16th Mar 2005 08:37
Dwyka Diamonds Limited16 March 2005 DIRECTORS' REPORT The Directors present their report for the half-year ended 31 December 2004. REVIEW AND RESULTS OF OPERATIONS Highlights • Industrial and mining division operations continue to produce positive gross profits (A$462,000 gross profit) • Rough diamond inventory of 4,111 carats at 14th March 2005 expected to be sold in March 2005 (including stones from Nooitgedacht, Blaauwbosch and Newlands) • Since October 2004 an average grade of 1.05 cpht has been achieved at Nooitgedacht. Last years improved average grade of 0.75 cpht at Nooitgedacht was maintained over the full half year period • New X-Ray diamond processing machine yields immediate positive results, with 5 Diamonds totalling over 3 carats recovered from five tonnes of grease room tailings • Dwyka enters into and subsequently extends option agreements to acquire kimberlite diamond mines in South Africa • Placement of 16.5 million shares at 26 pence (A$0.67) to raise net proceeds of £4.1 million (A$10.3 million) • Group cash on hand at the end of the half year A$13.1 million • Detailed follow-up of positive new targets revealed by Indian Reconnaissance Permit sampling program • Sampling at recently granted Orissa tenements, India, expected to commence during March 2005 • Drill core from Bosele exploration programme (South Africa) sent to Australia for analysis, results confirm volconoclastic crater facies has been sampled • Industrial division continues to experience strong demand South African Operations Dwyka's focus during the half-year has been to identify and analyse producing ornear production hard rock assets. During the half-year Dwyka entered into anoption agreement to purchase four hard rock diamond prospects, Blaauwbosch, NewElands, Newlands and West End. All of the four mines have historical productionbut were closed at varying times due to flooding, inappropriately appliedcapital, and inappropriate mining methods being utilised. Venmyn Rand and Resource Finance Associates have been retained to assist Dwykawith the evaluation of the prospectivity of the four projects. The period ofexclusivity, in which Dwyka may assess the performance and prospectivity of eachproject, as set out in the option period, has been extended until 31 March 2005. Mining and processing at two of the mines, Blaauwbosch and Newlands, have beenmonitored since late October 2004. This has involved measuring the tonnes minedfrom underground and the recovery grade achieved at the plant. Tailings arebeing processed separately to ascertain the relative grades and values of theunderground and tailings ore. Actual on-mine costs are also being measured. Bosele (Dwyka Diamonds 70%) The Bosele project is located near Barkly West in the Northern Cape Province ofSouth Africa, approximately 110 km north-west of Kimberley. Dwyka has 70%ownership of the project with the remaining 30% held by its Black EconomicEmpowerment partner, Kolong Investments. The Bosele project covers an area of 1,135Ha contiguous with the Dancarl DiamondMine owned by De Beers. The Dancarl Mine has exploited the Bobbejaan Fissureright up to the boundary of Dwyka's Bosele tenements. Dwyka commenced exploration activities in December 2003 with the objective oftracking the extension of the Bobbejaan Fissure onto the Bosele property.Dwyka's drilling activities during the half-year showed that the Bobbejaanfissure extends onto the Bosele property below the surface. A decision on the economic value of the fissure extension will be made duringthe coming months. Bosele South (Dwyka Diamonds 70%) On the southern part of the Bosele property a drilling programme on new targetshas been undertaken. Core from this program was recently air freighted toAustralia for testing. This test work commenced after the end of the half-yearand results are expected shortly. Early results show that the material is craterfacies resedimented volcanoclastic with abundant chromites. Reconnaissance,ground magnetic and electromagnetic surveys revealed a number of anomaloustargets which will be tested in the near future. Nooitgedacht Alluvial Mine Activities at Nooitgedacht were limited during the latter part of the half-yearas staff focussed on the due diligence being undertaken on the four hard rockproperties under option. Staffing at Nooitgedacht has since year end returned tonormal now that the assessment systems are in place on these properties. During