Shares in Africa-focused Firestone Diamonds (LON:FDI) went ballistic on Wednesday after it announced that stable power had returned to its Liqhobong mine in Lesotho, with the plant processing at full capacity.
Firestone had warned in October that
the mine was struggling due to insufficient power supply due to a two-month
maintenance shutdown at its only power supplier — Lesotho Highlands Water Project
(LHWP).
As a result, processing operations were halted from the beginning of the month to Oct. 26, when diesel generators were commissioned. The plant then operated at between 80% and 90% capacity throughout November.
While the LHWP resumed operations on
Dec. 1, the company said it had to book $1.1 million of additional costs from
the use of the generators, adding that it had also filed an insurance claim
over loss of profit.
Firestone has booked $1.1 million related to the cost of renting generators and of the associated diesel consumption.
Firestone’s stock was up 128% on
Wednesday mid-day in London at 0.97 pence a share, leaving the company with a
market capitalization of £6.18 million (about $8m). The stock price, however,
is far from the £3.88 the company’s shares were trading at a year ago.
Diamond miners are struggling across the board, especially those producing
cheaper and smaller stones, where there is an over-supply.
Increasing demand for synthetic
diamonds has also weighed on prices. Man-made diamonds require less investment
than mining natural stones and can offer more attractive margins.
Buyers, those that polish and cut
diamonds for retailers, have been hit this year by lower prices and tighter
credit, prompting them to delay purchases.
De Beers, the world’s No.1
diamond miner by value, has responded by axing production — with a target of 31
million carats this year compared with 35.3 million in 2018. It has also given
buyers more room to maneuver, by allowing them to refuse half the stones in many of the diamond parcels.
The Anglo American unit is also
spending more on marketing. At the latest sale, the company increased the amount of stones buyers were allowed to reject in
each lot purchased from 10% to 20%, according to people familiar with the
auction.
Firestone’s chief executive, Paul
Bosma, has said he’d expect prices for smaller diamonds to increase towards the
end of 2020, in part due to the closure of Rio Tinto’s Argyle mine in
Australia.