1st Quarter Results

SouthernEra Diamonds 2006 First Quarter Results

 

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

    Shares Issued and Outstanding: 159,428,601

    TSX: SDM

    AIM: SRE  

 

    TORONTO, May 12 /CNW/ - The Board of Directors of SouthernEra Diamonds

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

the Company's 2006 first quarter results.

    The Company recognized no revenue from diamond sales in the current

quarter or comparable quarter of 2005. In the first quarter of 2006, the

Klipspringer Diamond Mine, held by the Klipspringer Joint Venture ("KJV"- 57%

SouthernEra), was in care and maintenance status as the main operations at the

mine were suspended at the end of 2003. Disappointing carat prices produced

from the KJV combined with increased costs in US Dollar terms, within a strong

South African Rand environment, continued to render operations uneconomic. A

small scale stockpile processing operation which commenced in late 2005 was

terminated in early Q1 due to poor recoveries. No significant revenue was

realized.

    The Company does however incur mine operating costs as it maintains the

site in such a state that operations could resume without significant start up

capital. In the first quarter of 2006 $0.2 million of costs were incurred and

consisted of dewatering, security and site maintenance. Amortization charges

of $0.1 million and $0.2 million in the comparable period of 2005 relate to

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

    The Company therefore recorded a net loss from mining operations of

$0.2 million in the first quarter and is comparable to the first quarter of

2005.

    Corporate, general and administration expenses of $0.9 million (2005 -

$0.8 million) relate to the ongoing corporate, office, payroll and

administrative costs incurred by the Company. The current quarter includes a

$0.2 million charge to earnings for the fair value of granted and vested

common share purchase options granted to officers and employees of the

Company.

    The foreign exchange loss in the current quarter of $0.3 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,

strengthened slightly against the US dollar in the quarter, resulting in the

charge to earnings. In the first quarter of 2005 there was a comparable net

exchange gain of $1.5 million due to the weakening of the Rand in that

quarter.

    In summary, in the first quarter of 2006, the Company incurred an after

tax loss of $1.9 million versus and after tax net income of $0.2 million in

the first quarter of 2005.

    Cash used in operating activities in the first quarter of 2006 amounted

to $1.0 million versus a cash inflow from operations of $1.0 million in the

first quarter of 2005. In the current quarter, the Company expended cash to

fund care and maintenance costs at the KJV, continued exploration and

development activities, and general and administration expenditures.

    Subsequent to March 31, 2006 the Company issued 31,085,500 common shares,

through a private placement, at a price of C$0.43 for gross proceeds of

approximately $11.7 million. This transaction will be recorded in the second

quarter of 2006.

    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, 2006 balance approximated $38.5 million

(December 31, 2005 - $35.1 million).

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

full financial results for the first quarter of 2006.

    SouthernEra Diamonds is one of Canada's fully integrated diamond

companies with extensive alluvial and kimberlite diamond exploration in the

DRC as well as other countries including Canada, Gabon, Zimbabwe and South

 

Africa. 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)

    (unaudited)

 

                                                    March 31,    December 31,

                                                        2006            2005

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

    Assets

    Current assets:

      Cash and equivalents                       $     1,839     $     4,337

      Accounts receivable                              1,432           1,508

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

                                                       3,271           5,845

 

    Restricted cash                                    2,000           4,000

    Property, plant and equipment                      1,534           1,644

    Development projects                              14,811          14,596

    Exploration projects                              23,657          20,482

    Other assets                                       1,124           1,111

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

                                                 $    46,397     $    47,678

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

    Liabilities and shareholders' equity

    Current liabilities:

      Accounts payable and accrued liabilities   $     1,265     $     1,447

      Income taxes payable                            16,373          15,897

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

                                                      17,638          17,344

    Long-term liabilities:

      Future income taxes                                651             524

      Environmental rehabilitation provision           1,047           1,032

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

                                                      19,336          18,900

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

 

    Shareholders' equity:

      Common shares                                  108,899         108,882

      Share purchase warrants                          1,578           1,578

      Contributed surplus                              3,683           3,558

      Deficit                                        (85,125)        (83,266)

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

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

                                                      27,061          28,778

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

                                                 $    46,397     $    47,678

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

 

    These interim financial statements have not been subjected to a review

    by the Company's external auditors.

