Sunrise Diamonds plc
I am pleased to present your Company’s Annual Report and financial statements for the year ended 30 September 2009.
In 2009, in response to the global financial crisis, our diamond exploration programmes in Finland have been on care and maintenance and we have pared back administration costs to preserve cash resources. In addition key project interests have been favourably restructured to remove a major financial commitment through the purchase of the Kaavi-Kuopio claims for shares, and a royalty interest, where formerly our equity earn-in required substantial expenditures.
Our exploration budgets for 2010 allow for a resumption of diamond exploration in Finland but these plans will be kept under review and will depend on a renewed appetite for the funding of mineral exploration by the market.
Diamond Market Diamonds are luxury goods and in the last quarter of 2008, as the global financial crisis took hold, diamond prices went into free-fall as diamond traders, jewellery manufacturers and retailers were impacted by a loss of trade-finance facilities. High levels of debt and inventory were compounded by an established process of producer inventory de-stocking as the diamond industry transitions from a “producer push” to a “consumer pull” model.
The downward trend continued into 2009 with retail and rough diamond prices reportedly falling by 30% from their 2008 peak. Diamond producers responded with mine closures and cancellations of rough diamond sales. These measures, coupled with a strong stock market recovery, have had a noticeable effect on optimism in the industry and some mines were brought back into production by mid 2009 as major producers resumed diamond sales.
Despite this more optimistic outlook, industry commentators suggest that the value of rough diamond demand may continue to drop until early 2010 and that some remaining marginal mines will close or reduce output significantly by that time — helping to restore a market balance.
We are now in the last calendar quarter when, importantly, roughly 50% of annual diamond jewellery sales normally take place. Each of the last 25 shopping days before Christmas typically account for 1% of annual sales so it is encouraging that in this 2009 pre-Christmas period there have been good trading conditions in major trading centres with strong demand and firming prices in many diamond categories.
The value of mineral discoveries made today will depend — not on today’s commodity prices — but on those prevailing when a mine comes on stream years later. However, investor sentiment for diamond companies reflects today’s realities and so it is against this background that your Company has, whilst preserving and expanding the most promising diamond targets within its portfolio, widened its
search to include non-diamond projects to better balance the Company’s prospects in the future.
New Projects During the year we have looked at a large number of new project opportunities in a wide range of commodities. Projects considered have included internally generated projects where the entry costs are minimal but where opportunities exist to add significant value for shareholders for minimal expenditure. Examples include our new Cue project in Western Australia where we are targeting nickel-copper and platinum group metals as well as diamonds, and the Derryginagh barite project in Ireland. More details of these newly acquired projects can be found in the Operating Review.
We are also looking at more immediately “transformational” projects which would be of a larger scale or at a more advanced stage of development than those currently in our portfolio.
In the search for, evaluation and acquisition of new projects, procedures are in place to avoid any conflict of interest with Tertiary Minerals plc which provides management services at cost to the Company.
Annual General Meeting At the next AGM shareholders will be asked to consider, amongst the usual business, a resolution adopting an entirely new set of Articles of Association which, despite the changes made last year, is necessitated by the final stage implementation of the new Companies Act. Renewal of the share issue authorities, largely unused in 2009, is also sought and I hope you will once again support the Board in putting these in place.
Financials The Company’s financial statements for 2009 have been prepared in full compliance with International Financial Reporting Standards (IFRS) as adopted by the European Union.
The Company reported a loss of £227,563 for the year (2008: £634,880).
In Conclusion Although it has been a difficult year we believe that the efforts we have taken to preserve shareholders’ cash and protect and maintain key project assets during the year will be rewarded and that our ongoing efforts to secure new projects will take the Company forward.
I would like to thank all my fellow directors, and staff for their salary sacrifices during the year and also you, our shareholders, who have supported the Company in 2009.
Patrick L Cheetham Executive Chairman 7 December 2009