ELKEDRA DIAMONDS NL
Level 1, 130 Hay St, Subiaco, Western Australia 6008
P O Box 8035, Subiaco East, Western Australia 6008
Telephone: +61-8-6380 2855; Facsimile: +61-8-6380 1644
E-mail: elkedra@elkedra.com.au Web Site: www.elkedra.com.au
QUARTERLY REPORT TO SHAREHOLDERS
31 December 2006
Listed on ASX and AIM (Code EDN)
HIGHLIGHTS
BRAZIL
Chapada Diamond Project
* 5,974 carats of diamonds produced for the quarter compared to 4,310 carats
in the previous quarter.
* Revenue of US$2,516,933 generated from sales in the quarter.
* Plant ramp-up is well advanced with the plant running for extended periods
of time at up to 110% of design capacity.
AUSTRALIA
Diamond Exploration
* An NT Government aerial magnetic survey over the Tiwi Islands was completed
in November.
* Planning is underway for sampling programs in Elkedra's Thorntonia and
Altjawarra Diamond Projects for the coming 2007 field season.
Base Metals and Uranium
* Gravity anomalies and steep gravity gradients coincident with magnetic
targets have been identified at Marqua (SEL24769) and Field River
(EL24693).
CORPORATE
* Placement of 7,713,830 shares at A$0.47 raised A$3,625,500 to retire debt
and provide working capital.
OVERVIEW
1.0 BRAZIL
CHAPADA DIAMOND PROJECT - Elkedra 100%
PRODUCTION
Diamond production and key operating statistics since commencement of
operations to 31 December are shown in the following Table 1.
TABLE 1 - PRODUCTION STATISTICS
Production Month Plant Diamonds Recovered Average Average
Throughput Average Stone Size Value
(bcm)1 Grade (cts/stone) per Carat
Stones Carats (US$)
Total - Start up 114,707 0.038 10,114 4,338 0.43 382
To 30 Sep 06
October 44,367 0.038 3,397 1,698 0.50 353
November 58,835 0.038 3,431 2,243 0.65 442
December 51,428 0.040 3,753 2,033 0.54 409
Total - Dec Qtr 154,630 0.038 10,581 5,974 0.56 406
Year to Date 259,337 0.038 20,695 10,312 0.50 396
1. "bcm" means "bank cubic metre" of in situ gravel in mining benches and plant
throughput is based on total run of mine production including all under and
oversize material. The monthly plant throughput bcm's have been amended
marginally from previously issued figures due to balancing out of closing
stockpile inventories for the quarter.
By the end of the December quarter the plant debottlenecking modifications were
approximately 80% complete and the processing plant is now running for extended
periods of time at up to 110% of its throughput design capacity.
Fig. 1 Aerial View of the Chapada Diamond Project Processing Plant and Initial
Mining Operations
The processing plant's design throughput capacity is 50,000 bcm per month, or
approximately 200 tonnes per hour, of alluvial gravels which equates to
approximately 1.4 million tonnes of gravels per annum. With the plant
debottlenecking nearing completion the processing plant has been running at
around 220 tonnes per hour for some periods of time. On completion of the
debottlenecking program the next focus for plant ramp up will be to fine tune
maintenance operations to maximise plant availability (i.e. the actual hours
the plant is available for production each month).
During December the actual plant throughput was constrained for periods of time
by high percentages of limonite mineral reporting to the concentrate and
causing a bottleneck at the x-ray sorting machine, this in turn constrained the
plant total production for the month. The second x-ray sorter from South Africa
arrived at the plant in the last week of December and is schedule to be
installed in January to overcome this problem.
Fig. 2 Feed Preparation module producing washed and screened Fig. 3 Heavy Media
and Diamond Recovery plant in foreground
with Security Guardhouse and administration facilities in background gravel for
the Heavy Media Separation Module
Mining production ramp up has been progressing in parallel with the increasing
throughput capacity of the process plant. During the quarter the number of
excavators in the mining fleet has been increased from three to five and truck
numbers have been increased accordingly. The onset of the wet season in the
Chapada region has caused some loss in mining productivity by the mining
contractor however, working method alternatives are now being trialed to
minimise these wet weather effects on production.
Average grade achieved during the December quarter was 0.038 carats/bcm
compared to the reserve grade of 0.05 carats/bcm. The overall mining reserve at
Chapada is made up of a number of gravel terraces stepping down in elevation
towards the rivers to the east and west. To date, mining has only progressed in
the higher level terraces hence there is still potential for grades to improve
as mining moves into the lower terraces later in the year.
