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MINING: KCM In Battle To Survive

 



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CAPE TOWN-based diamond mining company Kimberley Consolidated Mining (KCM) appears to be in a desperate battle for survival as the global economic downturn takes its toll.

Unlike Remgro controlled diamond miner Trans Hex (which still has a large cash cushion to fall back on) KCM can’t exactly be regarded as well capitalised or claim to hold a strong balance sheet.

Currently KCM has pared back operations to the bare minimum, which probably means any cash flows derived from a weak rough diamond market will probably be no more than a trickle. Understandably some desperate measures are in place – including the sale of non-core and surplus mining assets.

KCM also managed to raise R4 million by issuing 34 million new shares at 8c to unnamed parties – but this transaction may be in doubt. The company recently disclosed that the ‘failure of an anchor investor to pay for subscribed shares’ contributed to lower production and additional costs.

Whether this refers to the recent placement of 34 million shares is not clear. Whatever the case it’s not great news for KCM.

The only glimmer of hope at this point seems to be in KCM’s ongoing negotiations with China National Geological and Mining (CNGM) – which presumably revolve around the Hong Kong-based firm taking a major stake in KCM and recapitalising the company.

Hopefully any potential deal with CNGM is concluded sooner rather than later because trading advisories coming from KCM look rather dire.

The company recently warned of deep losses for the year ended 28 February 2009 – a period that KCM initially reckoned would produce sizeable profits.


 
 
 
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