TIDMDCP
RNS Number : 2993E
Diamondcorp Plc
03 November 2015
3 November 2015
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 DIAMOND mine Project update
DiamondCorp, the Southern African diamond mining, development
and exploration company, is pleased to provide the following update
on the underground development at the Lace diamond mine in the Free
State province of South Africa.
Highlights
-- Development work in the Upper K4 (UK4) block is concentrating
in kimberlite on the 310m production level in preparation for
production ramp up to commence before the end of the year.
-- During September tunnelling activities advanced from heavily
diluted low-grade K6 kimberlite on the southern side of the
kimberlite pipe into a transitional zone into higher-grade K4
kimberlite in the centre of the pipe. As a consequence, ground
conditions improved and kimberlite development rates exceeded the
monthly call in October.
-- Challenging ground conditions reported previously on the 290m
doming level have been overcome with the installation of steel
arched sets which provide a safe canopy for employees and equipment
from potential falls of ground. The void above the canopy is now
being back-filled to cushion any potential falls of ground.
-- However, the time taken to install the sets and make the area
safe has resulted in a delay to the blasting of the slot drive from
which the initial tonnage ramp up commences.
-- This delay will result in cashflow pressure on the Company's
74%-owned operating subsidiary Lace Diamond Mines (Pty) Ltd in Q1
2016 when debt repayments are due to commence. As a result detailed
discussions have been held with the Company's primary lenders and
BEE partners regarding options to alleviate cashflow pressures.
-- The discussions have been positive and a formal request to
continue interest roll-up of the Industrial Development Corporation
loan until positive cashflow is achieved has been lodged.
Management do not expect any issues with respect to being granted
this request.
-- The conveyor belt system is fully installed and 80%
commissioned. Final electrical connections are underway and the
belt is scheduled to be fully commissioned by the end of this
week.
-- Processing of K6 kimberlite and K4 kimberlite recovered from
the production level drives and bulk test sites continued with
further encouraging results.
-- The final drilling and microdiamond work requested by the
Company's geological consultants to complete the resource statement
update is underway. The additional work requested will provide
greater levels of confidence in the resource estimate and will be
completed before year end.
-- Development costs to date are averaging R49,993 per metre
against a budget of R38,280 per metre as a result of the challenges
encountered, including a weaker than expected Rand exchange rate.
The commissioning of the conveyors will now have a positive impact
on reducing development costs as trucks will no longer be used in
decline development to the block cave level.
-- Positive test results have been received from initial bulk
tests undertaken on an optical/x-ray waste sorting system for the
processing plant to optimise processing of the Lace
kimberlites.
Underground Development
The Company's 74%-owned subsidiary Lace Diamond Mines (Pty)
Limited (LDM) continues with the implementation of the revised
development schedule for the ramp up of commercial production from
underground kimberlite mining.
Tunnel development during the past quarter concentrated on the
310m production level. Up until September, the tunnelling was
taking place in heavily diluted low-grade K6 kimberlite on the
southern side of the pipe. Tunnelling in this friable ground
requires additional support to ensure safety from potential falls
of ground which slowed the rate of advance. Pleasingly, ground
conditions have steadily improved as the K6 kimberlite transitions
into higher grade, more competent K4 kimberlite in the central
section of the pipe and for the month of October kimberlite
development rates exceeded our planned monthly call.
The challenging ground conditions encountered on the 290m doming
level, as previously reported, resulted in the Company engaging
specialist contractors to make the area safe. The contractors
recommended and have subsequently installed steel arched sets for a
10m section through the centre of the slot drive cross cut. These
sets have been installed without incident, and a safe canopy of
cover is now in place to prevent any potential falls of ground from
injuring workers or damaging machinery. When back-filling has been
completed, the tunnel will be available for the slot drive to
commence and the mining ramp up to begin during December.
As a result of the challenges with the cross cut on the 290m
level, the Company and its mining consultants have revised the
tunnel layout on the 310m production level, resulting in staggered
breakaways left and right rather than full cross cuts. This
revision to the layout will reduce rock stresses without impacting
mining rates, and minimises the chances of similar incidents
occurring.
During the period, the Company announced completion of the 400
tonne per hour underground conveyor belt system from the first
production level to the surface. Commissioning of the conveyor
belts is 80% complete and is progressing well. The belts are
scheduled to be fully commissioned by the end of this week. When
the conveyor is in operation, trucks will only be used to haul
kimberlite from the production level to the conveyor belt tipping
chamber. No trucks will be used for the continued decline
development in waste rock down to the block cave level as the
conveyor belt will be extended as the decline progresses. All the
required conveyor belt steelwork, drive motors and conveyor belting
for the continued extension down to the block cave level are on
site, protecting the Company against future price increases and
further weakening in the value of the rand.
Development costs for the project to date have averaged
R49,993/m against a budget of R38,280/m, with the weakening Rand
continuing to impact negatively on development costs. Following
commissioning of the conveyor belts, the Company is expecting a
reduction in development costs and an acceleration in development
rates.
The delay to the commencement of the slot drive resulting from
making the 290m level safe means that the Company is now behind
schedule on diamonds recovered from development. Mining of the slot
drive to provide initial ramp up tonnages had originally been
scheduled for August but will now only commence in December. This
delay combined with management's preference for not selling
sub-optimal diamond parcels in a weak diamond market will put
pressure on LDM's cashflow in Q1 2016 when debt repayments are
scheduled to commence. As a result detailed discussions have been
held with the Company's primary lenders and BEE partners regarding
options to alleviate cashflow pressure. The discussions have been
positive and a formal request to continue interest roll-up of the
Industrial Development Corporation loan until positive cashflow is
achieved has been lodged. Management do not expect any issues with
respect to being granted this request.
K6 and K4 kimberlite processing
Processing of K6 and K4 kimberlite from development tunnels in
the UK4 Block continued during the period and management continues
to be pleased with the quality of the diamonds recovered.
The kimberlite being processed from development drives is being
monitored by the Company's geological consults MPH Consulting
Limited of Toronto as a controlled bulk test for incorporation into
the upgraded resource statement. Work on the resource statement
during the period concentrated on correlating microdiamond analysis
from actual recoveries in bulk sample sites to ensure accuracy and
confidence in the quality of the resource estimate at deeper
levels. Because the distribution of internal waste in the
kimberlite which determines overall diamond grade is not
homogenous, the more of this correlation work which is undertaken,
along with the density and dilution data derived from the
delineation drilling, the greater the levels of confidence which
can ascribed to the resource estimate. MPH requested an additional
delineation drill hole and further microdiamond analysis which is
being completed. Management is committed to ensuring that the
finalised document is without qualification and comprehensively
presents the potential of the Lace project when being assessed by
analysts and the investment community. The report will be completed
by year end.
During the period, the Company conducted an independent
commercial valuation of the Lace diamonds recovered to date. The
valuation was undertaken by the Company's independent agent in
Antwerp, Natural Diamond Corporation NV. Pleasingly, the valuation
predicts diamond sales should average between US$140 and $160 per
carat at a 1.00mm bottom screen size cut off and between $160 and
$220 per carat at a 1.25mm bottom screen size in the current weak
market. These valuation ranges exclude the occurrence of larger
high value stones, the frequency of which is yet to be
established.
Plant and resource optimisation
The Company's 220 tonnes per hour (tph) dense media separation
plant operated efficiently on a batch basis during the period,
processing 5,825 tonnes of K6 and K4 kimberlite bulk samples
extracted from the development tunnels.
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