TIDMFDI
RNS Number : 8638D
Firestone Diamonds PLC
30 March 2011
Firestone Diamonds plc
Operations update
LONDON: 30 March, 2011
Firestone Diamonds plc, ("Firestone" or "the Company"), the
AIM-quoted diamond mining and exploration company (ticker:
AIM:FDI), is pleased to provide an update on the Company's mining
operations in Lesotho and Botswana.
HIGHLIGHTS
Liqhobong Mine, Lesotho
-- Mining
- K2 and K4 kimberlite units currently being mined
while high grade K5 and K6 units are being dewatered
- Material from K5 and K6 expected to be available
for treatment in Q2 2011
-- Production Plant 1
- Production commenced ahead of schedule in February
2011
- Grades from initial production in line with expectations
- High quality 15 carat white gem stone and two
yellow gem stones of 45 carats and 14 carats recovered
in first six weeks of production
- Plans to triple capacity of Plant 1 by end 2011
are on schedule
-- Grid power connection
- Contract awarded to extend grid power supply to
Liqhobong; expected to reach Liqhobong in Q1 2012
-- Production Plant 2
- Development decision for Plant 2, with planned
capacity of 4.2 mtpa and expected revenue of $140
million per annum, to be accelerated to end 2011
BK11 Mine, Botswana
-- Mining
- Mining progressing well, with pit depth now approximately
30 metres
-- Production plant
- Phase 1 and Phase 2 of the production plant operational
in Q1 2011; throughput reached 90% of target capacity
of 1.5 million tpa
- Problems encountered with crushing and scrubbing
circuits at the plant; diamond liberation of only
20-30% achieved
- Plant modifications to improve diamond liberation
to be completed in Q2 2011
- Quality of diamonds produced consistent with previous
production
- 2011 production targets still expected to be achieved
in 2011
-- Grid power supply
- Grid power expected to be available at BK11 in
Q3 2011
Diamond Sales
-- Next tender to be held in Gaborone, Botswana, in
early April
-- Approximately 5,000 carats from Liqhobong and 2,200
carats from BK11 to be sold
Financing
-- Terms agreed with Standard Chartered Bank Botswana
for $6 million, 3 year, 6.5% fixed rate credit facility
-- Facility expected to be available for draw down in
April 2011
Tim Wilkes, CEO of Firestone Diamonds, commented: "We are
pleased with the continued progress that we have made at Liqhobong,
which we believe has the potential to be a highly profitable mining
operation. The recovery of three large diamonds is particularly
encouraging at this early stage given we have yet to commence
mining at the high grade K5 and K6 units. While diamond recovery at
the BK11 plant has been below target, we expect this to be resolved
shortly and remain confident of meeting our 2011 production
targets. We believe that Firestone is now very well positioned to
become a significant diamond producer in 2011 and to reach its
target of producing 1 million carats per annum by 2014."
Liqhobong Mine, Lesotho
Very good progress has been made at Firestone's 75% owned
Liqhobong Mine in Lesotho, which the Company considers to be one of
the most attractive undeveloped kimberlites in the world.
Production commenced ahead of schedule in February 2011 and grades
from initial production have been in line with expectations. Plans
to triple the capacity of Plant 1 by the end of 2011 are on
schedule, and the Company now plans to accelerate the development
decision for the 4.2 million tonnes per annum ("tpa") Plant 2 to
the end of 2011.
Mining
The current Liqhobong mine plan provides for the mining of
approximately 60 million tonnes of kimberlite from the Main Pipe
over a period of approximately 17 years and the production of an
estimated 19 million carats. Mining operations for the first two
years will be primarily 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.
Following the appointment of a mining contractor in January
2011, earthmoving equipment arrived on site at the beginning of
February 2011. Mining operations commenced in mid February. The K2
and K4 units are currently being mined while the K5 and K6 units
are being dewatered. Material from K5 and K6 is expected to be
available for treatment in Q2 2011.
Production
Wet commissioning of Plant 1, which had been on care and
maintenance since Q4 2008, was completed in January 2011, and
production commenced in mid February. During the first six weeks of
operation the plant has successfully achieved its name plate
capacity of 0.4 million tpa. A number of problems have been
identified during this period with blockages occurring in the
recovery section and at the thickener. These problems are currently
being addressed and are expected to be resolved in Q2 2011.
Plans to expand the capacity of Plant 1 to 0.65 million tpa are
at an advanced stage, and the expansion is expected to be completed
on schedule in Q2 2011. The further capacity expansion to 1.3
million tpa is on schedule for Q4 2011, at which point 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.
Processing of material from K2 and K4 has resulted in recovered
grades of 28 carats per hundred tonnes ("cpht") and 30 cpht,
respectively, which compares well with the resource grades of 24
cpht and 31 cpht for these units. A high quality 15 carat white gem
stone, which is a fragment of a larger stone, and two yellow gem
stones, of 45 carats and 14 carats, respectively, have been
recovered in the first six weeks of operation, which is very
encouraging.
Mine infrastructure
Approximately 200,000 tonnes of kimberlite is being mined from
the Satellite Pipe in order to provide sufficient water storage to
supply Plant 1 during the drier months in Lesotho. The Satellite
Pipe material is being stockpiled and will be used as necessary for
blending with material from the Main Pipe. Mining of the Satellite
Pit is expected to be completed in 2-3 months, following which the
earth moving equipment will commence construction of a new
intermediate tailings dam. The intermediate tailings dam will
provide sufficient tailings capacity for the operation of Plant 1
until it is replaced by the planned 4.2 mtpa Plant 2, for which a
larger capacity tailings dam is planned.
