BlueRock Diamonds PLC, the AIM listed diamond producer, which owns and operates the Kareevlei Diamond Mine (‘Kareevlei’) in the Kimberley region of South Africa, is pleased to announce its audited results for the year ended 31 December 2021.
The Company’s annual report and accounts have been dispatched to shareholders and are available on the Company’s website at www.bluerockdiamonds.co.uk.
Fundamentals for Kareevlei remain solid
· Commissioned new plant designed to increase production to 1Mtpa from c 400,000tpa
· Upgraded Diamond Resource with 49% increase in net tonnes to 10,368,300 – confident this will increase further once more work is completed on KV3, the largest pipe
· Commenced opening up the main pit to reflect the upgraded Diamond Resource at depth and area
Achieved significantly better results than in 2020 despite major challenges including shutdowns due to DMR, Covid-19 and extreme weather
· 53% increase in the number of carats produced
· More than doubled revenue to £7.85m
· Recovered an increasing number of larger stones with a value in excess of USD50,000
The diamond market recovered well in 2021 and has come back stronger after the pandemic
· 2021 average price of USD470 is 13% higher than the average for 2019 of USD415
· Spike in prices post period end in February 2022 largely linked to the Ukraine situation
· Market now stabilised, but so far in 2022 sales prices have averaged over USD600, an increase of 29% on 2021 prices
Managing corporate challenges
· Cash resources depleted during what continues to be a period of heavy investment in mining development
· Entered into discussions to obtain financing to support the Company through this period. Discussions are ongoing for BlueRock to issue a new Loan Note for £1.6m as well as the provision of debt funding facility to Kareevlei for up to ZAR30m to be drawn as and when required.
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 (‘MAR’). Upon the publication of this announcement via Regulatory Information Service (‘RIS’), this inside information is now considered to be in the public domain.
Notes to editors:
BlueRock Diamonds is an AIM-listed diamond producer which operates the Kareevlei Diamond Mine near Kimberley in South Africa which produces diamonds of exceptional quality and ranks in the top ten in the world in terms of average value per carat. The Kareevlei licence area covers 3,000 hectares and hosts five known diamondiferous kimberlite pipes with a combined Inferred Resource of 10.4 million tonnes / 516,200 carats (February 2021); based on its planned production of 1 million tonnes per annum, this provides a minimum 10-year life of mine.
I am pleased to present our audited results for the year ended 31 December 2021.
Our main goal in 2021 was to complete the transformational new plant which is designed to increase production to 1 million tonnes per annum from c 400,000 tonnes per annum. By the end of the year the plant was being commissioned and beginning to demonstrate that it would be able to achieve our future production targets. Despite the ongoing expansion works the Company achieved significantly better results than in 2020; most notably a 53% increase in the number of carats produced and revenue more than doubling. Prices achieved in the year increased by 59%, reflecting the recovery in the market after Covid-19, and the recovery of some significantly larger diamonds.
The major objectives for the year were: 1) to open up the KV1/KV2 main pit to reflect the upgraded Diamond Resource at depth and area and this involved a material increase in development (waste) mining; 2) to complete the expanded new processing plant so that it was fully commissioned before the year end; 3) to manage the ongoing challenge of Covid-19 which was successfully done until Q4, when the Omicron version disrupted operations.
During Q1 management began to redesign its mine plan centered around the main pit. It was agreed a material pushback was required for the mine to access the new economic depth of 120/130m versus the previous estimate of 80/100m. This entailed a step up in the strip ratio in the short term, in order to ensure predictable and secure supplies of good quality ore as the new plant ramps up to full production. This new plan was also designed to ensure that there was sufficient stockpile to enable the plant to operate more easily in the rainy season. The new mining plan was delayed in its implementation due to mining equipment failure in Q3, the shut down imposed by the DMR in November/December 2021, which led to a loss of 20 days mining as announced on 19 November 2021, and the shutdown due to Covid-19 (Omicron) in December 2021 and January 2022, leading to a further loss of 14 days of mining as announced on 22 December 2021, at which point the rainy season had started inhibiting the development of the mine further. As we have reported the rainy season has extended into May 2022, hence we are some three or four months behind schedule in the mine development. The application for the renewal of the current Mining Licence, which expired in August 2019, has been progressing well. In accordance with South African legislation, the Group has the right to continue mining until such time as the application has been processed
Processing and Expansion project
The challenge for the year was to complete the expansion project, whilst maximising production using the old plant and later in the year utilising a mixture of the old plant, with the crushing circuit of the new plant. This proved successful although operating the two plants had an impact on costs, largely because of the requirement for a significant amount of rehandling of material.
