Liqhobong - Update (7463A)

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RNS Number : 7463A

Firestone Diamonds PLC

07 February 2011

Firestone Diamonds plc

Production to commence at Liqhobong Mine in February 2011

LONDON: 7 February, 2011

Firestone Diamonds plc, ("Firestone" or "the Company"), the AIM-quoted diamond mining and exploration company (ticker: AIM:FDI), is pleased to announce an update on developments at the Company's Liqhobong Mine in Lesotho.

HIGHLIGHTS

 
 --   Mining 
      -   Detailed mine planning and scheduling completed 
      -   Mining contractor appointed and earthmoving equipment 
           mobilised to site 
      -   Mining to commence in February 
      -   Mining initially focused on high grade K5 and 
           K6 kimberlite units 
 --   Production Plant 1 
      -   Wet commissioning completed in January 2011 and 
           ready for first delivery of ore 
      -   Expected to achieve rated production capacity 
           of 0.4 mtpa on schedule by March 2011 
      -   Capacity to be tripled to 1.3 mtpa by Q4 2011 
      -   Expected to generate revenue of $43 million per 
           annum at full capacity 
 --   Production Plant 2 
      -   Work continuing on specifications and design for 
           Plant 2, with planned capacity of 4.2 mtpa and 
           expected revenue of $140 million per annum

In December 2010, Firestone announced that it had raised GBP13 million through an equity placing, the proceeds of which were principally to be used to accelerate the Company's plans to recommence and significantly expand production at the Main Pipe at its 75% owned Liqhobong Mine in Lesotho. Good progress has been made at Liqhobong since December and production is expected to recommence ahead of schedule in February 2011.

A resource of 91 million tonnes at an average grade of 34 carats per hundred tonnes containing 31 million carats has been identified at the Main Pipe. With an average estimated diamond value of $98/carat and a contained value of approximately $3 billion, Liqhobong is considered by the Company to be one of the most attractive undeveloped kimberlites in the world.

Philip Kenny, CEO of Firestone Diamonds, commented: "We are pleased with the very rapid progress that we have made at Liqhobong, which we believe has the potential to be a highly profitable mining operation. Together with production from the BK11 mine and our extensive portfolio of kimberlites in Botswana, we believe that Firestone is now very well positioned to become a significant diamond producer and to reach its target of producing 1 million carats per annum by 2014."

Mining

Initial mine planning studies undertaken by the Company in 2010 indicated that open pit mining operations can be undertaken to a depth of 390 metres and would result in the mining of approximately 60 million tonnes of kimberlite and the production of an estimated 19 million carats over a period of approximately 17 years. These numbers are likely to increase following the increase in diamond valuation for Liqhobong from $86/carat to $98/carat in December 2010.

An experienced Lesotho-based mining contractor has been appointed to manage mining operations at Liqhobong. The contractor has mobilised the earthmoving equipment required to recommence mining operations and this equipment arrived on site at the beginning of February 2011. Mining operations are expected to commence in February 2011. It is expected that much of the mining planned in 2011 can be undertaken without blasting, so a blasting contractor will only be mobilised to site when required later in the year.

Detailed mine planning and scheduling was completed in January 2011 in preparation for the recommencement of operations. Mining operations will initially be focused on the K5 and K6 kimberlite units, which are the highest grade units in the Main Pipe and are considered, based on recoveries from previous mining operations, to have the highest potential to yield large, high value diamonds.

Production Plant

Plant 1

Wet commissioning of Plant 1 was completed in January 2011 and the plant is ready for the first delivery of ore for treatment. It is expected that the plant will achieve its current rated production capacity of 0.4 million tonnes per annum ("mtpa") on schedule in March 2011.

Work on the proposed expansion of Plant 1, which will triple production capacity to 1.3 mtpa commenced in January 2011, and the Company expects the expansion to be completed on schedule in Q4 2011. At full capacity of 1.3 mtpa Plant 1 is expected to generate revenue of $43 million per annum, based on the average price achieved in December 2010 for Liqhobong diamonds of $98/carat. Capital costs for the Plant 1 expansion work are estimated to be $9 million, which will be financed from the proceeds of the December 2010 placing.

Plant 2

Work is continuing on the specifications and design for Plant 2, which is planned to have a capacity of 4.2 mtpa, and these will be finalised later in 2011 using data from the operation of Plant 1. It is expected that the decision to commence construction of Plant 2 will be made in 2012, with initial production expected to commence in 2013. At full production Plant 2 is expected to generate revenue of $140 million per annum.

Labour and mine infrastructure

Planning commenced in December 2010 for the sourcing of staff. All of the labour required to support the recommencement of operations at Liqhobong has now been mobilised to site. Work on upgrading the access road to Liqhobong commenced in January 2011 and is still ongoing.

For further information, visit the Company's web site at www.firestonediamonds.com or contact:

 
                                         +44 20 8834 1028/+44 7831 
 Philip Kenny, Firestone Diamonds         324 645 
 Tim Redfern, Evolution Securities 
  (Joint Broker)                         +44 20 7071 4312 
 Rory Scott, Mirabaud Securities 
  (Joint Broker)                         +44 20 7878 3360 
 Alexander Dewar, Brewin Dolphin 
  (Nominated Adviser)                    +44 131 529 0276 
 Jos Simson / Leesa Peters, Tavistock    +44 20 7920 3150/+44 7899 
  Communications                          870 450

Background information on Firestone Diamonds:

Firestone Diamonds plc is an international diamond mining and exploration company with operations focused on Lesotho and Botswana. Firestone operates the Liqhobong Mine in Lesotho and the BK11 Mine in Botswana. Firestone is also the largest holder of mineral rights in Botswana's diamondiferous kimberlite fields, controlling approximately 10,000 square kilometres around the major Orapa and Jwaneng mines and the entire Tsabong kimberlite field. In addition to Liqhobong and BK11, Firestone has 108 kimberlites in its portfolio, of which 30 have been proven to be diamondiferous.

Lesotho is emerging as one of Africa's significant new diamond producers and hosts Gem Diamonds' Letseng Mine, Firestone's Liqhobong Mine as well as the Kao and Mothae development projects. 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.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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