Botswana Operations Update
December 10 2009 - 2:00AM
UK Regulatory
TIDMFDI
RNS Number : 8835D
Firestone Diamonds PLC
10 December 2009
Firestone Diamonds plc
Mine development to commence at BK11 diamond project in Botswana
LONDON: 10 December, 2009
The Board of Firestone Diamonds plc, ("Firestone" or "the Company"), the
AIM-quoted diamond mining and exploration company (ticker: AIM:FDI), is pleased
to announce that it intends to commence development of commercial mining
operations on its BK11 kimberlite in Botswana. BK11 is situated approximately 20
kilometres south east of Debswana's Orapa Mine and seven kilometres north west
of Debswana's Letlhakane Mine.
HIGHLIGHTS
+--+--+--+----------------------------------------------------------------+
| -| Decision made to proceed with mine development following final phase |
| | of evaluation |
+--+----------------------------------------------------------------------+
| | | -| Production to commence ahead of schedule in Q2 2010 |
+--+--+--+----------------------------------------------------------------+
| | | -| Development costs to be funded from existing cash reserves |
+--+--+--+----------------------------------------------------------------+
| | | -| Full production capacity of 1.5 million tonnes per annum to be |
| | | | in place in Q3 2010 |
+--+--+--+----------------------------------------------------------------+
| |
+-------------------------------------------------------------------------+
| -| Good results obtained from final phase of bulk sampling |
+--+----------------------------------------------------------------------+
| | | -| Overall diamond value increased to $137/carat |
+--+--+--+----------------------------------------------------------------+
| | | -| Diamond value increased in KW area to $157/carat |
+--+--+--+----------------------------------------------------------------+
| |
+-------------------------------------------------------------------------+
| -| Resource increased since June 2009 |
+--+----------------------------------------------------------------------+
| | | -| Resource of 12 million tonnes containing 800,000 carats to 120 |
| | | | metres; includes six million tonnes in the KW area, with |
| | | | average grade of 10 carats per hundred tonnes |
+--+--+--+----------------------------------------------------------------+
| | | -| Additional six million tonnes containing 200,000 carats |
| | | | between 120 and 250 metres; further sampling to be undertaken |
| | | | at this level |
+--+--+--+----------------------------------------------------------------+
| |
+-------------------------------------------------------------------------+
| -| Mining to commence in KW area of BK11 |
+--+----------------------------------------------------------------------+
| | | -| Estimated revenue of $16 per tonne and operating costs of |
| | | | $6.50 per tonne |
+--+--+--+----------------------------------------------------------------+
| | | -| Expected to produce annual revenues of approximately $24 |
| | | | million per annum at operating margins of 60% |
+--+--+--+----------------------------------------------------------------+
| | | -| Substantial upside with diamond prices expected to increase |
+--+--+--+----------------------------------------------------------------+
| |
+-------------------------------------------------------------------------+
| -| Firestone interest in BK11 increased from 80% to 90% |
+--+--+--+----------------------------------------------------------------+
Philip Kenny, CEO of Firestone Diamonds, commented: "Commencing development of a
new mine at BK11 is a major milestone for Firestone Diamonds. By the middle of
2010 our company will have become one of only a small number of listed
kimberlite producers worldwide. This is a significant achievement in its own
right, but even more so as we will have done so in less than two years from the
results of our initial evaluation work on the project. The BK11 mine will give
us a very solid foundation from which to further develop our exciting portfolio
of projects and opportunities in Botswana. With the projected shortfall in rough
diamond supply expected to drive diamond prices higher in coming years, we
believe that the prospects for Firestone are extremely good."
In July 2009 the Company commenced work on the final phase of evaluation on
BK11. The primary objective of this work was to recover a sufficiently large
parcel of diamonds in order for a high confidence diamond valuation to be
obtained and to allow a mine development decision to be made.
Excellent progress has been made, and grade and diamond quality from material
processed from the bulk sampling trench have been in line with expectations.
Valuation of approximately 500 carats from the trench has been completed,
resulting in an overall modelled value of $137/carat (a 1% increase from June
2009) and a modelled value of $157/carat for the KW area on the west side of
BK11 (a 9% increase from June 2009), which is the area initially targeted for
mine development. Based on these results, the Company now intends to proceed to
mine development on BK11.
Significant progress has been made on modifying the production plant at the
Company's Bonte Koe mine in South Africa for use at BK11, and this work is
currently ahead of schedule. The plant will be relocated and commissioned in two
phases, with production to commence ahead of schedule in Q2 2010 with a plant
capacity of approximately 650,000 tonnes per annum, increasing to full
production capacity of 1,500,000 tonnes per annum in Q3 2010.
With revenue estimates of $16 per tonne and with low operating costs in the
Orapa area of approximately $6.50 per tonne, mining of the KW area at BK11 is
expected to produce annual revenues of approximately $24 million per annum at
operating margins of 60%. Any further increases in diamond prices, which the
Company believes is likely to occur as a result of a projected shortfall in
diamond supply in the coming years, would add substantially to the potential
profitability of BK11.
The required development costs will be financed from the Company's existing cash
resources. Firestone has entered into an agreement with its Botswana partners at
BK11 to finance their share of mine development costs, in return for which the
Company's interest in the project will be increased from 80% to 90%.
Diamond valuation increased
The quality of diamonds recovered from the bulk sampling trench has continued to
be very good, comprising mostly clear white gemstones and very little boart. A
parcel of approximately 500 carats was valued in December 2009 by Johan Erikson,
an independent diamond valuator with 28 years' experience in diamond valuation,
resulting in a raw value of $131 per carat.
