Shares at AIM-listed diamond producers BlueRock Diamonds (LON:BRD) have surged almost 7% after the company released an optimistic Q4 and FY production update, citing “strong results in a challenging year” as its processed tonnes increased by 25% year-on-year.
Despite its mine being closed due to COVID-19 for a period of 50 days starting on 24 March 2020, BlueRock’s total processed tonnes still exceeded the year prior, and the firm estimated the increase over the year would have been approximately 45% “assuming a constant run rate during the period of closure”.
Tonnes processed during Q4 were “lower than anticipated” due to abnormally high and early rains in late 2020 (238mm in December 2020 compared with 70mm in December 2019) at its Kareevlei Diamond Mine (‘Kareevlei’) in the Kimberley region of South Africa, but production was still higher than the year earlier and is nonetheless a “remarkable achievement in a very difficult year”.
BlueRock is expecting to open a new plant in the near future, and once production is completed, processing is expected to be “significantly less impacted” by the rainy season.
The firm’s carat production was up 10% year-on-year, with carat sales also growing on the back of increased production, although the value per carat of USD295 was “around the bottom end of the Company’s guidance for 2020 and 26% down on FY 2019, due largely to the impact of COVID-19 on the marketing chain and the reduced incidence of higher value diamonds in 2020 compared with 2019”.
The latter, BlueRock explained, is partly due to the development of the the Kareevlei’s Main Pit, which required a “large tonnage of higher level and near edge ore to be mined” as the company continues to prepare for the expansion of its operations in 2021.
BlueRock estimates that the like-for-like reduction in pricing is approximately 10 to 15%, in what the firm described as a “decent result in what was a very difficult market environment”. In particular, BlueRock cited an increased reliance on “private sales to a limited number of buyers” as the tender system was not in operation for much of the year.
Executive Chairman, Mike Houston, commented on BlueRock’s update:
“Given the problems of operating in the COVID-19 world, I am very encouraged by our outturn for Q4 2020 and the full year as the management team has delivered in the areas that it can control with production tonnes and sales carats significantly up on the 2019 figures.
“The fall in the value per carat is unfortunate as it has reduced the impact of the improved production output, but we are now seeing signs of recovery in general pricing and early signs of an increasing incidence of the high value stones.
“A major focus for much of 2020 has been the preparation and development of our exciting expansion project, which was initially delayed by the COVID-19 lockdown and then the ongoing impact it had on the global supply chain.
“The plan to transition to the new operation by running both plants during Q1 will minimise the disruption on production in early 2021. Despite having to deal with the ongoing exceptionally poor weather conditions and, weather permitting, the project is still expected to be fully commissioned by the end of Q1 but may push into early Q2. Our guidance for 2021 remains at 850,000 to 1,000,000 tonnes and 34,000 to 46,000 carats”.
BlueRock’s shares bounced on the news, up 6.90% to 62.00p at midday on Tuesday.