Diamondcorp Plc LACE MINE PROJECT UPDATE (7987R)

TIDMDCP

RNS Number : 7987R

Diamondcorp Plc

31 October 2013

DiamondCorp plc

AIM share code: DCP & JSE share code: DMC

ISIN: GB00B183ZC46

(Incorporated in England and Wales)

(Registration number 05400982)

(SA company registration number 2007/031444/10)

("DiamondCorp", "the Group" or "the Company")

Lace mine Project update

DiamondCorp, the Southern African diamond development and exploration company, is pleased to provide the following update on the underground development and tailings re-treatment activities at the Lace diamond mine in the Free State province of South Africa.

Highlights

   --      Underground tunnel development remains close to schedule and under budget;

-- The owner-operated mining fleet continues to provide over 90% availability and is operating under budget.

   --      The new boxcut is completed and the twin declines have commenced from the base of the ramp.

-- The underground conveyor belt system is on schedule and within budget with installation of the first leg about to commence.

-- Tailings re-treatment has been optimised to maximise dump treatment rates, diamond output and reduce operating costs. Changes to bottom size screen panels mean that 90% of the forecast diamond production is now being recovered from less than 50% of the head feed tonnage. The first sale of diamonds from tailings will now take place after the Indian Diwali festival in November.

-- A diamond beneficiation joint venture has been signed to give the Company the option of sharing in the polishing profits of large and high value diamonds which fall outside the Laurelton Offtake Agreement. The first diamond beneficiated has already netted the company 185% of its reserve price.

-- Initial drilling of the Bulge area from underground confirms the potential for additional kimberlite between the 260m and 470m levels which is not currently in the mine plan.

Underground development

The Company's 74%-owned Lace Diamond Mines (Pty) Limited (LDM) continues to ramp up underground development close to schedule and within budget.

Underground tunnel development is currently 11% complete versus a scheduled 12%, and is being achieved at 95% of the budgeted cost per metre. Until now, underground development has been limited to two crews operating three shifts while blasting of the temporary vent raise which by passes the blockage in the vertical shaft was completed. With the completion of this vent raise and installation of surface exhaust fans this week, multi blast conditions now exist underground and the rate of development can increase to more than double the current rate of 200m per month.

The underground mining fleet continues to provide over 90% availability, with operating costs running at 87% of budget. The mining fleet rebuild costs are running at 95% of budget, with the last of the dump trucks and underground loaders (LHDs) required to achieve maximum underground development rates currently being assembled in the workshop and scheduled to be commissioned by year end. With the completion of these two 20 tonne dump trucks and two LHDs, the full development and production fleet of five trucks, five LHDs and four face drilling rigs will be in place. In addition, an order has been placed with Sandvik for a new long hole drilling rig required for drilling the undercut levels of the block cave. This drilling rig is scheduled for delivery in the second half of 2014 and the rand-euro exchange rate has been fixed.

The new life of mine (LOM) boxcut was completed in September and development of the twin declines from the base of the ramp has commenced. Steel sets for reinforcement of the portal area are now being installed.

The design and detail drawings for the underground conveyor belts conveyor belt system is on schedule (65% complete) and within budget. Fabrication of the first leg of the conveyor belt to be installed is 95% complete and installation is about to commence. Procurement and exchange rate protection on all long lead time and imported items is 100% complete.

Tailings retreatment

The 1.2 million tonne per annum dense media separation (DMS) plant at Lace was successfully re-commissioned during August with material from the 3,000,000 tonnes of tailings remaining from mining activities which took place between 1902 and 1931. The refurbished plant will now allow seamless transition from tailings re-treatment to processing of kimberlite from underground development.

During the commissioning process, management undertook a series of trials to optimise the bottom size screen panels on the plant with the aim of maximising throughput and operating margins on the tailings.