the latter part of the half-year, Dwyka targeted mining areas containinglarge boulder trap sites. From November, the mobile scalping plant waspositioned adjacent to the mining pit to eliminate the double handling andtransport of oversize rock. This has had a marked impact on performance througha reduction in machine hours and the costs associated with production. Over the half-year, diamonds weighing 289.13 carats were recovered from 38,614tonnes of gravel fed to the treatment plant at an average grade of 0.75 cpht.There were two distinct periods of operations with a reduction in costs, anddiamond production improving dramatically to 1.3 cpht, once the new scalpingmachine was optimally utilised in conjunction with the new mining focus. The Nooitgedacht mine is located on the farm Nooitgedacht and the project areaextends for 6km along the eastern bank of the Vaal River, covering an area of4,671 hectares. Processing Plant Developments In September 2004, Dwyka decommissioned the grease room at De Hoop and placedorders for a new wet X-ray diamond sorting system. All of the equipment wasdelivered to site and successfully commissioned by the end of December. The total cost of the new plant was just under ZAR2 million. Dwyka anticipatesrecovering this capital cost within a short period through improved diamondrecoveries from fresh gravel feed, and from re-treatment of stockpiled greaseroom tailings. During plant commissioning on grease room tailings, five diamondstotalling over three carats in weight were recovered from the five tonnes ofmaterial re-treated. The installation consists of a feed preparation section followed by two"Flowsort" X-Ray sorters. The Flowsorts with their associated control andsecurity systems are all mounted in a standard 20 foot sea container. They aredesigned for complete "hands-off" operation with diamonds being recovered intotamper-proof stainless steel boxes. The security system incorporates links tothe computerised control systems plus digital surveillance for 24 hour remotemonitoring of operations. The new plant has been used to recover diamonds from concentrates produced bythe Nooitgedacht gravel treatment plant during the final quarter of 2004. Overthe next half-year it will also re-treat the grease room tailings from previousoperations at the Nooitgedacht and De Hoop mines. When Dwyka establishes newmines in the Kimberley area, the new plant will form the basis of a centralisedconcentrate treatment facility. Industrial Division The Industrial division has experienced strong demand for the majority of thehalf-year. As is usual, demand decreased as the holiday season approached andthe brick plant was reduced to one shift per day during December. Since Half-year end, the brick plant has returned to two shifts per day asdemand returned to normal. Indian Diamond Exploration Programme Dwyka has an Alliance Agreement with BHP Billiton to explore for and developworld-class hard rock diamond deposits in India. Positive results have been achieved from Dwyka's alliance permits in threeIndian states. Assessment of several early completed samples returnedsignificant quantities of kimberlitic indicator minerals. The ongoing samplingprogram has already collected 65 samples and narrowed potential indicator sourceareas to two prospects. Detailed ground geophysics and geochemical sampling ofthese prospects will be pursued during the first half of 2005. Final laboratoryresults from the batch of samples already taken are expected next month. During the half-year, a new Reconnaissance Permit was recommended to be grantedto Dwyka Diamonds' wholly owned subsidiary AMIL India Pvt Ltd, in the state ofOrissa. This tenement was amongst the first tenements to be granted in thishighly prospective State, with several other tenement applications by theCompany currently being considered for grant by the Orissa State Government. Initial sampling of the newly awarded permits in Orissa is due to commenceduring March 2005. This program of sampling new permits in close spatial andgeological proximity to recently discovered diamondiferous kimberlites isamongst the first to be carried out by modern explorers in this state. DIRECTORS The names of the Directors of the Company in office during the half-year anduntil the date of this report are: Ed Nealon, Melissa Sturgess and Evan Kirby. CORPORATE Placement During the half-year, Dwyka announced that 16,532,500 fully paid ordinary shareswere