Fig. 4 Removal of sand overburden to expose gravel bed Fig. 5 Mining in
progress - sand overburden removal by excavator
in foreground with gravel bed excavation by excavator behind
When at full design capacity over 4 million tonnes per annum of diamondiferous
gravels and sand overburden will be mined at Chapada which makes the Chapada
Project the largest diamond mining and processing operation in South America.
SALES
The total diamond production from the Chapada operations is sold under
agreement to the Leviev Diamond Group on a monthly basis. Under the terms of
the sales agreement the price for each diamond sale is determined by a mutually
agreed London based independent diamond valuer.
This monthly off-take arrangement with Leviev not only reduces the security
risk but also provides regular cash flow and allows the Company to deploy
capital to areas which provide growth opportunities rather than funding
inventory levels.
During the quarter three independent diamond valuations and sales were
undertaken on the following dates
* 5th October 2006
* 1st November 2006
* 6th December 2006
These sales generated revenue of US$2,516,993.
Subsequent to the end of the quarter, on 10 January 2007, a further sale of
1,995 carats was completed generating revenue of US$799,942. Including this
sale the Chapada project has to date sold, a total of 10,669 carats (21,968
stones), for a total value of US$4,219,296.
The run of mine production continues to achieve around 90% gem quality diamonds
and the average stone size is achieving 0.50 carats/stone which are both in
line with expectations. The stone size distribution during the project ramp-up
period indicates that recovery of larger size stones (+5 carats) has been
steadily increasing. The +5 carat stones accounted for 9% of the carats
produced and 43% of the diamond revenue during the December quarter.
The increased number of larger stones recovered in the December quarter is
reflected in the higher average stone size (0.56 carats/stone compared to 0.43
in the last quarter) and average carat value of US$406 per carat compared to
average carat value of US$382 achieved during the September quarter.
Fig. 6 Photo of day's production (6 Nov 06) before acid cleaning
Fig.7 Photo of day's production (24 Nov 06) after acid cleaning
Diamonds falling into the specials category are noted as follows:
6th December Valuation
* 4 stones in the +11 carat specials category
*
+ average US$3,606/carat
+ total US$196,985
+ including
* 1 stone of 13.11 carats valued at US$62,928 (US$4,800/ct)
* 1 stone of 14.51 carats valued at US$65,295 (US$4,500/ct)
1st November Valuation
* 3 stones in the +11 carat specials category
*
+ average US$1,879/carat
+ total US$70,506
+ including
* 1 stone of 12.45 carats valued at US$43,475 (US$3,500/ct)
5th October Valuation
* 3 stones in the +11 carat specials category
*
+ average US$2,669/carat
+ total US$92,448
+ The largest stone was 12.2 carats.
Kimberley Certification PROCESS
The previously reported delays for the issue of Kimberley Certificates by the
Brazilian authorities has been resolved. The bureaucratic processes required
under Brazil's revised Kimberley Certificate legislation are now operational
and recent monthly certificates have been received within 7 - 10 days of
applications being made. The Kimberley Certificate to allow the export of
Chapada's first 3 months of diamond production was issued on 6th November and
this was the first Certificate to be issued in Brazil under the revised
legislation.
Fig. 8 Pre-sealing with the Government authorities, the first export parcel of
diamonds for a Kimberley Certificate
Fig. 9 First Kimberley certificate issued under Brazil's new legislation
Exploration - Brazil
With the ramp up activities associated with the mine and plant operations at
Chapada nearing completion the Company will now commence implementation of its
Brazilian exploration activities during the March 2007 quarter.
The Company's priority will be to commence exploration on the tenements it
already holds surrounding the existing Chapada operations, which include some
270 km2 of highly prospective ground.
The current declared probable reserves are contained within tenements covering
only 15 km2 and the additional 270 km2 tenement holdings provide good
exploration potential to fast track the expansion of the Chapada Project. The
Company's medium term objective is to increase its reserves to sustain a mine
life in excess of 20 years and increase production to 100,000 carats per annum.
BRAZILIAN TENEMENTS AND RESERVES
The Chapada Project Tenements in Brazil cover a total area of approximately
285 km2.
Fig. 10 Tenement Plan - Brazil
Current Reserves
The Chapada Project has a current probable reserve of 5.4 million bcm of
diamondiferous gravels at a grade of 0.05 carats per bcm. This reserve is
sufficient to sustain a mine life of 9 years based on the proposed initial rate
of gravel processing of 600,000 bcm (1.4 million tonnes) per annum, with
expected annual diamond production of more than 30,000 carats. The diamonds
recovered during bulk sampling are of a high gemstone quality with an average
size of 0.5 carats. Based on an independent assessment of the sales data from
previous sales of bulk sampling production an average selling price of above
US$400 per carat is expected to be realised. The latest sales prices support
this expectation.