Significant work has been undertaken on the access road to
Liqhobong. The road is now greatly improved, and can facilitate
access for the large trucks that will be required to transport
equipment for the Plant 1 expansion to site.
Grid power supply
The government of Lesotho has awarded the contract to extend the
grid power supply from Ha Lejone to the Kao and Liqhobong
kimberlites. Detailed surveys for the cable towers have been
completed and long lead items have been ordered. Current plans
indicate that grid power will be available at Liqhobong in Q1 2012,
which will result in both lower costs and improved availability for
the Liqhobong production plant.
Plant 2 Development
Work is continuing on the specifications and design for Plant 2
and these are expected to be finalised later in 2011 using data
from the operation of Plant 1. With grid power now expected to be
available at Liqhobong area sooner than expected, the Company is
considering accelerating the completion of the feasibility study
for Plant 2 in order to allow a development decision to be made by
the end of 2011. Plant 2 is expected to commence operation in 2013,
and to generate revenue of $140 million per annum at full
production.
BK11 Mine
Mining operations at the Company's 90% owned BK11 Mine in
Botswana have progressed well, although problems were encountered
with operation of the production plant during Q1 2011. Despite
these problems, the Company is confident that 2011 production
targets will still be achieved.
Mining
Under the current BK11 mine plan approximately 11.5 million
tonnes of kimberlite is expected to be mined at an average grade of
8.5 cpht, giving total production of approximately 1 million carats
over a 10 year mine life at an average value of $155/carat. In the
KW area, where the current mining pit is located, an average
diamond value of $175/carat is expected.
Pre-stripping of overburden and near-surface low grade
kimberlite was completed in Q4 2010, which resulted in the first
kimberlite targeted for mining becoming available for treatment.
Mining has progressed well and the pit has now been deepened to a
depth of approximately 30 metres. The mine now has an earth moving
capacity of approximately 30,000 tonnes per day, which will allow
stripping to keep pace with the mine plan.
Production
Both Phase 1 and Phase 2 of the production plant were
operational in Q1 2011. While throughput reached 90% of the target
capacity of 1.5 million tpa during the quarter, a number of
problems have been encountered with the crushing and scrubbing
circuits at the plant, the principal problem being insufficient
diamond liberation.
Phases 1 and 2 of the production plant were designed to maximize
throughput and diamond liberation from the relatively soft
kimberlite sediments that comprise the BK11 resource by utilising
primary crushing and aggressive scrubbing. A minimum diamond
liberation of 80% was expected, but samples of oversize material
from the production plant that have been tested through the pilot
plant indicate that liberation has been consistently lower, in the
region of 20-30%. This is principally due to the near-surface K1
kimberlite that has been mined to date being much harder than
anticipated, and is reflected in a recovered grade of 2.5 cpht
during Q1 2011. A sample of run of mine K1 kimberlite has been
processed through the pilot plant and produced a grade of 6.5 cpht.
This is in line with the resource grade for K1, and confirms the
diamond liberation problem.
Plans to improve diamond liberation are now advanced.
Construction of Phase 3 of the production plant, which comprises a
recrush circuit, has been accelerated and is expected to be
operational by the end of Q2 2011. In the meantime, a series of
mobile crushing units are being secured and are expected to
commence processing the oversize stockpile, which is estimated at
100,000 tonnes, by the end of April 2011.
The quality of the diamonds produced is consistent with previous
production. Under the current mine plan, an average head feed grade
of 9-10 cpht is expected to be achieved in 2011, and the Company is
confident that its 2011 production targets will still be
achieved.
Mine infrastructure
Upgrading of the access road that connects BK11 to the tarred
road near Letlhakane is almost complete. This work is being
undertaken in cooperation with Lucara Diamonds, which is developing
a new mining operation at the AK6 kimberlite, which is located 5
kilometres from BK11.
Grid power supply
The Botswana Power Corporation is at an advanced stage with work
on the new power line that will connect BK11 to the national grid.
It is expected that grid power will be available at BK11 in Q3
2011, which will result in both lower costs and improved
availability for the BK11 production plant.
Diamond Sales
A tender will be held at the Company's diamond sales office at
the Diamond Technology Park in Gaborone, Botswana from 4(th) to
14(th) April. Approximately 5,000 carats from Liqhobong and 2,200
carats from BK11 will be available for sale.
Financing
The Company has agreed terms with Standard Chartered Bank of
Botswana for a $6 million, 3 year, 6.5% fixed rate credit facility.
This facility will give the Company greater flexibility in planning
and financing its activities in Botswana and in Lesotho.
Documentation for the facility is currently being finalised, and it
is expected to be available for draw down in April 2011.
Discussions with a number of banks in respect of a debt facility to
finance the construction of Plant 2 at Liqhobong have
commenced.
For further information, visit the Company's web site at
www.firestonediamonds.com or contact:
+44 20 8834 1028/+44 7831
324 645
Philip Kenny, Firestone Diamonds +27 78 457 6623/+267 713
Tim Wilkes, Firestone Diamonds 77686
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 / Emily Fenton, 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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