Operational Update (1418F)

TIDMDCP

RNS Number : 1418F

Diamondcorp Plc

12 June 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 on operations at the Lace mine in South Africa.

HIGHLIGHTS

-- From 15 March 2012 until the end of May 2012 the Company treated 55,391 tonnes of tailings for a recovery of 4060.97 carats. This represents a recovered grade of 7.33 carats per hundred tonnes (cpht), which is 47% above budget and included an 8.3 carat good quality white gem diamond.

-- Tailings retreatment costs in May averaged R28.70 per tonne, 14% below the budgeted R33.40 per tonne.

-- Planned production rates of 36,000 tonnes per month are expected to be achieved during June and tender sales of the Lace tailings diamonds will resume in Johannesburg in September.

-- The major rebuilds on the underground mining fleet are continuing on schedule and within budget to allow for a rapid restart to underground development once project finance is available for drawdown.

Commenting on developments, DiamondCorp CEO, Paul Loudon said: 'We are pleased with the plant performance on tailings retreatment and delighted that diamond recoveries are better than expected and costs are well within budget.'

TAILINGS RETREATMENT

The Lace project contains a measured 3.3 million tonnes of tailings from pre-1931 mining activities at an estimated average recoverable grade of 5.00 cpht. A decision was taken earlier in the year to recommence tailings retreatment following completion of underground bulk testing activities.

Since March, the following tonnage has been processed:

 
 Month    Tonnage   Carats    Grade (cpht) 
-------  --------  --------  ------------- 
 
 March    8,623     677.79    7.86 
-------  --------  --------  ------------- 
 April    12,949    982.34    7.59 
-------  --------  --------  ------------- 
 May      33,819    2400.84   7.10 
-------  --------  --------  ------------- 
 
 TOTAL    55,391    4060.97   7.33 
-------  --------  --------  -------------

The recovered grade of 7.33 cpht is 47% above the budgeted grade of 5.00 cpht. Based on management's previous tailings retreatment experience, the dump grade is expected to be variable, and progressively decline over time. This is because the old mine records show that the grade of the Lace kimberlite pipe improved with depth and the tailings from the deepest, higher grade mining are on the outside of the dumps. The recovered grade of the dumps is therefore expected to decline as mining progresses into the older dumps from the highest levels of the pipe where grades were historically lower.

The diamonds recovered are mainly the smaller size fractions, as expected from pre-1931 diamond tailings, with a higher than average proportion of gem diamonds as is typical from the Lace pipe. The dumps occasionally yield a significant gem and during May a fine 8.3 carat E/F sawable white gem diamond was recovered.

The Company will recommence tenders on the Lace diamonds in Johannesburg during September, and these will then be held approximately every eight weeks.

The Lace recovery plant is performing to expectations and plant operating costs for May were R28.70 per tonne, 14% below the budgeted R33.40 per tonne as a result of careful operations management and cost control.

UNDERGROUND DEVELOPMENT

Underground activities are currently limited to pumping and general making safe. The major rebuilds on the Company's underground mining fleet is progressing on schedule and within budget, which will allow for a rapid recommencement of underground activities once project financing facilities are available for drawdown.

BACKGROUND - LACE MINE, FREE STATE PROVINCE, 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 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 retreatment 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 2011. Bulk sampling of the pipe was completed in October 2011, and an independent engineering report recommending a block cave development on the 47 level was completed by SRK Consulting in March 2012.

London

12 June 2012

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