This current probable reserve of gravels is contained on two tenements,
"Quilombo", for which mining licences have been granted, and the adjacent "Peba
Lagoinha" tenement, for which a development installation licence is being
progressed. These two tenements together give an expected mine life of 9 years
and cover an area of only 15 km2.
Exploration Tenements
Elkedra holds a further seven granted exploration tenements covering some
270 km2 within the surrounding Chapada basin region. Historical exploration
activities have shown these areas to also contain diamondiferous gravel
deposits. If ongoing exploration work indicates economic resources in these
tenements then low capital cost satellite mining operations can be established
at these tenements providing a gravel concentrate back to the Chapada process
plant for final diamond recovery.
No tenements were applied for or relinquished in Brazil during the quarter.
2.0 AUSTRALIA
AUSTRALIAN TENEMENTS
During the quarter no new tenement applications were made.
EPM15230 (Cravens Peak North) located on the Queensland-NT border was granted
on 31 October 2006.
The Company's total tenement holding in the NT and Queensland is currently
12,707 km2, including both granted tenements and pending applications.
Fig. 11 Current Tenement Plan - Australia
Diamonds - Elkedra 100%
Tiwi Islands Diamond Project (NT)
Elkedra is targeting on-shore Tertiary-age lamproite pipes in the Tiwi Islands
analogous to the numerous 30 million year old lamproite diatremes known in the
Timor Sea some 200 km offshore. An NT Government aerial magnetic survey over
the Tiwi Islands was completed in November 2006. Preliminary magnetic images
have been viewed and several sets of probable igneous dykes and associated
discrete anomalies have been identified. Elkedra is currently awaiting release
of the final data products to enable detailed evaluation of the magnetic
targets. A data review of previous mineral exploration activity on the Tiwi
Islands has been compiled. Elkedra will seek a comprehensive exploration
agreement with the Tiwi Land Council once specific target areas have been
delineated.
Thorntonia Diamond Project (Queensland)
Over 100 macrodiamonds were recovered from rivers in this project area by past
explorers, however no diamond indicator minerals or diamond sources were ever
located. Discovery of a local primary diamond source usually requires trails of
indicator minerals to be traced back to source. However, Elkedra believes past
explorers failed to locate indicator minerals because only the coarse
grain-size fractions (+0.4 mm) of heavy mineral concentrates were ever
recovered. In the intense weathering regime of the Mt Isa region coarse grained
indicator minerals are unlikely to survive. With the grant last quarter of the
two Thorntonia Project tenements, planning is underway for a sampling program
in the 2007 field season.
Altjawarra Diamond Project (Queensland/NT)
Following an in-fill aerial magnetic survey earlier in the year, a number of
subtle magnetic targets in the Cravens Peak area (Queensland) were identified
for follow-up exploration. Following the grant of EPM15230 in October, a
sampling program is planned for the coming 2007 field season.
Base Metals and Uranium - Elkedra 100%
Base Metals and Uranium
An evaluation and report of Elkedra's base metal and uranium prospects was
completed last quarter and a data package compiled and documented. The Company
is currently assessing the alternatives available to progress exploration
development of these projects with consideration been given to potential joint
ventures or floating a dedicated uranium and base metals company.
Gravity Survey Results (NT)
During the quarter, results of an evaluation of three in-fill gravity surveys
undertaken in July 2006 were received. The surveys were conducted over part of
the Boat Hill base metals corridor at Christmas Dam (SEL24769), and over
bulls-eye magnetic anomalies CWN-169 (EL24693) and CWN-148 (SEL24769). The
in-fill surveys were undertaken in conjunction with the NT Geological Survey's
regional East Arunta Gravity program. The purpose of these surveys was to
identify potential base metal mineralized targets based on their density
contrast compared to surrounding country rocks. In all three in-fill areas
steep gravity gradients, believed to correspond to major basement faults, were
identified. At CWN-148, a gravity high correlates with the magnetic high zone.
At CWN-169, a gravity high in the NE part of the survey area correlates with
the magnetic high and to the SW a distinctive, discrete, elliptical gravity low
is present. Christmas Dam is a complex gravity low zone that correlates with
intersecting faults seen in magnetic imagery. The results of the surveys
support the base metal prospectivity of the target areas and in the case of
CWN-169 have provided an additional discrete anomaly for drill testing.
Fig. 12 Map showing current primary targets in the Altjawarra project area (NT)
CORPORATE
The total issued capital of the company is 94,446,003 shares including
7,353,915 shares which were released from ASX escrow on 20/12/2006.
