Final Results

SouthernEra Diamonds 2005 Year-End Results

 

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

    Shares Issued and Outstanding: 128,343,101

    TSX: SDM

    AIM: SRE

 

    TORONTO, March 31 /CNW/ - The Board of Directors of SouthernEra Diamonds

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

the Company's 2005 year-end results.

    SouthernEra is engaged in diamond exploration, mine development and

mining activities internationally. Exploration activities in 2005 were

conducted in Canada, South Africa, Gabon, the Democratic Republic of Congo

(the "DRC"), Australia and Zimbabwe.

    The Company's 57%-owned Klipspringer Diamond Mine ("Klipspringer") in

South Africa continued on a care and maintenance basis for most of 2005, due

primarily to the continued strength of the South African Rand ("Rand").

    The Company continues to pursue the commencement of development and

mining operations at the Camafuca Diamond Project. The Company holds its

interest through the Camafuca Joint Venture (CJV). In 2005, the CJV obtained

the approval of the Angolan government and has since incorporated a local

operating company, Camafuca - Sociedade Mineira Lda. (CSM).

    The group's activities in 2005 included regional reconnaissance, ground

and airborne geophysics, sampling and drilling exploration in addition to

general and administrative, and corporate activities

    No significant revenue was generated in 2005 from diamond sales at

Klipspringer and compares to the minimal sales recognized in 2004.

    Care and maintenance costs, at Klipspringer in 2005, amounted to

$0.4 million and are comprised of steady state site maintenance, dewatering

and security of the mine site. Comparable mining costs amounted to

$1.3 million in 2004 and reflect the initial costs to wind down the

operations.

    Lower amortization charges of $0.6 million recorded in 2005 versus

$3.2 million charged to operations in 2004 reflects the lower asset base of

the depreciable assets at Klipspringer. In 2004 the Company re-evaluated the

carrying cost of its plant and equipment at Klipspringer and recognized a

$1.9 million charge to the statement of operations.

    In summary, care and maintenance costs in 2005 and 2004 resulted in a

loss from mining operations, after amortization, of $1 million and

$4.5 million respectively.

    In 2005, $1 million of interest expense was recorded as a period cost

relating to accrued interest on the South African tax liability. This compares

to a charge in 2004 of $2 million that comprised both the interest on the tax

liability and interest paid on a Rand overdraft facility at Klipspringer. The

overdraft facility was fully repaid in September 2004 and was not utilized in

2005.

    Corporate, general and administration expenses increased from

$2.7 million in 2004 to $3.8 million in 2005. The 2005 results marked the

first full year that the Company operated without the Platinum Division and

the increase reflects the increased level of corporate costs recorded as a

stand alone entity.

    In 2005, after evaluating carrying values of the Company's exploration

and development projects, it was determined that results from the Yilgarn

Diamond Project in Australia and certain projects within South Africa fell

below the consistently applied criteria the Company has set for continued

involvement in exploration projects and wrote down the carrying value of the

projects by $1.3 million. This compares, in 2004, to a write down of

$3.0 million for certain projects both in Canada and South Africa.

    The foreign exchange gain recognized in 2005 of $1.7 million is a

reversal of the $1.6 million loss recorded in the comparable period of 2004.

The fluctuation in the income versus expense is related, in the main, to the

fluctuations in the value of the South African Rand versus the US dollar.

    The Company, through a reciprocal agreement with Southern Platinum Corp.,

collected a $1.0 million change of control fee from Southern Platinum Corp. in

June 2005 when Southern Platinum Corp. was purchased by Lonmin Plc. The

$1.0 million has been recorded as a recovery of general and administration

expenses on the statement of operations.

    Overall, the Company incurred a loss before taxes of $6.2 million in

2005, a reduction from the loss from continuing operations in 2004 of

$14.5 million.

    Net loss after tax amounted to $5.8 million ($0.06/share) after a net

recovery of current and future income taxes of $0.4 million compared to a net

loss after tax from continuing operations of $13.5 ($0.17/share) in 2004.

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

www.sedar.com to view the full audited financial results for the year ended

December 31, 2005.

