1st Quarter Results

SouthernEra Diamonds 2005 First Quarter Results

 

    (All amounts are in United States dollars unless otherwise noted)

    Shares Issued and Outstanding: 102,066,601

    TSX: SDM

    AIM: SRE

 

    TORONTO, May 16 /CNW/ - The Board of Directors of SouthernEra Diamonds

Inc. ("SouthernEra") (the "Company") (TSX: SDM, AIM: SRE) today reported on

the Company's 2005 first quarter results.

    The Klipspringer Diamond Mine continued on care and maintenance in the

first quarter of 2005. The Company therefore recognized no diamond sales in

the quarter. In the comparable quarter of 2004, the recovery from production

was nominal.

    Mine maintenance costs at Klipspringer in the first quarter of 2005 of

$0.2 million were offset by sales of scrap materials, down from $0.6 million

in the first quarter of 2004. Amortization charges of $0.2 million relate to

the Klipspringer diamond recovery plants and the corporate group fixed assets.

Overall, the Company recorded a net loss from mining operations of

$0.2 million in the first quarter compared with a loss in the comparable

quarter of 2004 of $0.5 million.

    The Company is studying alternative mining methods and optimal levels of

production at Klipspringer with the intention of resuming mining operations in

the near term. Start up costs in each of the alternatives being studied are

not expected to be significant.

    Corporate, general and administration expenses of $0.8 million are

slightly less than the first quarter of 2004 of $1.1 million.

    The foreign exchange gain in the current quarter of $1.5 million

comprises net unrealized gains on Canadian and South African currency

denominated monetary assets and liabilities and reflects the relative movement

against the Company's reporting currency (the US dollar). The South African

Rand, in which currency the Company's main monetary liabilities are stated,

weakened slightly against the US dollar in the quarter, resulting in the gain.

In the first quarter of 2004 there was a comparable net exchange loss of

$1.3 million due to the strengthening of the Rand in that quarter.

    In the first quarter, the Company incurred an after tax profit of

$0.2 million from continuing operations versus a $2.8 million loss in the

first quarter of 2004.

    Cash inflow from operating activities in the first quarter of 2005

amounted to $0.9 million versus cash outflows of continued diamond operations

of $3.0 million in the first quarter of 2004. In the current quarter, the

Company expended cash to fund care and maintenance costs at the Klipspringer

Mine, continued exploration and development activities, and general and

administration expenditures.

    The increase in the Company's cash and cash equivalents balance as at

March 31, 2005, versus December 31, 2004 reflects two private placement

financings completed during the quarter net of continued exploration and

development costs.

    Where the Company has determined that exploration and development results

remain promising, the amounts expended on these projects are included on the

balance sheet. The March 31, 2005 balance approximated $31.2 million

(December 31, 2004- $29.9 million).

    Please refer to the Company's website (www.southernera.com) to view the

full financial results for the first quarter of 2005.

 

    SouthernEra Diamonds is one of Canada's largest fully integrated

international diamond companies with extensive diamond exploration in five

countries including Canada, Australia, Gabon, the DRC and South Africa. This

represents the fourth most active global diamond exploration program after the

majors DeBeers, BHPB and Rio Tinto. The Company also operates the Klipspringer

Diamond Mine in South Africa and maintains an 18 percent free-carried interest

in the Camafuca Diamond Project in Angola.

 

    For further information: SouthernEra Diamonds Inc., Mr. Chris Reynolds,

Senior Vice President and CFO, or Ms. Sharon Allan, Investor Relations,

Telephone: [phone], Fax: [phone], E-mail:

inbox(at)southernera.com, www.southernera.com

    (SDM.)