Namibian Minerals trims losses as output rises

Although still deep in the red, Namibian Minerals (NMR-T) is making headway at increasing alluvial diamond production off the coast of Namibia.

In early 2001, two years after its spectacular debut, the marine diamond miner nearly sank after its proprietary NamSSol mining system became lodged on the seafloor. The seabed crawler was eventually hauled to surface for repairs, but not before forcing the company to place key South African and Namibian Minerals subsidiaries into provisional liquidation to ward off hungry creditors and senior lenders.

By April, Namibian Mineral’s luck had turned the corner: the Leviev Group of Israel infused $27 million into the company to become its largest shareholder and sole marketing agent. Subsequently, the subsidiaries were discharged and limited production resumed; but neither was enough to overcome the operational setback, nor weaker diamond prices. The miner lost a staggering US$56 million last year as revenue plummeted to US$12.5 million.

Production for the year rang in at a mere 85,589 carats, or less than half that of 2000, and cash costs nearly quadrupled to US$412 per carat. The increase in operating expenses partly reflected the launch of the MV Ya Toivo, which supports the Nam2 mining system, and higher charter rates for the MV Namibian Gem airlift vessel.

The latest financial quarter was also unkind to Namibian Minerals, but operational improvements over the past year are showing up on the bottom line. Losses in the first three months of this year rang in at just under US$8 million (or US8 per share) on revenue of US$6.4 million, compared with losses of US$12.2 million (US26 per share) on US$4.7 million in the similar period of last year.

Namibian Minerals used up US$4.3 million to keep its mining vessels afloat, or half as much as a year earlier. Both periods were much worse than the final quarter of 2001, when operations contributed nearly US$1 million in cash flow.

Production topped 42,259 carats during the recent quarter, representing a fourfold increase from a year earlier. The MV Ya Toivo contributed 33,510 carats; the MV Namibian Gem, 8,471 carats; and the exploration vessel MV Zacharias, 278 carats.

Direct production costs totalled US$8 million, which is US$1.4 million less than a year earlier. The 15% reduction reflects a downward swing in charter rates and the benefits of earlier repairs to the Namibian Gem.

Namibian Minerals realized US$147 for each carat sold, versus US$171 per carat a year earlier. The reversal was partially offset by an 11% decrease in marketing expenses.

The company ended the quarter with US$1.2 million in cash and 17,514 carats in diamond stocks, against a working capital deficiency of US$4.7 million. Accordingly, Namibian Minerals is pursuing additional financings and higher production rates.

For instance, the MV Kovambo set sail for Namibian coastal waters in April and was expected to have completed trial runs by June. The vessel supports the NamSSol and would augment production significantly if it were returned to action.

Namibian Minerals has secured a $10-million loan facility with Leviev, from which it has withdrawn US$6.4 million for working capital and debt repayment. Repayment terms for the convertible debentures that were issued in early 2001 and for those related to a US$2.6-million loan have been favourably amended as well.

On May 24, the company was delisted from the Nasdaq after its shares failed to exceed the mimimum bid price of US$1. The company still trades on the Toronto Stock Exchange, in the 16 range.

Namibian Minerals has US$54.6 million in long-term debt and more than 100.2 million shares outstanding. On a fully diluted basis, it has 273.4 million shares outstanding.