Zstar Mineral Resource Consultants has used the valuation data to carry out a
modelling exercise on the BK11 diamond population. This produced an overall
modelled value for BK11 diamonds of $137/carat, a 1% increase from June 2009.
The KW area, which is the area initially targeted for mine development, has a
higher modelled value of $157/carat, which represents a 9% increase from June
2009, with upper and lower confidence limits of $222 and $90 per carat,
respectively.
The BK11 diamond values are considered to be high for kimberlite production. The
Company expects that average diamond size will increase as mining progresses
into the grain flow deposits that have been identified at depth, and that
diamond values will increase accordingly.
Resource increased
The Company has undertaken significant resource delineation work on BK11. This
work has resulted in the definition of a resource of 12 million tonnes
containing approximately 800,000 carats to a depth of 120 metres. Approximately
6 million tonnes of this resource is in the KW area with an average grade of 10
carats per hundred tonnes, of which approximately 2.3 million tonnes is in the
indicated resource category. Additional work will be undertaken to convert the
entire KW resource to the indicated category as mining progresses. The Company
believes that actual mining grades have the potential to increase significantly
due to the use of selective mining and the presence of higher grade zones which
are expected at depth.
An additional inferred resource of 6 million tonnes of kimberlite containing
approximately 200,000 carats has been identified between 120 and 250 metres.
Limited sampling has been carried out on this part of the resource, and further
work will be undertaken as mining progresses.
The resource in the KW area is as follows:
+-----------------------------------------+-------------------+
| KW Area | Modelled results |
+-----------------------------------------+-------------------+
| Inferred and Indicated Resource | 6 |
| (million tonnes) | |
+-----------------------------------------+-------------------+
| Grade (cpht) | 10 |
+-----------------------------------------+-------------------+
| Diamond value ($ per carat) | $157 |
+-----------------------------------------+-------------------+
| Revenue ($ per tonne) | $16 |
+-----------------------------------------+-------------------+
Commercial production advanced to Q2 2010
Significant progress has been made on modifying the production plant at the
Company's Bonte Koe mine in South Africa for use at BK11, and this work is
currently ahead of schedule.
With the Environmental Impact Assessment already having been approved by the
Department of Environmental Affairs, and the mining lease application expected
to be ready for submission to the Department of Minerals, Energy and Water
Resources shortly, production is now expected to commence ahead of schedule in
Q2 2010.
The plant will be relocated and commissioned in two phases, with phase 1
expected to go into operation in Q2 2010 at a capacity of approximately 650,000
tonnes per annum, increasing to 1,500,000 tonnes per annum in Q3 2010.
A number of changes are also being planned to the plant flow sheet based on ore
dressing data obtained from operation of the pilot plant over the past five
months. The addition of larger scrubbing circuits is expected to significantly
decrease the amount of material reporting to the DMS section, which would result
in higher plant capacity being achieved.
Negotiations are under way with the Botswana Power Corporation for the
construction of a 14 km long power line from Orapa to BK11, but the Company has
planned sufficient generating capacity available to operate the plant. This will
add approximately $1/tonne to operating costs until grid power is available.
For further information, visit the Company's web site or contact:
+----------------------------------------+-------------------------------+
| Philip Kenny, Firestone Diamonds | +44 20 8834 1028/+44 7831 324 |
| | 645 |
+----------------------------------------+-------------------------------+
| Simon Edwards / Tim Redfern, Evolution | +44 20 7071 4330 / 4312 |
| Securities (Joint Broker) | |
| | |
+----------------------------------------+-------------------------------+
| Rory Scott, Mirabaud Securities (Joint | +44 20 7878 3360 |
| Broker) | |
| | |
+----------------------------------------+-------------------------------+
| Alexander Dewar, Brewin Dolphin | +44 131 529 0276 |
| (Nominated Adviser) | |
| | |
+----------------------------------------+-------------------------------+
| Jos Simson / Leesa Peters, Conduit PR | +44 20 7429 6603/+44 7899 870 |
| | 450 |
+----------------------------------------+-------------------------------+
Background information on Firestone Diamonds:
Firestone Diamonds plc ("FDI.L") is an international diamond mining and
exploration company with operations in Botswana and South Africa. Botswana is
the world's largest and lowest cost producer of diamonds, with annual production
worth over $2.5 billion, and is considered to be one of the most prospective
countries in the world to explore for diamonds.
Firestone is the largest holder of mineral rights in Botswana's diamondiferous
kimberlite fields, controlling over 25,000 square kilometres around the major
Orapa and Jwaneng mines and the entire Tsabong kimberlite field. Firestone has
95 kimberlites in its portfolio, of which 24 have been proven to be
diamondiferous. Fifteen of Firestone's kimberlites are at the bulk sampling
stage.
Notes:
1. The information in this statement has been reviewed by Mr. Tim Wilkes, BSc,
Pr Sci Nat, who is a qualified person for the purposes of the AIM Guidance Note
for Mining, Oil and Gas Companies. Mr. Wilkes is Chief Operating Officer of
Firestone Diamonds plc and has over 27 years' experience in diamond exploration,
mineral resource management and mining. Mr. Wilkes is a member of the
sub-committee for diamonds of the South African Mineral Resource Committee
(SAMREC).
2. All grades and diamond values are based on a bottom cut off of 1mm.
3. The resource estimates in this statement have been compiled in accordance
with the SAMREC code.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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