I am pleased to say that our expansion project was completed at the end of December 2021, after delays caused by the Section 54 stoppage imposed by the DMR in November/December 2021, followed by the closure due to Covid-19 (Omicron) in December 2021 and early January 2022. Since the end of the year the ramp up in production has been hindered by the excessive rain fall in Q1 and Q2 2022.
The Diamond Market
The diamond market recovered well in 2021. Average price per carat in 2021 was USD470 compared with USD295 in 2020, although prices in 2020 were significantly impacted by Covid-19 and the consequent cancellations of the diamond auctions. Interestingly, the 2021 average price of USD470 is 13% higher than the average for 2019 of USD415, indicating that the market has come back stronger after the pandemic. Since the end of the year the market was initially volatile with a big spike in prices in February largely linked to the Ukraine situation. It has since stabilised, but at prices significantly higher than our average for 2021. We expect the supply side of quality diamonds, as those recovered by Kareevlei, to remain tight for the foreseeable future, with the ongoing conflict in Ukraine affecting the supply of rough diamonds.
The Company continued to recover an increasing number of larger stones with a value in excess of USD50,000. During 2021 twelve larger stones were recovered for an aggregate sales value of $1,764,000. The Company recovered a record 58 carat (previous largest mid 20 carat) reflecting the potential of the Kareevlei Diamond Resource.
Diamond Resource (“Resource”)
Kareevlei hosts five known diamondiferous kimberlite pipes with a combined Inferred and Indicated Resource of 10.4 million tonnes/516,200 carats (February 2021) and produces excellent quality diamonds with 90% of output gem quality.
In February 2021, we announced a Resource update demonstrating a 49% increase in net tonnes to 10,368,300, a 53% increase in net carats to 516,200 and notably 19% of the Resource was upgraded from the Inferred to Indicated category. Based on our planned production of 1mtpa, this provides a minimum 10-year life-of-mine, however, we remain confident that the Resource will increase further once more work is completed on KV3, our largest pipe, where at present only 40% of this pipe’s volume is included.
In March 2021 the Company raised £1.5m of equity to continue to fund the expansion project which had increased in scope from a capacity of 750,000 tonnes to 1 million tonnes per annum. A further £1.6m was raised (£0.94m received during 2021 and £0.66m in 2022) for working capital purposes through a convertible loan note issued to Teichmann, following the approval of a waiver from the requirements of Rule 9 of the City Code on Takeovers and Mergers, and shareholder approval in June 2021.
As announced on 1 June 2022, the impact of the unusually high rainfall in the first five months of 2022 has severely impacted the Group’s cash resources, leaving the Group requiring additional funding, whilst it completes its mining development.
Discussions continue with potential funders to BlueRock and to Kareevlei which is expected to be sufficient to fund the company through this development period. Further details will be announced as discussions progress.
Events following the end of the year
Due to the delays in implementing the new mining plan, exacerbated by the excessive rainfall, the Group sought further funding to fund the mine development costs and raised £2m through an issue of new equity in March 2022. Unfortunately, heavy rain continued into April and May 2022. As a result Mining development fell 36% (400,000 tonnes) compared to the budget for April and May, which has limited the mine’s access to quality kimberlite and necessitated the use of lower grade and more difficult to handle material (high clay content) in Kareevlei’s processing operations. Additionally, where BlueRock had hoped to ramp up production at its new 1Mtpa processing plant, the unforeseen days lost to rain and the lower-grade feed resulted in operations being down against budget over the period March to May by 48% on tonnes processed, 51% on grade and 74% on carats produced.
As a result of fewer diamonds being produced and sold, as well as increasing costs, BlueRock’s cash resources have been depleted during what continues to be a period of heavy investment in mining development. The Company has therefore entered into discussions to obtain financing to support it through this period.
The Company continues to attract high prices for its high quality diamonds. So far in 2022 sales prices have averaged over USD600, an increase of 29% on 2021 prices.
Despite the advances made in 2021, there is still work to be done for Kareevlei to benefit fully from the potential of the new plant. The fundamentals for Kareevlei remain solid and I look forward to reporting more positive news as we move forward through the rest of the year.
I would like to thank everyone at BlueRock and Kareevlei, as well as our shareholders and key stakeholders for their continued efforts and support.
For further information, please visit BRD’s website www.bluerockdiamonds.co.uk or contact:
BlueRock Diamonds PLC
David Facey, FD
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