Firestone Questions Future of Operations

RAPAPORT... Firestone Diamonds is assessing its ability toremain operational, as it struggles with mounting debt and lower prices in theweak market. "From a market perspective, pricing remains subdued,"Firestone CEO Paul Bosma said last week. "The company continues to engage withits debtholders to ensure it can sustain operations through the currentdownturn, and further announcements in this regard can be expected in duecourse." Sales of rough diamonds from the company's Liqhobong mine inLesotho fell 21% year on year to $10.6 million in the first fiscal quarterending September 30. Sales volume dropped 13% to 168,612 carats, with the minerachieving an average price of $63 per carat, compared to $70 the previous year. The average price per carat was lower than the previous quarter,despite the sale of several high-value stones, including a 37-carat, fancy-pinkstone and a 55-carat, fancy-yellow stone, the miner noted. This was due to the fact that the majority of rough sold was comprised of either lower-valueor smaller-sized goods, the companyadded. Firestone's production slipped 16% to 201,091 carats for thethree-month period. Although Firestone mined ore predominantly from thehigher-grade southern pit, the grade was lower than the company expected, seemingly because the ore gets harder as the miner deepens the pit, it explained. The company also expects production and sales to fall in thesecond quarter, it noted. A power interruption at Liqhobong, which has affectedoperations since October 1, is expected to cause the loss of an entire month'sproduction, and the miner has had to cancel its December tender because it willnot have enough rough to offer buyers. "The loss of revenue and higher operating costs will impactthe company's cash balance, and together with the impact of a weakerdiamond-pricing environment, has placed further focus on finding an interimsolution regarding its indebtedness," Firestone said. Image: The Liqhobong mine. (Firestone Diamonds)