Lucara Diamond, the mining company with assets in Botswana, said its loss was higher in its latest financial results, raising fears that its funds will not be enough to fully complete the AK6 mine.
The results showed that net loss for the quarter ended September 30, 2011 was $5.5 million (about P40.9 m) while the net loss for the nine months ended September 30, 2011 was $13.2 million (about P92m).
The loss was blamed on the exploration and depreciation costs at Mothae, net of the first diamond sales of 9,381 carats for $7.5 million (after payment of royalties and selling costs).
However, at September 30, 2011 Lucara had cash and cash equivalents of $70.7 million and working capital of $64.3 million, as compared to cash of $32.9 million and working capital of $27.3 million at December 31, 2010.
But the BSE quoted company is worried that its funds will not be sufficient to complete the AK6 project, which is expected to be on stream by next year.
“The company’s existing funds as of September 30, 2011, and the expected proceeds from the sale of diamonds may not be sufficient to finance the anticipated expenditures of between US$120-130 million for the full development and construction of the AK6 mine, working capital requirements prior to the first anticipated diamond sale at AK6, the ongoing test mining program on the Mothae Project and general corporate expenses over the next twelve months,” it said in a statement accompanying the results.
Lucara said certain of these expenditures are discretionary and will be dependent on the company having an additional $15-$20 million available in early 2012.
“There is no assurance that such financing will be available to the company at the time and in the amount required or, if available, that it can be obtained on terms satisfactory to the company,” it added.
The company’s cash used in operating activities for the nine months to 2011 was $16.5 million, and consists mainly of the net loss of $13.2 million adjusted for the impact of non-cash items, including depletion, depreciation and amortisation of $2.0 million, and changes in non-cash working capital items.
Net cash from financing activities for the nine months of 2011 was $108.8 million, resulting from a private placement completed in February 2011, and the completion of a $50 million debenture financing in July 2011.
The net cash used in investing activities for the nine months of 2011 was $52.9 million for expenditures primarily related to the development of the Boteti AK6 mine.
In conjunction with the development of the AK6 mine, the Company has purchase commitments of $40 million and estimated remaining capital expenditures of approximately $20 million.
Construction at AK6 has advanced from 55 percent complete at the end of Q2 to 84 percent complete at the end of Q3. This is as per the August re-baselined schedule, which reflects the impact of the steel industry strike in July.
Lucara said the project is trending within the initial capital budget, and expenditure to the end of Q3 is 46 percent of budget with a total of 83 percent of the approved capital budget being committed.
The Company intends to continue with the construction of the AK6 Phase 1 production facility, which includes a process plant and support facilities designed for an initial throughput of an estimated 2.5 million tonnes per year. Commissioning is intended to commence in Q1 of 2012, with full ramp up expected to be reached during the first half of 2012.
Based on current projections, the Company expects to conduct the first sale of diamonds from AK6 in the second quarter of 2012.
