Firestone Diamonds share price drops more than 35 per cent as the diamond market loses its sparkle
Shares in Aim-listed Firestone Diamonds dropped more than 35 per cent today after the firm revealed its full-year loss widened and said it would have to raise new funds to keep one of its mines afloat.
Firestone’s share price dropped 36.71 per cent to 12.5p after the company revealed it had made a loss before tax of $130m (£96m) in the year to the end of June compared with a loss of $9m the previous year.
In a separate announcement, the company, which operates in Lesotho, southern Africa, said it sought to raise £18.5m before expenses through the issue of shares priced at a deep discount of 10p per share. Firestone’s shares closed at nearly 20p yesterday.
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“As we have been predicting for some time now, Firestone is having to raise significant funds in order to survive the current relatively weak diamond markets,” said Yuen Low, an analyst at Shore Capital.
The company plans to raise the funds to pay for the ongoing operations at its Liqhobong diamond mine, which has produced lower than average diamond values.
Firestone also reached an agreement in priciple with its lender, Absa Bank, conditional upon completion of the fundraising, to defer debt repayments by 18 months to June 2019.
“The raise is not underwritten, and there is thus no guarantee that Firestone will receive all the monies it is seeking. Indeed, given the history of open offers and placings under such conditions, we are not optimistic that the full sum will be raised,” said Low, who predicted shares would crash today.
Stuart Brown, chief executive of Firestone, said the company achieved a number of milestones in 2017, including completing construction at Liqhobong.
“However, the weaker than expected diamond market together with our lower than anticipated recovery of higher value diamonds has put pressure on our cash reserves and meant that we have had to raise additional equity and restructure our debt in order to be able to adopt a revised mining plan which seeks to maximise cash flow in the shorter term while we address the issues affecting value recovered.
“We believe the Liqhobong Mine remains a quality asset with the potential to deliver attractive returns as the diamond market recovers and the production footprint becomes more representative over the medium term and potential efficiencies are further improved,” Brown said.
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