placed with institutional and other investors by Williams de Broe Plc at aprice of 26 pence (A$0.67) per share. Net proceeds of the placing were approximately £4.1 million (A$10.3 million) andthe funds will be utilised primarily to expand Dwyka's operations throughproject acquisition and development. MATTERS SUBSEQUENT TO THE END OF THE HALF-YEAR No matters or circumstances have arisen since 31 December 2004 that havesignificantly affected, or may significantly affect: a) the consolidated entity's operations in the future financial periods,b) the results of those operations in future financial periods, andc) the consolidated entity's state of affairs in future financial periods. ROUNDING OF AMOUNTS The amounts contained in this Report have been rounded to the nearest $1,000(where rounding is applicable) under the option available to the Company underASIC Class order 98/0100. The Company is an entity to which the class orderapplies. AUDITORS' INDEPENDENCE DECLARATION Section 307C of the Corporations Act 2001 requires our auditors,PricewaterhouseCoopers, to provide the Directors of the Company with anIndependence Declaration in relation to the review of the half-year financialreport. This Independence Declaration is set out on the following page. Dated at Perth this 16th day of March 2005. Signed in accordance with a resolution of the Directors. M SturgessChief Executive Officer Auditors' Independence Declaration As lead auditor for the review of Dwyka Diamonds Limited for the half year ended31 December 2004, I declare that to the best of my knowledge and belief, therehave been: a) no contraventions of the auditor independence requirements of theCorporations Act 2001 in relation to the review; andb) no contraventions of any applicable code of professional conduct inrelation to the review. This declaration is in respect of Dwyka Diamonds Limited and the entities itcontrolled during the period. David J SmithPerthPartner 16 March 2005PricewaterhouseCoopers CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE FOR THE HALF-YEAR ENDED 31 DECEMBER 2004 Note Half-year Half-year Ended Ended 31 Dec 2004 31 Dec 2003 $'000s $'000s -------- --------- Revenue from sale of goods 2,366 3,682 Cost of sales (1,904) (2,335) -------- ---------Gross profit 462 1,347Other revenue from ordinary activitiesProceeds from sale of plant and equipment 24 1,064Proceeds from sale of investments 4 - 1,147Foreign exchange gains 4 19 7Other 292 233 Other expenses from ordinary activitiesAdministration (1,793) (1,458) Borrowing costs expense - (3)Cost of investments sold 4 - (363)Mining properties and exploration expenditurewritten off (336) -Projection generation (475) -Written down book value of plant andequipment - (845)sold -------- ---------(Loss)/profit from ordinary activities beforeincome tax (expense)/benefit (1,807) 1,129Income tax (expense)/benefit (1) 11 -------- ---------Net (loss)/profit from ordinary activities (1,808) 1,140 -------- ---------Net profit attributable to outside equityinterest 1 - -------- ---------Net (loss)/profit attributable to members ofDwyka Diamonds Limited (1,809) 1,140 -------- ---------Total changes in equity other than thoseresulting from transactions with owners asowners (1,809) 1,140 ======== =========Basic (loss)/earnings cents per share (2.40) 1.88Diluted (loss)/earnings cents per share (2.40) 1.88 The above Consolidated Statement of Financial Performance should be read inconjunction with the accompanying notes. CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2004 31 Dec 2004 30 June 2004 Note $'000s $'000s --------- ---------- CURRENT ASSETS Cash 13,071 6,632Receivables 776 547Inventories 367 250 --------- ----------Total Current Assets 14,214 7,429 --------- ---------- NON-CURRENT ASSETSInvestments 89 89Receivables 1,732 1,482Property, plant & equipment 3,515 3,054Exploration and evaluation expenditure 631 -Other 156 145 --------- ----------Total Non-Current Assets 6,123 4,770 --------- ----------TOTAL ASSETS 20,337 12,199 --------- ----------CURRENT LIABILITIES Accounts payable 594 982 Interest bearing liabilities 31 - Provisions 493 503 --------- ----------Total Current Liabilities 1,118 1,485 --------- ----------TOTAL LIABILITES 1,118 1,485 --------- ----------NET ASSETS 19,219 10,714 ========= ==========EQUITY Contributed equity 5 52,147 41,834Accumulated losses (32,928) (31,120) --------- ----------Total Equity 19,219 10,714 ========= ========== The