TIDMDCP
RNS Number : 3478W
Diamondcorp Plc
30 January 2012
DiamondCorp plc JSE share code: DMC AIM share code: DCP ISIN:
GB00B183ZC46 (Incorporated in England and Wales) (Registration
number 05400982) (SA company registration number 2007/031444/10)
('DiamondCorp' or 'the Company')
OPERATIONAL UPDATE
DiamondCorp plc, the African diamond mine development and
exploration company, is pleased to provide an update of mine
development plans at the Lace mine in South Africa.
HIGHLIGHTS
- Negotiations are progressing with numerous parties interested
in providing debt facilities to finance the development of the Lace
diamond mine.
- Indicative terms suggest that equity dilution for existing
shareholders can be minimised.
- SRK Consulting is working on the Independent Engineering
Report required to secure debt finance, with delivery scheduled for
next month.
- Geotechnical testwork on the Lace kimberlite samples reveals
high rock strength which has positive implications for tunnel life
in the Lace block caves but means the first block cave needs to be
located deeper than originally planned to ensure sufficient rock
pressure for caving.
- New mine optimisation studies have recommended the 47 Level
(470m depth) as a suitable development level. This means 12 million
tonnes of kimberlite will be mined in the first block rather than
6.5 million tonnes, and brings higher grade, more valuable
kimberlite earlier into the mine plan.
- Detailed in-house costing estimates that a block cave on the
47 Level will cost R450 million ($58 million), including a
contingency of approximately R60 million ($7.7 million) - 11 per
cent more than the previous mine plan.
- Approximately R432 million ($55 million) in revenue is
forecast to be generated from diamonds recovered from the undercut,
initial caving and tailings retreatment, as well as sale of waste
rock - 127% higher than the previous mine plan.
- The maximum cash drawdown during development is estimated at
approximately R250 million (US$32 million) in month 21 of the
development schedule, with almost all the development capital
repaid by month 33 when caving reaches the 4,000 tonnes per day
full production rate.
- The working capital requirement for the mine development is
approximately R100 million ($12.8 million) more than the original
Lace mine plan. However, because of the forecast higher diamond
grade at the 47 Level, initial diamond production is estimated at
more than 400,000 carats per annum resulting in faster payback and
operating margins in excess of 65 per cent.
- At this production rate and current diamond prices of $160/ct,
initial annual revenue would be in excess of US$60 million.
- The detailed cost estimates will be reviewed by SRK Consulting
as part of their Independent Engineering Report.
- Underground drilling has confirmed the presence of a bulge in
the Lace kimberlite between the 24 Levels and the 33 Levels on the
southern side of the pipe. DiamondCorp will investigate early
mining of this kimberlite by rim loading simultaneous with block
cave development.
Commenting on financing and engineering developments,
DiamondCorp CEO, Paul Loudon said: 'The long-term metrics for the
diamond industry are very strong. Few new long-life kimberlite
mines are in the planning, in a market where end users are
scrambling to secure supply. For this reason, we have a significant
number of debt providers interested in committing development
finance for the Lace mine.
'Discussions range from partial debt financing and convertible
structures, to complete debt financing and off-take agreements.
Ultimately, the financing path chosen will be determined on the
basis of the least dilutive route for existing shareholders. I
would expect that the preferred financing option will be determined
shortly after SRK deliver our Independent Engineering Report this
quarter and that full-scale mine development should commence by the
middle of the year.
'The increased depth for the first block cave results in a far
more robust mining project, as bringing the higher grade kimberlite
earlier into the mine plan has a very positive impact on
cashflow.'
LACE FINANCING OPTIONS
DiamondCorp has entered into discussions with more than six
different parties with respect to potential debt finance facilities
for the development of the Lace mine. In addition to traditional
banks, the Company is also in discussions with trade financiers,
Government development agencies and other mining companies in a bid
to find the finance option which maximises return and minimises
dilution to existing shareholders. Indicative terms discussed to
date suggest that equity dilution can be minimised.
In order to secure debt financing, DiamondCorp has appointed SRK
Consulting to complete the necessary Independent Engineering Report
("IER") which will provide the Company and financiers with an
independent opinion on the proposed mining method, mine plan and
detailed financial model for Lace. Work on the IER is advancing
well, and the report is scheduled to be completed in the current
quarter.
GEOTECHNICAL TESTWORK AND MINE PLAN REVISION
DiamondCorp has completed rock strength tests on samples of the
brown volcanoclastic kimberlite extracted from the 26 Level during
the bulk test last October. The results reveal rock strengths of
between 100MPa and 170MPa. This is rock strength is high compared
with other kimberlites where rock strengths are typically in the
range 50MPa to 100MPa. The higher rock strength means that tunnels
on the production level in the block cave should have a long life
without the requirement for major secondary support. This should
have a positive impact on capital and operating costs over the life
of the block. However, the high rock strength means that the first
block cave will need to be located deeper than planned to ensure
there is sufficient rock pressure for caving to initiate. Once
caving starts, all the kimberlite above the production level falls
down by gravity and is extracted from below.
New mine optimisation studies completed during January have
recommended the 47 Level (470m) for the first block cave, 130m
deeper than originally planned. Locating the first block cave
production tunnels on the 47 Level has the following positive
impacts:
- The tonnage to be extracted from the first block increases by
84 per cent from 6.57 million tonnes to 12.12 million tonnes.
- The contained diamonds in the block increases 114 per cent
from 1.6 million carats to 3.4 million carats.