Particle size analysis of the dump material overlaid with diamond recoveries and sales figures from 2008-2009 tailings re-treatment showed that approximately 50% of the dump material is smaller than 1.5 mm and that the lower value diamonds recovered in the 1.2-1.4 mm range accounted for less than 10% of total diamonds recovered by weight and less than 3% of revenue.

As a result of this analysis, modifications were made to increase the bottom screen cut size in the plant which is now recovering 90% of the diamonds previously recovered from less than 50% of the front end tonnage. In September, the plant recovered 1,264 carats from 22,740 tonnes run of mine (ROM) but only 9,288 tonnes were delivered to the DMS. This recovery represents a recovered grade of 5.6 carats per hundred tonnes (cpht) ROM, which is 12% higher than the original estimate. However, with between 50-60% of the material being screened out ahead of the DMS, management forecast operating costs can be reduced from R32 per tonne to R22 per tonne, once three shifts are operating.

Further, the diamonds now being recovered are coarser in size distribution and are therefore expected to fetch a higher average price per carat than the diamonds previously recovered from tailings. In order to confirm these figures, the Company has postponed the first sale of tailings diamonds until after the Indian Diwali holidays in November. While the sales revenue generated from these first parcels is not material to the overall Lace development budget, it will give management confidence that the tailings optimisation has the potential to significantly improve operating margins on this activity which was previously expected to operate at only a small profit margin.

The plant is on schedule to process at full capacity) from one shift in November (34,000 tonnes of tailings per month), with a second shift scheduled to start in December and a third shift by January. Plans are in place to increase tailings throughput to more than 150,000 tonnes per month in the first half of 2014 by introducing in-pit screening. If recoveries are in the order of 5 cpht, the in-pit screening has the potential to increase production to 7,500 carats per month which will allow a significant proportion of the tailings to be re-treated prior to the underground achieving full production.

Diamond Beneficiation Joint Venture

LDM has signed a diamond beneficiation joint venture agreement with Distinctive Choice 1235 cc, a small Johannesburg cutting and polishing factory which specialises in the manufacturing of large, high quality diamonds. Under the terms of the joint venture, LDM has the option of processing some of the larger, high quality diamonds which fall outside the Offtake Agreement signed in January with Tiffany & Co. subsidiary, Laurelton Diamonds, Inc (Laurelton Agreement). On those diamonds which are selected for beneficiation, profits over and above the reserve price of the rough diamond are to be shared equally between the two parties.

The first stone manufactured under the joint venture was an 8.36 carat stone E/F colour white diamond recovered from the dumps prior to the Laurelton Agreement which had a reserve price of $3,100 per carat. From this diamond, three brilliant cut diamonds are being manufactured and the colour has improved during polishing. The largest stone is a 2.02 carat internally flawless D coloured diamond with no fluorescence, which has been sold for $68,000. LDM's profit share on this stone alone has increased the return to 185% of the reserve price. Over the life of the mine, the beneficiation joint venture has the potential to provide LDM with significant additional income, give important insight into how the Lace diamonds perform during polishing and assist with beneficiation targets under the Mining Charter.

Bulge drilling

Drilling of the Bulge area continues from inside the kimberlite, with 2,000m of core drilling planned to be drilled by the end of the year. The drilling rig is a new LM-30 drill rig purchased from Boart Longyear. Completion of the first holes has confirmed that the Bulge area has the potential to host significant additional kimberlite between the 260m and 470m levels which is not currently in the mine plan. The drilling will form the basis of a resource upgrade for the Bulge area during the first half of 2014 and thereafter a feasibility study on the economics of mining this area.

Contact details:

DiamondCorp plc

Euan Worthington, Chairman

Tel: +44 (0) 7753 862 097

UK Broker & Nomad

Panmure Gordon (UK) Limited

Dominic Morley/Adam James

Tel: +44 20 7886 2500

JSE Designated Advisor

Sasfin Capital (a division of Sasfin Bank Limited)

Angela Teeling-Smith

Tel: +27 118097794