Diamondcorp Plc Lace Mine Project Update (8363F)

TIDMDCP

RNS Number : 8363F

Diamondcorp Plc

30 April 2014

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 development remains close to schedule and within budget.

-- The programme for installation of the underground conveyor belt system is on schedule and fabrication of the first two legs has been completed.

   --      Surface piling for the raise boring of the life of mine vent shaft has been completed.

-- The plant processed 149,957 tonnes of tailings against a budget of 140,000 tonnes in the three months ending 31 March 2014.

-- Diamond recoveries for the period totalled 6,953 carats at a recovered grade of 4.64 carats per hundred tonnes (cpht) against a budget of 5.00 cpht.

   --      The recovered grade in March was 5.81 cpht and April to date is 5.77 cpht.

-- Diamond sales for the year to date have totalled 7,505 carats at an average price of US$63 per carat.

-- The 400 tonne per hour (tph) tailings sand screen is to be replaced with a conventional de-grit circuit in May.

-- Underground core drilling designed to better define the rim of the Main Pipe for finalised cave layout and definition of the 'Bulge' area has intersected significantly more high-grade kimberlite on the eastern side of the pipe above the 345m level than was projected in the original Lace geological model.

-- This Upper K4 Block has the potential to add at least 1.0 million tonnes of additional kimberlite to the Lace mine plan which could be mined, without the requirement for additional project finance, while the 47 Level Block Cave development progresses.

-- The Company remains on track for the commercial production ramp up from underground kimberlite mining to commence in H2 2015.

Underground development

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

At the end of March, underground tunnel development was 21% complete versus a scheduled 24% (1,508m against 1,777m), and is being achieved at 95% of the project budgeted cost per metre (R33,616/m against R35,327/m). Development rates were impacted during the period due to mechanical breakdowns on face drilling rigs and heavy seasonal rains which caused slippery roadway conditions on the boxcut ramp. The rains have now ceased, and the rigs are again providing good availability.

Surface piling for the life of mine vent shaft was completed in the period, well ahead of mobilising the raise bore due in the second half of the year.

Pleasingly, the underground mining fleet is providing 88% availability. The last underground loader required for full production is currently being assembled and is scheduled for completion within the current quarter. Operating costs are within budget for the Company's rebuilt trucks and loaders.

The design and detailed drawings for the underground conveyor belt system is on schedule (95% complete) and under budget. Fabrication of the first two legs of the conveyor belt to be installed is 100% complete and has been delivered to site. Fabrication of the third leg has begun. There is a total of eight legs to the conveyor system, which will be progressively commissioned between Q4 2014 and H1 2015.

The Company has experienced no labour issues and continues to hire the personnel it requires. The labour force at 31 March 2014 totalled 287. The underground development is now operating with three mining crews on a three shift basis. A fourth crew will be recruited when additional development ends and the production level become available. Safety remains a major priority for the Company, with the lost time injury frequency rate for the year to date standing at zero.

The Company remains on track for the commercial production ramp up from underground kimberlite mining to commence in H2 2015.

Tailings retreatment

Following adjustments to the bottom screen size cut reported previously, tailings retreatment continued on two shifts in January and February, and three shifts in March.

During the period ended 31 March, the plant processed 149,957 tonnes of tailings against a budget of 140,000 tonnes. Diamond recoveries totalled 6,953 carats at a recovered grade of 4.64 cpht against a budget of 5.00 cpht. Production in January and February was from the oldest and lowest grade section of the dumps. The recovered grade for March was 5.81 cpht and April to date is 5.77 cpht.

The 400 tph sand screen commissioned in February did not achieve the required performance and has been demobilised from site. In accordance with the supplier contract, the Company only paid for mobilisation and demobilisation costs. The Company is now installing a conventional de-grit circuit which has the potential to increase tailings throughput to 120,000 tonnes per month. This is expected to be commissioned in May.

Sales of diamonds from tailings recovery for 2014 commenced in February, with ten sales scheduled for the year. Sales for the year to date (including carryover of year end stock) totalled 7,505 carats for proceeds of $471,160. The average sales price of $63 per carat is in line with our forecast for the year.

At current exchange rates, the budget grade and sales price, and operating costs after the installation of the de-grit circuit, the tailings re-treatment is forecast to generate positive cashflow of R9 per tonne.

Demand for rough has improved and prices have increased 5-10% over the prices achieved in December. The Company is forecasting the market to be steady to modestly higher for the balance of 2014, with potential for price strengthening in 2015 as world economies continue to recover.

Underground drilling

Underground core drilling designed to better define the rim of the Main Pipe for finalised cave layout and definition of the 'Bulge' area, as previously announced, has intersected significantly more high-grade kimberlite on the eastern side of the pipe above the 345m level than was projected in the original Lace geological model. This block is predominantly higher grade kimberlite (K4 hypabyssal, otherwise called coherent or CK kimberlite) and has thus far been defined over an area of approximately 75m x 75m on the 250m level, and is being actively delineated above and below to add to the resource base.

No kimberlite of any type above the 345m level is included in the current mine plan, as definition drilling from surface was not possible due to the presence of old workings. This Upper K4 resource drilling is now being completed from underground with the Company's own rig and drilling crews, under the direction of the Company's independent consultants.

The Upper K4 Block now being defined has the potential to add at least 1.0 million tonnes of additional kimberlite to the Lace mine plan which could be mined while the 47 Level Block Cave development progresses.

In the current Lace geological model, the K4 kimberlite becomes volumetrically dominant below the 500m level. Previous microdiamond analysis of the K4 kimberlite has predicted 57 cpht as recoverable in diamond sizes larger than 1.18mm. Microdiamond analysis of core from the current drilling is underway and tunnels to independently bulk test the block are being driven off the existing decline development. Kimberlite from the bulk test will start to be processed in the third quarter of 2014 and be completed by year end.

Mining of the UK4 Block by conventional stoping could commence in the first quarter of 2015 and reach 30,000 tonnes per month by the third quarter of 2015. Development of the block would be financed from existing project finance facilities. MPH Consulting Limited has been appointed as the competent person with respect to the bulk test as well as the preparation of an updated resource statement in the second quarter of 2014, based initially on the new core drilling and microdiamond work, then subsequently on the bulk test.

Core drilling of the Bulge area provisionally indicates that the zone is largely lower grade (volcanoclastic) kimberlite, meaning that the total recoverable diamond content is likely to be significantly less than the UK4 Block. Mining of the UK4 Block has the potential to provide significant additional cashflow which would allow the Bulge to be bulk tested and (if warranted) financed from internally generated cashflow, whereas mining of the Bulge alone would require additional project finance. Further, the UK4 Block has the potential to provide high grade ore while the 47 Level Block cave is developed and matures and smoothes out the potential lumpiness in tonnage which can occur in the early stages of caving. For these reasons it is considered a high priority development target, and the zone where underground production drilling will now concentrate.

Competent Person

Mr. Paul Sobie, P.Geo., President of MPH Consulting Limited, being an Independent Qualified Person and a member in good standing of the Association of Professional Geoscientists of Ontario, Membership # 0374, has reviewed and approved the technical content of this news release.

Contact details:

DiamondCorp plc

Paul Loudon, Chief Executive

Tel: +27 56 216 1300

Euan Worthington, Chairman

Tel: +44 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)