Industry News
Namakwa Diamonds: 2.7% Increase in diamond production in fiscal Q1 2009
19/01/2009
Diamond resource company Namakwa Diamonds produced 12,207 carats during the period of September 1, 2008 to January 12, 2009, a 2.7 percent increase compared to the 11,878 carats produced in the preceding quarter that ended August 30, 2008. The company, which focuses on alluvial diamond deposits in South Africa, the Democratic Republic of Congo (DRC), Namibia and Angola, also reports that cash costs for the quarter were lower at US$4.24 per ton (US$748 per carat) compared to US$5.04 per ton for the preceding quarter. The company attributes the mining costs to the impact of the expansion ramp up phase as well as the high cost of diesel during the period.
Similar to other mining producers in the industry, Namakwa is conducting ongoing review of its mining operations of its North West operations in South Africa to optimize production and maximize profitability during the global crisis. Upon completion of the review, the company will decide which operations will be placed on care and maintenance and which will be reduced.
Namakwa is continuing its resource delineation program in the DRC. Bulk samples of in excess of 14,000 tons have been processed from the company's concession numbers 641 and 2306. The grade delineated to date has been satisfactory, says the company. While Namakwa does not plan to commence with commercial mining in the DRC until there is more certainty with diamond prices, the plant is ready to commence mining by the end of the second quarter of 2009.
In an environment of reduced rough diamond prices, Namakwa, which beneficiates its own stones, sold 11,102 carats of rough diamonds at a gross margin of 4.38 percent during the first quarter of 2009, compared to 18,474 carats sold during the fourth quarter of 2008. Namakwa is refraining from selling significant volumes of rough diamonds during the period under review. Instead, it has committed a significant portion of its rough diamond inventory to cutting and polishing in its own factories in Johannesburg and by using contractor polishers where appropriate.
In December 2008, Namakwa opened a rough and polished trading office in Israel.
Additionally, the company also agreed to establish a joint venture to be called Swiss Diamonds DMCC with Swiss Gold DMCC, a gold bullion trading house in the Middle East. Swiss Diamonds will be located in the Dubai Multi Commodities Centre (DMCC) in the Almaz Towers. Under the agreement, Namakwa will supply diamonds to Swiss Diamonds and Swiss Gold will supply the gold. Swiss Diamonds will then sub-contract the manufacture of jewelry, which it will then sell via wholesale and retail channels. The joint venture will also sell individual diamonds and parcels of diamonds sourced from Namakwa.
For the quarter, Namakwa reports having a net working capital of US$91.4 million, including a diamond inventory of US$55.0 million. The increase in inventory from the financial year-end of August 31, 2008 of US$5.8 million was primarily a consequence of Namakwa's decision not to sell its rough diamond inventory into the depressed rough diamond market.
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