Exceptional costs and fewer sales translated into a small quarterly loss for marine diamond miner
Losses in the three months ended Sept. 30 totalled US$665,000 (or 1 per share) on operating income of US$9.3 million, compared with net earnings of US$5.4 million (14 per share) on US$12.4 million in the similar period of 1999.
Cash flow also was down, at US$1.7 million, versus US$5.7 million in the third quarter of 1999.
Namibian, which mines diamonds off the coast of Namibia, attributes the poorer performance to expenses associated with improving its mining fleet and a US$428,000 writeoff on certain South African concessions. The situation was exacerbated by a decline in diamond sales at similar realized prices.
Namibian operates three mining vessels, one of which supports the proprietary NamSoll seabed crawler. The others employ conventional air-lift technology and were acquired through the November 1999 takeover of Ocean Diamond Mining of South Africa. The addition of these vessels caused direct production costs to jump to US$14.8 million in the first nine months of 2000 from US$9.7 million a year earlier. Consequently, comparable net earnings were 84% lower at US$2.6 million, while operating income was kept relatively steady at US$32.2 million.
Namibian produced 163,500 carats in the first nine months, of which 65,000 carats were mined in the recent quarter. Nine-month production was down 21%, which mainly reflects poor mining conditions encountered by NamSoll earlier in the year. (This was partially offset by production from the air-lift vessels, both of which set historical records.)
A total of 178,600 carats was sold in the recent nine-month period at an average price of US$176 per carat. A 17% increase in realized prices offset a 23% drop in sales from the first nine months of 1999.
Quarterly cash costs averaged US$95 per carat, bringing the 9-month average to US$102 per carat. These compare, respectively, with year-earlier costs of US$71 and US$58 per carat. These figures include royalties and marketing costs.
Final tests on the Nam 2 seabed crawler are under way, and the final support facilities on the MV Ya Toivo are being installed. Although the project is behind schedule, commercial production is expected to begin by year-end.
The Nam 2 mining system has the capacity to treat 1.5 million cubic metres of sediments annually, or just over twice that of NamSoll. Combined with other enhancements, the increased capacity is expected to boost the company’s annual output.
A total of US$27.5 million has been spent on the new mining system. Repayment is expected within 18 months of the start of commercial production.
Namibian is reducing its offshore property holdings to 18,000 sq. km, having relinquished deep-water concessions in South Africa. Instead, the company will focus on concessions in waters no deeper than 100 metres.
The exploration vessel MV Zacharias continues to sample 65 of 163 geological features identified in earlier geophysical and geotechnical surveys. The targets, some of which were partially tested before, extend from known resources in licensed mining areas.
Namibian Minerals’ properties host combined resources of 3.7 million carats, of which 830,000 carats are in the measured category.
On Sept. 30, Namibian had a negative working capital of US$7,534. The company began the current quarter with 19,500 carats stockpiled and US$9.1 million in cash.
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