223,174) $ 12,257 11. Related party transactions: (a) During the three months ended March 31, 2005, the Company incurred$12,239 (three months ended March 31, 2004 - $nil) for administration servicesby a company related to an officer and director of the Company. (b) During the three months ended March 31, 2005, the Company incurred$48,095 (three months ended March 31, 2004 - $3,418) for financial consultingservices by a shareholder of the Company. 12. Segmented information: The Company's activities are conducted in following geographic segments. Allactivities relate to the exploration of diamonds from its mineral properties. Sierra Leone Bermuda Great Britain Total $ $ $ $ Three months ended March 31, 2005 Revenue Interest 447 151,121 519 152,087ExpensesGeneral and administrative 94,184 182,646 7,657 284,487Professional 8,017 97,765 24,926 130,708Travel 35,841 16,907 19,138 71,886Depreciation 166,366 583 444 167,393Foreign exchange 1,052 45,428 (1,239) 45,241Stock-based compensation - 325,463 - 325,463Loss for the period (305,013) (517,671) (50,407) (873,091)Capital expenditures 2,924,174 - 4,384 2,928,558Total assets 15,067,703 33,302,001 26,479 48,396,183Three months ended March 31, 2004Expenses 133,771 150,445 3,347 287,563Loss for the period (133,771) (150,445) (3,347) (287,563)Capital expenditures 1,466,930 2,997 4,383 1,474,310Total assets 6,505,820 2,900 4,219 6,512,939 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
AMI.L