Diamondcorp Plc Lace Diamond Mine Project Update (9454M)

TIDMDCP

RNS Number : 9454M

Diamondcorp Plc

26 January 2016

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

-- Production ramp up from the Upper K4 (UK4) Block continues on schedule to achieve full production of 30,000 tonnes per month by July.

-- The conveyor belt system is operating to design specification and mining of the UK4 is proceeding without any issues with respect to ground conditions.

-- The diamonds recovered from initial processing are meeting expectations in terms of colour and quality, including three stones larger than 10 carats, the largest of which was a 22.11 carat H coloured stone.

-- This diamond has been sold into the Company's South African beneficiation joint venture for $5000 per carat with a view to recovering an 8 carat emerald cut stone after cutting and polishing.

-- To date, a total of 7,449 carats of diamonds have been accumulated from bulk testing and initial production (see photograph on our website at www.diamondcorp.plc.uk).

-- Diamond market sentiment has started 2016 in a reasonably positive mood as supply management by the major producers appears to have resulted in renewed demand for rough diamonds in certain size categories.

-- The Company's resource statement update was impacted by the Christmas shutdown by processing laboratories in Johannesburg. All microdiamond data required to complete the statement has now been delivered to the Company's consultant and the document is awaiting his final input.

Production

During the three months ended 31 December 2015, the Company's 74%-owned subsidiary Lace Diamond Mines (Pty) Limited (LDM) continued with the implementation of the revised development schedule and budget for the ramp up of commercial production from underground kimberlite mining at the Lace mine.

The 400 tonne per hour conveyor belt system was commissioned in November and production ramp up from the UK4 Block commenced in December. The conveyor belt system is operating to design capacity and mining is progressing without any issues with respect to ground conditions. Following a two-week Christmas shutdown, mining has resumed in January and remains on target to achieve production of 30,000 tonnes per month by July.

During tailings re-treatment, management determined that considerable operational efficiencies and water savings could be achieved in the Lace processing plant by increasing the bottom screen size from 1.00 mm to 1.25 mm. The change in bottom screen size has been applied to kimberlite processing, which will result in a reduced recovered grade but a higher average carat value for the diamonds recovered, as the smallest diamonds are the lowest value stones. A final decision on the bottom screen size will be made following receipt of the microdiamond analysis being undertaken as part of the resource statement update and the first few diamond sales are concluded, which will provide pricing data for the different diamond size categories. Analysis of this data will allow the plant to be optimised for management's key financial metric which is operating margin per tonne.

To date, management is pleased with the quality and colour of the diamonds being recovered, including three stones greater than 10 carats. One of the diamonds is an H coloured stone of 22.11 carats which management has decided to beneficiate locally. The stone has been sold into the Company's beneficiation joint venture for $5000 per carat with a view to recovering an 8 carat emerald cut diamond after cutting and polishing. When the polished diamond is sold, the Company will receive a 50% share of the cutting and polishing profit in addition to the price of the rough.

Diamond market and sales

In addition to the sale of the 22.11 carat stone, the Company last week prepared to export 3,577 carats of diamonds recovered from development and bulk testing activities in the second half of 2015. (A photograph of the parcel before sorting has been uploaded to the Company's website.) The diamonds will be sorted in Antwerp ahead of the commencement of diamond sales in the next few months. To date a total of 7,449 carats have been produced towards the first sale. Accumulation will continue until management is satisfied that prices will not be adversely impacted by the sale of sub-optimal parcel sizes.

At the same time, management is carefully monitoring sentiment in the rough diamond market, which has commenced the year in a slightly more positive mood than the latter part of 2015. Supply management by the major producers has resulted in shortages in certain size categories resulting in improved buying interest and prices since December, particularly for smaller goods. These improved market conditions are not expected to be sustained so management has adopted an attitude of flexibility with respect to timing and size of the commencement of sales.

Resource statement update

During the period, all the drilling, bulk testing and microdiamond sampling requested by the Company's independent consultants MPH Consulting Limited for finalisation of an update to the Company's resource statement was completed. Unfortunately, the extended Christmas holiday shutdown in South Africa meant that the laboratory analysis of the microdiamond samples was not completed until January. This data has now been forwarded to the Company's microdiamond consultant Dr Johan Ferreira for analysis. Dr Ferreira is a former geostatistician for De Beers and has 28 years experience in diamond resource evaluation. The resource statement update is in its final draft and MPH is awaiting Dr Ferreira's report for inclusion before it can be signed and published, hopefully within the next few weeks.

Corporate finance

In December, the Company arranged an institutional placing of shares in two tranches which together raised gross proceeds of GBP4 million. The placing was completed in January. These funds topped up the Company's working capital requirements following agreement with the Company's major lender, the Industrial Development Corporation of South Africa, to continue to capitalise interest on loan repayments throughout 2016.

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)