 

    SouthernEra Diamonds is one of Canada's largest fully integrated diamond

companies with extensive diamond exploration in five countries including

Canada, Gabon, the DRC, Zimbabwe and South Africa. This represents one of the

most active global diamond exploration programs after the majors DeBeers, BHPB

and Rio Tinto. The Company also holds the Klipspringer Diamond Mine in South

Africa and maintains an 18 percent free-carried interest in the Camafuca

Diamond Project in Angola.

 

    SouthernEra Diamonds Inc.

    Consolidated balance sheets

    (in thousands of United States dollars)

 

 

                                                          2005          2004

    -------------------------------------------------------------------------

    Assets

    Current assets:

      Cash and equivalents                           $   4,337     $     732

      Accounts receivable                                1,508         3,207

    -------------------------------------------------------------------------

                                                         5,845         3,939

 

    Restricted cash (note 3)                             4,000             -

    Property, plant and equipment (note 4)               1,644         2,264

    Development projects (note 5)                       14,596        13,715

    Exploration projects (note 6)                       20,482        16,217

    Other assets                                         1,111         1,149

    -------------------------------------------------------------------------

                                                     $  47,678     $  37,284

    -------------------------------------------------------------------------

    Liabilities and shareholders' equity

    Current liabilities:

      Accounts payable and accrued liabilities       $   1,447     $   1,530

      Income taxes payable                              15,897        15,733

 

    -------------------------------------------------------------------------

                                                        17,344        17,263

    Long-term liabilities:

      Future income taxes (note 8)                         524           700

      Environmental rehabilitation provision             1,032         1,165

    -------------------------------------------------------------------------

                                                        18,900        19,128

    -------------------------------------------------------------------------

    Shareholders' equity:

      Common shares (note 7)                           108,882        94,571

      Share purchase warrants                            1,578           518

      Contributed surplus                                3,558         2,501

      Deficit                                          (83,266)      (77,460)

      Cumulative translation adjustments                (1,974)       (1,974)

 

    -------------------------------------------------------------------------

                                                        28,778        18,156

 

    -------------------------------------------------------------------------

                                                     $  47,678     $  37,284

    -------------------------------------------------------------------------

    Going concern (note 1)

    Commitments (note 12)

 

 

 

    SouthernEra Diamonds Inc.

    Consolidated statements of operations

    For the Years Ended December 31

    (in thousands of United States dollars, except loss per share amounts)

 

 

                                                          2005          2004

    -------------------------------------------------------------------------

    Revenue                                          $       6     $      10

    -------------------------------------------------------------------------

    Direct costs:

      Care and maintenance                                (366)       (1,276)

      Amortization                                        (581)       (3,176)

    -------------------------------------------------------------------------

                                                          (947)       (4,452)

    -------------------------------------------------------------------------

    Loss from mining operations                           (941)       (4,442)

    Interest expense                                      (957)       (1,978)

    General and administration expenses                 (3,801)       (2,737)

    Stock option expense (note 7)                         (877)         (799)

    -------------------------------------------------------------------------

    Loss before the undernoted                          (6,576)       (9,956)

    Exploration and development project writedowns

     (note 6)                                           (1,346)       (2,954)

    Foreign exchange gain (loss)                         1,682        (1,627)

    -------------------------------------------------------------------------

    Loss before income taxes                            (6,240)      (14,537)

    Income taxes:

      Current expense (note 8)                            (834)          (35)

      Future recovery (note 8)                           1,268         1,072

    -------------------------------------------------------------------------

    Loss after income taxes                             (5,806)      (13,500)

    Net loss of discontinued operations                      -       (26,331)

    -------------------------------------------------------------------------

    Net loss for the period                          $  (5,806)    $ (39,831)

    -------------------------------------------------------------------------

    Basic and diluted loss per share (note 9)

      Continuing operations                          $   (0.06)    $   (0.17)

      Discontinued operations                        $       -     $   (0.33)

      Net loss per common share                      $   (0.06)    $   (0.50)

    -------------------------------------------------------------------------

 

 

 

    Consolidated statements of deficit, contributed surplus and cumulative

     translation adjustments

    For the Years Ended December 31

    (in thousands of United States dollars)

 

 

                                                                        2005

    -------------------------------------------------------------------------

                                                                  CUMULATIVE

                                                   CONTRIBUTED   TRANSLATION

                                         DEFICIT       SURPLUS   ADJUSTMENTS

    -------------------------------------------------------------------------

    Beginning of period                $ (77,460)    $   2,501     $  (1,974)

