Charlotte Mathews
13 November 2008
Johannesburg — DIAMOND miner Trans Hex believed it was in a better position than its competitors to weather the sudden downturn in rough diamond demand, which had seen even prices for top-quality stones drop as low as after the 9/11 terrorist attacks in the US, CEO Llewellyn Delport said yesterday.
He said Trans Hex was in a strong position because it was consuming less cash in SA and Angola than last year. In the Northern Cape mines, grades had improved at its Baken mine and the plant at Bloeddrif had been recommissioned.
In Angola, exploration at Luana was now self-funding, with 9400 carats recovered during the test phase, and 32%-owned Fucauma was close to profitability.
Only Luarica remained in financial distress, and discussions were taking place with Trans Hex's partners to find a solution.
Delport also expected some of the downturn in prices would be offset by the weakening of the rand- dollar exchange rate.
"The only thing that could work against us would be if the bottom falls out of the market, and we don't anticipate a complete meltdown," Delport said.
In the six months to September, revenue from continuing operations dropped 16% to R329,7m compared with the same period last year, largely because sales at its latest tender were hit by the global credit crisis.
Delport said prices were 20% lower than at the previous tender.
Trans Hex's revenue was also reduced by R78m because it had to withhold 10% of production from its last sales cycle to offer to the State Diamond Trader.
New legislation introduced last year, with the intention of growing local downstream industry, requires diamond producers to offer a portion of production to the state.
Delport said the diamonds would only be recorded as sold once a price had been agreed with the State Diamond Trader and in the meantime they were reflected in inventory.
Delport said it was too early to comment on whether the new legislation was working effectively. Early teething problems were to be expected, and were being tackled.
The group's headline loss increased to 52c per share from 22c per share a year ago and the interim dividend was passed, as management considered it was prudent to conserve cash during the credit crisis.
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