Firestone Faces Fallout from Power Disruption

RAPAPORT… Production at Firestone Diamonds faltered in the second fiscal quarter, as the miner faced a near monthlong power disruption it estimates will cost it $4.6 million.

Output from the company’s Liqhobong mine in Lesotho fell 39% to 138,000 carats in the three months ending December 31, due to the outage, during which Firestone was unable to operate its processing plant, it said Tuesday. For an additional month, the miner managed with only a generator, reducing its operational capacity to 90%, it added.

The disruption has forced Firestone to revise its production forecast for the year ending June 30. The company now expects output of between 720,000 and 750,000 carats compared with the 820,000 to 870,000 carats it had previously indicated.

Proceeds from rough sales plunged 30% to $9.7 million for the period, according to Rapaport calculations. Sales volume dropped 31% to 132,885 carats, outweighing a 1% rise in the average price as the miner sold larger and higher-quality goods from its south lobe, including one diamond over 100 carats and two above 90 carats.

“The unexpected power disruption had a devastating impact on production and revenue generation,” said Firestone CEO Paul Bosma. “As a result…we have reduced our guidance for the year.”

The miner will also delist from AIM — the London Stock Exchange’s submarket for smaller companies — pending shareholder approval. The move is an effort to save money and pay back mounting debts totaling $102.3 million, it said.

“Due to the production setback and the lackluster market conditions, the board has decided that it is imperative that it does all it can to reduce costs in order to survive the prolonged downturn,” Bosma added. “This includes delisting from AIM and reducing the size of the board.” 

While Firestone sees some improvement in the market, prices for the smaller goods that make up the bulk of its production are still subdued, it said. It is also uncertain of the impact the coronavirus epidemic will have on demand, it added.

The miner’s stock fell 66% on Tuesday following the announcement. 

Image: The Liqhobong mine. (Firestone Diamonds)