    Translation gains (losses)

     net for the period                        -             -             -

    Fair value of share options

     granted and vested                        -           877             -

    Transfer to Southern

     Platinum Corp. (note 11)                  -           180             -

    Net loss for the period               (5,806)            -             -

    -------------------------------------------------------------------------

    End of period                      $ (83,266)    $   3,558     $  (1,974)

    -------------------------------------------------------------------------

 

 

                                                                        2004

    -------------------------------------------------------------------------

                                                                  CUMULATIVE

                                                   CONTRIBUTED   TRANSLATION

                                         DEFICIT       SURPLUS   ADJUSTMENTS

    -------------------------------------------------------------------------

    Beginning of period                $ (70,155)    $   2,293     $   8,623

    Translation gains (losses)

     net for the period                        -             -        (1,363)

    Fair value of share options

     granted and vested                        -           799             -

    Transfer to Southern

     Platinum Corp. (note 11)             32,526          (591)       (9,234)

    Net loss for the period              (39,831)            -             -

    -------------------------------------------------------------------------

    End of period                      $ (77,460)    $   2,501     $  (1,974)

    -------------------------------------------------------------------------

 

 

 

    SouthernEra Diamonds Inc.

    Consolidated statements of cash flows

    For the Years Ended December 31

    (in thousands of United States dollars)

 

 

                                                          2005          2004

    -------------------------------------------------------------------------

    Net loss for the period                          $  (5,806)    $ (39,831)

    Net loss from discontinued operations                    -        26,331

    -------------------------------------------------------------------------

    Net loss from continuing operations                 (5,806)      (13,500)

    Adjustments for non-cash items:

      Exploration and development project writedowns     1,346         2,954

      Amortization                                         581         3,176

      Interest charged to earnings                         957         1,978

      Stock option expense                                 877           799

      Income tax expense                                  (434)       (1,037)

      Foreign currency translation (gain) loss          (1,682)        1,627

    -------------------------------------------------------------------------

                                                        (4,161)       (4,003)

    Change in non-cash working capital balances          1,675        14,657

    Cash used in discontinued operations                     -       (23,003)

    -------------------------------------------------------------------------

    Cash used in operations                             (2,486)      (12,349)

    -------------------------------------------------------------------------

    Financing activities:

      Issue of common shares and share units

       for cash, net of issuance costs                  16,443            98

    Cash used in discontinued financing activities           -       (21,911)

    -------------------------------------------------------------------------

    Cash (used in) provided by financing activities     16,443       (21,813)

    -------------------------------------------------------------------------

    Investing activities:

      Exploration and development projects              (6,340)       (7,481)

      Property, plant and equipment                        (12)          (86)

      Restricted cash                                   (4,000)            -

    Cash used in discontinued investing activities           -        (8,457)

    -------------------------------------------------------------------------

    Cash used in investing activities                  (10,352)      (16,024)

    -------------------------------------------------------------------------

    Increase (decrease) in cash                          3,605       (50,186)

    Transfer of cash to Southern Platinum Corp.

     under Plan of Arrangement                               -       (12,599)

    Foreign exchange (loss) gain on cash held

     in foreign currency                                     -          (506)

    Cash and equivalents - beginning of period             732        64,023

    -------------------------------------------------------------------------

    Cash and equivalents - end of period             $   4,337     $     732

    -------------------------------------------------------------------------

    Cash and cash equivalents comprise:

      Cash                                           $   4,337     $     513

      Short-term investments                                 -           219

    -------------------------------------------------------------------------

                                                     $   4,337     $     732

    -------------------------------------------------------------------------

    Supplementary information:

      Significant non-cash investing activity -

       Acquisition of additional interest in

       subsidiary for shares                         $       -     $ (28,798)

    -------------------------------------------------------------------------

 

   

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

Senior VP, CFO and Secretary, Telephone: [phone], Fax: [phone],

E-mail: inbox(at)southernera.com, www.southernera.com; London: 4C-Burvale,

Carina Corbett, Director, Telephone: ++44 (0) 207-907-4761,

Fax: ++44 (0) 207-907-4769, Email: Corbett(at)4c-burvale.co.uk

    (SRE)