- The cave will be located in a higher grade kimberlite, with
average grades estimated at 40 cpht in this part of the pipe due to
the predominance of higher grade coherent kimberlite ("CK")
- The cave life increases from five years to nine years.
- Only three caves will be required to mine Lace to the 85
Level, compared with four in the previous mine plan.
Locating the cave on the 47 Level has an 11 per cent impact on
capital costs - R450 million ($58 million) compared with R405
million ($52 million) - and increases the ramp up to full
production from 24 months to 33 months. The R450 million includes
contingencies of R60 million ($7.7 million).
During the 33 months to full production, approximately R432
million ($55 million) in revenue is forecast to be generated from
diamonds recovered from the undercut, initial caving and tailings
retreatment, as well as sale of waste rock - 127% higher than the
previous mine plan.
The maximum cash drawdown during development is estimated at
approximately R250 million (US$32 million) in month 21 of the
development schedule, with almost all the development capital
repaid by month 33 when caving reaches the 4,000 tonnes per day
full production rate.
The working capital requirement for the mine development is
approximately R100 million ($12.8 million) more than the original
Lace mine plan. However, because of the forecast higher diamond
grade at the 47 Level, initial diamond production is estimated at
more than 400,000 carats per annum, resulting in faster payback and
operating margins in excess of 65 per cent. At this production rate
and current diamond prices of $160/ct, initial annual revenue would
be in excess of US$60 million. The detailed cost estimates will be
reviewed by SRK Consulting as part of their Independent Engineering
Report.
THE BULGE
A programme of underground drill holes has confirmed the
presence of a bulge in the Lace kimberlite between the 24 and 33
Levels. The bulge means the area of the pipe at the 33 Level is
approximately 50 per cent greater than the pipe at the 24 Level.
DiamondCorp will now investigate early mining of this kimberlite by
rim loading, a mining method which was used by De Beers at Finsch
and Kimberley mines. This additional tonnage and potential for
earlier cashflow is not taken into account in the current mine
plan.
BOTSWANA
Large diameter drilling of J-01, a 10ha diamondiferous
kimberlite 9km from De Beers Jwaneng mine in Botswana, was
completed last week. The samples are currently being processed at
the Lace Mine, after delays were encountered in getting the
material across the border from Botswana to South Africa. Results
from this sampling will be released as soon as they are to hand.
Previously announced results from the mini-bulk sample of the J-05
kimberlite are currently being evaluated.
BACKGROUND - LACE MINE, FREE STATE PROVENCE, SOUTH AFRICA
The Lace diamond mine is located 25km northwest of the town of
Kroonstad within the Free State Province of South Africa. The mine
operated from 1896 to 1931, and according to mine records produced
approximately 700,000 carats of diamonds from 4.5 million tonnes of
kimberlite at a recovered grade of 16 cpht. The production was
reported to be high quality, white diamonds, with the biggest
stones recorded historically being 122 and 86 carats. The
kimberlite was mined by open pit to approximately 100m depth, then
by underground methods to 240m depth. In 1920s, higher grade
kimberlite was encountered as the workings went deeper, and a
decision was taken to develop a 6.5m x 2.5m vertical shaft to the
36 level (360m) and pre-develop the kimberlite between the 24 level
and the 33 level with 2m x 2m development drives.
The vertical shaft and development drives were completed in
1930, a year before the mine closed when diamond prices collapsed
in the Great Depression. The mine was then kept dewatered until
1939, when it was acquired by De Beers Consolidated Mines Limited.
De Beers never operated the mine, but instead let it flood, thereby
sterilising the resource as part of their control of the supply
side of the diamond industry. Following progressive changes to the
mining law in South Africa, DiamondCorp acquired the property from
the Christiaan Potgieter Trust in 2006 in conjunction with Black
Economic Empowerment partners Shanduka Resources and Sphere
Investments.
In 2007, DiamondCorp constructed a 1.2 million tonne per annum
dense medium separation plant at Lace and commenced treatment of
approximately 3.4 million tonnes of kimberlite tailings from the
mining activities which took place between 1896 and 1931.
Approximately 1.1 million tonnes of tailings were treated at a
recovered grade of 8 cpht. At the same time, a 4.5m x 4.5m decline
was commenced to access and bulk test the kimberlite below the
previous mining levels. Decline development and tailings
re-treatment ceased at the end of 2008 when diamond prices fell by
50 per cent during the credit crisis. Decline development resumed
in May 2009 and reached the kimberlite sampling level 25 in May
2010.
London
30 January 2012
The Competent Person responsible for the technical information
contained in this announcement is Mr Paul Zweistra (Pr. Sci. Nat.,
Registration number 400016/93) a full-time employee of VP3
Geoservices (Pty) Ltd. VP3 and Mr Zweistra have revieved the
information contained herein and approved the contents of this
press release.
AIM Nomad: Fairfax I.S. plc
AIM Brokers: Fairfax I.S. plc, Ocean Equities Ltd JSE Sponsor:
PSG Capital (Pty) Limited DiamondCorp plc, Paul Loudon +44 20 3151
0970/+27 56 212 2308 Ewan Leggat, Fairfax I.S. plc +44 207 598 5368
Guy Wilkes, Ocean Equities Limited +44 207 786 4370 John-Paul
Dicks, PSG Capital (Pty) Limited +27 21 887 9602 Charmane
Russell/Marion Brower, Russell & Associates +27 11 880 3924
This information is provided by RNS
The company news service from the London Stock Exchange
END
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