 

 

 

    SouthernEra Diamonds Inc.

    Consolidated Statements of Operations

    For the Period Ended March 31

    (in thousands of United States dollars, except (loss) income

    per share amounts)

    (unaudited)

 

    For Three Months Ended                              2006            2005

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

    Diamond sales revenue                        $         -     $         -

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

    Direct costs:

      Mining operations                                 (128)              -

      Amortization                                      (118)           (150)

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

                                                        (246)           (150)

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

    Loss from mining operations                         (246)           (150)

    Interest expense                                    (250)           (326)

    General and administration expenses                 (921)           (764)

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

    Loss before the undernoted                        (1,417)         (1,240)

    Foreign exchange gain (loss)                        (298)          1,508

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

    (Loss) income before taxes                        (1,715)            268

    Income tax :

      Current expense                                    (17)           (154)

      Future (expense) recovery                         (127)             41

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

    Net (loss) income after income taxes         $    (1,859)    $       155

    Basic and diluted income (loss) per share    $     (0.01)    $      0.00

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

 

 

 

    Consolidated Statements of Deficit, Contributed Surplus and Cumulative

    Translation Adjustments

    For the Three Months Ended March 31

    (in thousands of United States dollars)

    (unaudited)

 

                                            2006                         2005

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

                             CONTRI-  CUMULATIVE          CONTRI-  CUMULATIVE

                               BUTED TRANSLATION            BUTED TRANSLATION

                    DEFICIT  SURPLUS ADJUSTMENTS  DEFICIT SURPLUS ADJUSTMENTS

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

    Beginning of

     period        $(83,266)  $3,558   $(1,974)  $(77,460)  $2,501   $(1,974)

    Fair value of

     share options

     granted and

     vested               -      125         -          -       75         -

    Net (loss)

     income for

     the period      (1,859)       -         -        155        -         -

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

    End of period  $(85,125)  $3,683   $(1,974)  $(77,305)  $2,576   $(1,974)

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

 

    These interim financial statements have not been subjected to a review by

    the Company's external auditors.

 

 

 

    SouthernEra Diamonds Inc.

    Consolidated Statements of Cash Flows

    For the Period Ended March 31

    (in thousands of United States dollars)

    (unaudited)

 

    For Three Months Ended                             2006             2005

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

    Net income (loss) for the period             $   (1,859)     $       155

    Adjustments for non-cash items:

      Amortization                                      118              150

      Accrued interest                                  250              326

      Fair value of granted and vested share

       options                                          125               75

      Future income taxes                               127                -

      Foreign currency translation loss (gain)          298           (1,508)

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

                                                       (941)            (802)

    Change in non-cash working capital balance         (105)           1,711

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

    Cash (used in) provided by operations            (1,046)             909

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

    Financing activities:

      Issue of common shares for cash                     -            4,270

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

    Cash provided by financing activities                 -            4,270

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

    Investing activities:

      Exploration and development projects           (3,438)          (1,319)

      Property, plant and equipment                     (16)              (3)

      Restricted cash                                 2,000                -

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

    Cash used in investing activities                (1,454)          (1,322)

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

 

    Increase (decrease) in cash                      (2,500)           3,857

    Foreign exchange gain (loss) on cash held

     in foreign currency                                  2              (55)

    Cash and equivalents - beginning of period         4,337             732

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

    Cash and equivalents - end of period               1,839           4,534

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

    Cash and cash equivalents comprise:

      Cash                                               839           4,534

      Short-term investments                           1,000               -

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

                                                 $     1,839     $     4,534

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

 

    These interim financial statements have not been subjected to a review

    by the Company's external auditors.

 

 

    For further information: please contact: 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

    (SRE)