Namco revival still iffy

With all four of its production vessels at sea, Namibian Minerals (NMR-T) is producing considerably more diamonds these days, but whether it can rise from the red remains unclear.

The company (Namco), which operates off the cost of Namibia, sucked up 46,379 carats in the three months ended June 30 to inflate 6-month output to 88,635 carats — 4% more than its entire haul last year. The 2001 results would have been better had a mining face not collapsed on the NamSSol seabed crawler in January, putting the vessel out of commission for the remainder of the year.

Compared with the corresponding periods of a year ago, production costs were up in the recent quarter but down in the first half of 2002. The extra quarterly costs relate to increased sampling by the MV Zacharias vessel and the re-commissioning, in May, of the MV Kovambo mining vessel, which supports NamSSol.

The MV Toivo, which supports the Nam2 crawler, remains Namco’s flagship, having cranked out 38,033 carats in the quarter and 71,543 carats in the first half. The vessel subsequently set a 1-day production record by sucking up 16,417 carats on July 23 (T.N.M., Aug. 5/02).

The MV Namibian Gem airlift vessel, which was acquired through the takeover of Ocean Diamond Mining in 2000, contributed 15,343 carats to the half-year. The remaining output for the period was supplied by MV Zacharias, which remains on exploration detail.

Namco sold 35,461 carats in the recent quarter and 78,747 carats in the first half, putting its average realized prices at US$159 and US$153 per carat, respectively. The company realized noticably more for its stones last year.

Despite the production jolt, Namco slipped deeper into financial coma: losses rang in at about US$25 million (or 25 per share) for the recent quarter and US$33 million (33 per share) for the first six months. The losses would have been about US$16 million less had the remaining goodwill arising from the acquisition of ODM not been written off. Revenue came to more than US$5 million and US$12 million, respectively.

In the second quarter and first half of 2001, Namco lost nearly US$13 million (17 per share) on US$1.5 million in revenue, and US$25 million (40 per share) on US$6 million. The company went on to record a loss of US$56 million for the entire year, though impairment charges accounted for a third of the red ink.

Operations used up nearly US$14 million in the first half of 2001, or two times more than in the first half of this year.

Namco entered the second half of 2001 with a working capital deficit of nearly US$10 million, US$2.5 million in cash and 28,739 carats in diamond stocks. Production in the current quarter should come in at a respectable weight given the mid-July catch; however, the company needs additional funding from its creditors to remain afloat, and expects to have an answer shortly.

Namco has more than 100 million shares outstanding, or nearly 272 million on a fully diluted basis. The Leviev Group of Israel holds the single largest block and remains the company’s largest creditor.