Namco caught in red tide

Namibian Minerals (NMR-T) continues to be plagued by a months-old accident which put the company’s NamSSol mining system out of commission.

During the three months ended March 31, Namibian Minerals (Namco) posted a loss of US$12.2 million (or US26 per share) on revenues of US$4.7 million, compared with first-quarter earnings of US$2.2 million (US5 per share) on revenues of US$12.2 million last year. Cash consumed by operations during the latest quarter was US$8.8 million, compared with US$4.7 million generated in the same period of 2000.

The company produced 10,700 carats during the recent quarter, down from 52,900 carats a year earlier. The latest cash costs were not reported. They averaged US$104 per carat a year ago. The company averaged US$168 per carat for diamond sales in the recent quarter, down US$14 per carat from the year-ago US$182.

Direct production costs increased to US$11.3 million, compared with US$5.9 million a year earlier. They included US$2.4 million of year-end 2000 diamond stocks, which were expensed during the quarter. The company had no diamond stocks at the end of the recent quarter.

Namco’s production shortfall stemmed from the loss of the NamSSol mining system in January, when production from the system’s support vessel, the MV Kovambo, ran dry.

The Ivan Prinsep airlift vessel was withdrawn from operation at the end of January and was sold to reduce the company’s debt position.

In February, the cash-strapped company was forced to place its South African and Namibian subsidiaries into provisional liquidation, putting a halt to its marine diamond production.

In early April, Namco raised US$9.4 million via a private placement and long-term marketing agreement with the Leviev Group of Israel. This warded off bankruptcy. Leviev became Namco’s largest shareholder and sole marketing agent.

By mid-April, Namco’s Ya Toivo, which supports the Nam2 mining system, had resumed marine diamond production off the coast of Namibia. Nam2 is expected to provide the bulk of Namibian’s production in 2001. The seabed crawler can mine 1.5 million cubic metres of material annually. This is twice as much as its predecessor.

By the end of May, Namco had raised about US$27 million and regained control of its Namibian subsidiaries and one South African subsidiary. The company resumed operation of the airlift equipment on MV Zacharias, testing for extensions of known resource areas in mining licences 51 and 36 off the coast of Namibia.

The vessel’s drilling system is expected to gear up in the third quarter, after repairs are made to its hydraulic levelling system. The MV Namibian Gem is also expected to return to operation at that time.

In the third quarter, the company plans to discharge its remaining subsidiaries through a court-sanctioned, creditor-approved compromise.

Namco was recently advised that its insurance claim for repair costs for NamSSOl (an estimated US$1.5 million) has been accepted. Repairs have begun and should wrap up in the fourth quarter. Discussions are ongoing about another claim for compensation for the interruption of business.

At the end of the first quarter, Namco had US$5.6 million in cash and US$56.6 million in long-term debt, compared with cash of US$4.4 million and debt of US$54.2 million at the end of 2000.