above Consolidated Statement of Financial Position should be read inconjunction with the accompanying notes. CONSOLIDATED STATEMENT OF CASH FLOWS FOR HALF-YEAR ENDED 31 DECEMBER 2004 ----------------------------- --------- --------- Half-year Half-year Ended Ended ----------------------------- --------- --------- 31 Dec 2004 31 Dec 2003 ----------------------------- $'000s $'000s ----------------------------- --------- ---------CASH FLOWS FROM OPERATING ACTIVITIES----------------------------- --------- --------- ----------------------------- --------- ---------Receipts from customers (inclusive of GST) 2,247 3,174-----------------------------Payments to suppliers and employees (inclusive ofGST) (4,588) (4,317)-----------------------------Interest received 269 131----------------------------- ---------Interest paid/finance costs - (3)----------------------------- --------- ---------Net cash outflow from operating activities (2,072) (1,015)----------------------------- --------- --------- CASH FLOW FROM INVESTING ACTIVITES----------------------------- --------- --------- ----------------------------- --------- ---------Payments for plant & equipment (636) (46)----------------------------- --------- ---------Proceeds from sale of plant and equipment 24 1,064----------------------------- --------- ---------Rehabilitation bonds (11) ------------------------------ --------- ---------Proceeds from sale of investments - 1,147----------------------------- --------- ---------Payment for exploration expenditure (961) (460)----------------------------- --------- --------- ----------------------------- --------- ---------Net cash (outflow)/inflow from investingactivities (1,584) 1,705----------------------------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES----------------------------- --------- --------- ----------------------------- --------- ---------Loans to other parties (250) ------------------------------ --------- ---------Borrowings 31 ------------------------------ --------- ---------Repayment of borrowings - (2)----------------------------- --------- ---------Proceeds from Issue of Shares 10,856 1,787----------------------------- --------- ---------Payment for equity issue costs (543) (130)----------------------------- --------- ---------Net cash inflows from financing activities 10,094 1,655----------------------------- --------- --------- Net increase/(decrease) in cash held 6,438 2,345-----------------------------Cash at the beginning of the reporting period 6,632 4,494-----------------------------Exchange rate adjustments 1 7----------------------------- --------- ---------Cash at the end of the reporting period 13,071 6,846----------------------------- ========= ========= The above Consolidated Statement of Cash Flows should be read in conjunctionwith the accompanying notes. NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THEHALF-YEAR ENDED 31 DECEMBER 2004 1. BASIS OF PREPARATION OF HALF-YEAR REPORT This general purpose financial report for the interim half-year reporting periodended 31 December 2004, has been prepared in accordance with Accounting StandardAASB 1029: Interim Financial Reporting, other mandatory professional reportingrequirements (Urgent Issues Group Consensus Views) other authoritativepronouncements of the Australian Accounting Standards Board and the CorporationsAct 2001. This interim financial report does not include all the notes of the typenormally included in an annual financial report. Accordingly, this report is tobe read in conjunction with the Annual Report for the year ended 30 June 2004and any public announcements made by Dwyka Diamonds Limited during the interimreporting period in accordance with the continuous disclosure requirements ofthe Corporations Act 2001. 2. ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTINGSTANDARDS Australia is currently preparing for the introduction of International FinancialReporting Standards (IFRS) effective for financial periods commencing 1 January2005. This requires the production of accounting data for future comparativepurposes at the beginning of the next financial year. The adoption of Australianequivalents to IFRS will be first reflected in the Consolidated Entity'sfinancial statements for the half year ending 31 December 2005 and the yearending 30 June 2006. The Consolidated Entity has allocated internal resources to manage theimplementation project and will engage external consultants