Diamond miner the Trans Hex Group on Wednesday reported the widening of its first half losses primarily because of the global financial market turmoil.

The company posted a headline loss per share of 52 cents from continuing operations for the six months to end September 2008 against a headline loss per share of 22 cents the same period the year before.

The loss for the period deepened to R64.35-million compared to last year's first half loss of R11.09-million.

Trans Hex's South African operations declined from 51 871 carats to 43 670 carats due to lower grade at Baken during the first quarter, while carat production at Angola's Luarica, in which Trans Hex has a 35 percent interest, reduced by 44 percent to 29 000 carats from 51 700 carats due in part to "severe operating cash flow constraints".

Total rough diamond sales for the reporting period amounted to US$42.6-million, a reduction of 24 percent over H1 2007 total rough sales of $55.7-million.

Rand revenue at R329.7-million was 16 percent lower than the comparative period.

"The decline in sales revenue was due primarily to the last tender sale coinciding with the global banking credit crisis, which resulted in lower volumes sold, as well as a 20 percent drop in the average price per carat," Trans Hex said.

A loss from continuing operations of R56-million was reported compared to a loss of R2.7-million for the comparative period, with a loss per share of 53 cents compared to a loss per share of 2.6 cents in the comparative period.

The cost of goods sold was negatively affected by the 11 percent decline in carat production, due primarily to lower grades achieved in the first quarter, as well as a significant escalation in costs including a 66 percent increase in the fuel cost per litre from the comparative period last year.

The company warned that although the bulk of the reporting period was characterised by strong demand and continuous price increases, sales after August 2008 were severely impacted as the global economic downturn impacted negatively on the industry.

"Rough prices for this period showed decreases from previous highs and demand has fallen as liquidity and concerns over polished jewellery sales have now resulted in slower rough diamond buying activity," Trans Hex said.

Looking ahead, the company expects the improved grades currently being achieved at Baken to help increase South African carat production by 25 percent in the second half.

Production at Fucauma is anticipated to increase further as Trans Hex's recovery plan gains impetus.

At Luana pilot production is expected to increase from 2000 carats per month to 5000 carats per month by the end of the year.

But Trans Hex warned that rough and polished sales are likely to face a difficult period until confidence returns.

It said this would to some extent be mitigated should the current rand/US$ exchange rate prevail.

"We remain positive that strong demand for the high-value large stones which Trans Hex produces will return to pre-global credit crisis levels," the company said.

No dividend was declared as the company aimed to maintain cash resources.

I-Net Bridge