should they berequired in the future. To date the project has not identified any accountingpolicy changes that will be required other than those disclosed in the 30 June2004 Annual Report or below. In some cases choices of accounting policies areavailable, including elective exemptions under Accounting Standards AASB1First-time Adoption of Australian Equivalents to International FinancialReporting Standards. Some of these choices are still being analysed for the mostappropriate accounting policy for the Consolidated Entity. For these reasons itis not yet possible to quantify the impact of the transition to Australianequivalents of IFRS on the Consolidated Entity's financial position and reportedresults. AASB 6 Exploration for and Evaluation of Mineral Resources was released inDecember 2004 and is not expected to have any significant impact on theConsolidated Entity's existing accounting policy. 3. SEGMENT INFORMATION The consolidated entity operates primarily in three geographical segments beingSouth Africa, India and Australia where it conducts primarily diamond mining andexploration. Half-year 2004 South Australia India Unallocated Consolidated Africa $'000s $'000s $'000's $'000s $'000s Total segment 2,408 - 24 269 2,701revenue ======== ======== ========= ========= ========= Segment result (813) (1,278) 14 269 (1,808) ======== ======== ========= ========= ========= Half-year 2003 Total segment 4,872 1,261 - - 6,133revenue ======== ======== ========= ========= ========= Segment result 1,409 (247) (22) - 1,140 ======== ======== ========= ========= ========= 4. PROFIT FROM ORDINARY ACTIVITIES AFTER INCOME TAX Profit from ordinary activities after related income tax expense includes thefollowing items of revenue and expense which, together with other disclosures inthis report, are relevant in explaining the financial performance for thehalf-year: 31/12/04 31/12/03 $'000 $'000 --------- --------- Profit on sale of investments - 784Foreign currency exchange gain 19 7 ========= ========= 5. EQUITY SECURITIES ISSUED 31/12/04 31/12/03 ---------- ---------- $ $The following equity securities were issued by theparent entity during the period: 16,532,500 ordinary shares at GBP0.26 ($AUD0.67) toraise general working capital 10,856,115 - 5,255,000 ordinary shares at $AUD0.34 each to raisegeneral working capital - 1,786,700 Movements in ordinary share capital: Date Details Issue price Number of shares $ 1/7/2003 Opening balance 55,802,696 38,695,676 16/7/03 Placement $A0.34 5,255,000 1,786,700 Total issue costs (130,332) --------- ---------31/12/2003 Balance 61,057,696 40,352,044 ========= ========= 1/7/2004 Opening balance 63,907,696 41,834,044 10/8/04-13/9/ Placement GBP0.26 16,532,500 10,856,11504 ($AUD0.67) Total issue costs (542,809) --------- ---------31/12/2004 Balance 80,440,196 52,147,350 ========= ========= 6. SUBSEQUENT EVENTS No matters or circumstances have arisen since 31 December 2004 that havesignificantly affected, or may significantly affect: a. the consolidated entity's operations in the future financial periods, b. the results of those operations in future financial periods, and c. the consolidated entity's state of affairs in future financial periods. 7. CONTINGENT LIABILITIES There were no known contingent liabilities as at 31 December 2004. DWYKA DIAMONDS LIMITED AND ITS CONTROLLED ENTITIES DIRECTORS' DECLARATION In the Directors' opinion : a) the financial statements and notes set out on pages 7 to 12 are inaccordance with the Corporations Act 2001, including:(i) complying with Accounting Standards, the CorporationsRegulations 2001 and other mandatory professional reporting requirements; and(ii) giving a true and fair view of the consolidated entity'sfinancial position as at 31 December 2004 and of its performance, as representedby the results of its operations and its cash flows, for the half-year ended onthat date; andb) there are reasonable grounds to believe that Dwyka Diamonds Limitedwill be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Directors. M SturgessExecutive Director Dated at Perth, this 16th day of March 2005. Independent review report to the members of Dwyka Diamonds Limited Statement Based on our review, which is not an audit, we have not become aware of anymatter that makes us believe that the financial report of Dwyka DiamondsLimited:• does not give a true and fair view, as required by theCorporations Act 2001 in Australia, of the financial position of the DwykaDiamonds Limited Group (defined below) as at 31 December 2004 and of itsperformance for the half-year ended on that date, and• is not presented in accordance with the Corporations Act 2001,Accounting Standard AASB 1029: Interim Financial Reporting and other mandatoryfinancial reporting requirements in Australia, and the Corporations Regulations2001.This statement must be read in conjunction with the rest of our review report. Scope The financial report and directors' responsibility The financial report comprises the statement of financial position, statement offinancial performance, statement of cash flows, accompanying notes to thefinancial statements, and the directors' declaration for the Dwyka DiamondsLimited Group (the consolidated entity), for the half-year ended 31 December2004. The consolidated entity comprises both Dwyka Diamonds Limited (thecompany) and the entities it controlled during that half-year.The directors of the company are responsible for the preparation and true andfair presentation of the financial report in accordance with the CorporationsAct 2001. This includes responsibility for the maintenance of adequateaccounting records and internal controls that are designed to prevent and detectfraud and error, and for the accounting policies and accounting estimatesinherent in the financial report. Review approach We conducted an independent review in order for the company to lodge thefinancial report with the Australian Securities and Investments Commission. Ourreview was conducted in accordance with Australian Auditing Standards applicableto review engagements. For further explanation of a review, visit our websitehttp://www.pwc.com/au/financialstatementaudit. We performed procedures in order to state whether, on the basis of theprocedures described, anything has come to our attention that would indicatethat the financial report does not present fairly, in accordance with theCorporations Act 2001, Accounting Standard AASB 1029: Interim FinancialReporting and other mandatory financial reporting requirements in Australia, aview which is consistent with our understanding of the consolidated entity'sfinancial position, and its performance as represented by the results of itsoperations and cash flows. We formed our statement on the basis of the review procedures performed, whichincluded: • inquiries of company personnel, and• analytical procedures applied to financial data. Our procedures include reading the other information included with the financialreport to determine whether it contains any material inconsistencies with thefinancial report. These procedures do not provide all the evidence that would be required in anaudit, thus the level of assurance provided is less than that given in an audit.We have not performed an audit, and accordingly, we do not express an auditopinion. While we considered the effectiveness of management's internal controls overfinancial reporting when determining the nature and extent of our procedures,our review was not designed to provide assurance on internal controls.Our review did not involve an analysis of the prudence of business decisionsmade by directors or management. Independence In conducting our review, we followed applicable independence requirements ofAustralian professional ethical pronouncements and the Corporations Act 2001. PricewaterhouseCoopers David J Smith PerthPartner 16 March 2005 DWYKA DIAMONDS LIMITED AND ITS CONTROLLED ENTITIES CORPORATE DIRECTORY DIRECTORS E.F.G Nealon M.J. Sturgess E. Kirby COMPANY SECRETARY M.J. Langoulant REGISTERED OFFICE Level 4, HPPL House 28-42 Ventnor Avenue WEST PERTH WA 6005 Telephone: (+61 8) 9324 2955 Facsimile: (+61 8) 9324 2977 ADVISER AND BROKER Williams de Broe Plc 6 Broadgate London EC2M 2RP United Kingdom AUDITORS PricewaterhouseCoopers QV1 250 St. Georges Tce PERTH WA 6000 AUSTRALIA LAWYERS TO THE COMPANY Australia: Clayton Utz QV1 250 St Georges Tce PERTH WA 6000 South Africa: Werksmans Attorneys 155 - 5th Street Sandown Sandton 2196 SOUTH AFRICASHARE REGISTRY Australia: Computershare Investor Services Pty Ltd Reserve Bank Building Level 2 45 St George's Terrace PERTH WA 6000 United Kingdom: Computershare Investor Services Pty Ltd Po Box 859 The Pavillions Bridgewater Road Bristol BS99 1XZ UNITED KINGDOM ASX CODE Shares: DWY AIM CODE Shares: DWY This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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