The number of unlisted convertible notes on issue at 31 December 2006 is
496,612.
During the quarter 7,713,830 new shares were issued for 47 cents and 297,949
new shares were issued for 297,949 warrants exercised at 12 pence. These issues
raised A$3.7 million.
200,000 directors options and 250,000 employees options exercisable at A$0.65
and expiring 31 December 2009 were issued during the quarter.
As at 31 December 2006 a total of 13,673,724 unlisted options exercisable at
between A$0.35 and A$1.20 are on issue, in addition to 8,368,532 warrants
exercisable at 12 pence listed on AIM in the UK.
The Company retained A$4.02 million in cash as at 31 December 2006.
The Company regularly updates its Web Site at www.elkedra.com.au
For and on behalf of the Board
M.D.J. Cozijn
Director/Company Secretary
25 January 2007
The resource information on the Brazilian Chapada Alluvial Diamond Project has
been prepared in accordance with the 2004 edition of the Australasian Code for
Reporting Exploration Results, Mineral Resources and Ore Reserves (the "JORC
Code"). The term "Probable Reserve" is used as per its definition in the JORC
Code (available at www.jorc.org). The information is based on data compiled by
and reported upon by Mr Hugh Durey of Hugh Durey & Associates Pty Ltd. Mr Durey
is a member of the Australasian Institute of Mining & Metallurgy and qualifies
as a Competent Person as defined in the JORC Code. Mr Durey consents to the
inclusion in this report of the matters in the form and context in which it
appears.
The geological information on the Australian projects is based on information
compiled by and reported upon by Dr Wayne Taylor, Elkedra's Chief Mineralogist,
who is a member of the Australian Institute of Geoscientists and qualifies as a
Competent Person as defined in the JORC Code. Dr Taylor consents to the
inclusion in this report of the matters in the form and context in which it
appears.
Rule 5.3
Appendix 5B
Mining exploration entity quarterly report
Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001.
Name of entity
ELKEDRA DIAMONDS NL
ABN Quarter ended ("current
quarter")
ABN 42 092 334 220 31 December 2006
Consolidated statement of cash flows
Cash flows related to operating activities Current quarter Year to date
$A'000 (6 months)
$A'000
1.1 Receipts from product sales and 3,494 4,443
related debtors
1.2 Payments for: (a) exploration and (114) (278)
evaluation (net)
(284) (827)
(b) development
(2,576) (3,814)
(c) production
(755) (1,433)
(d) administration (net)
1.3 Dividends received
1.4 Interest and other items of a similar 14 45
nature received
1.5 Interest and other costs of finance (259) (454)
paid
1.6 Income taxes paid
1.7 Other (138) (738)
- Movement in inventory (348) (628)
- Security & Maintenance
Net Operating Cash Flows (966) (3,684)
Cash flows related to investing
activities
1.8 Payment for purchases of: (a) (3) (23)
prospects
(b) equity investments
(c) other fixed assets
1.9 Proceeds from sale of: (a) prospects
(b) equity investments
(c) other fixed assets
1.10 Loans to other entities
1.11 Loans repaid by other entities
1.12 Other (provide details if material)
Net investing cash flows (3) (23)
1.13 Total operating and investing cash (969) (3,707)
flows (carried forward)
1.13 Total operating and investing cash (969) (3,707)
flows (brought forward)
Cash flows related to financing
activities
1.14 Proceeds from issues of shares, 3,521 4,403
options, etc. (net)
1.15 Proceeds from sale of forfeited
shares
1.16 Proceeds from borrowings 500 500
1.17 Repayment of borrowings (927) (1,019)
1.18 Dividends paid
1.19 Other - Trade Creditors/etc.. (256) (393)
Net financing cash flows 2,838 3,491
Net increase (decrease) in cash held 1,869 (216)
1.20 Cash at beginning of quarter/year to 2,211 4,235
date
1.21 Exchange rate adjustments to item (64) (3)
1.20
1.22 Cash at end of quarter 4,016 4,016
Payments to directors of the entity and associates of the directors
Payments to related entities of the entity and associates of the related
entities
Current quarter
$A'000
1.23 Aggregate amount of payments to the parties 117
included in item 1.2
1.24 Aggregate amount of loans to the parties -
included in item 1.10
1.25 Explanation necessary for an understanding of the transactions
1.23 Being Executive Directors salaries and superannuation plus
Director's fees and superannuation.
Non-cash financing and investing activities
2.1 Details of financing and investing transactions which have had
a material effect on consolidated assets and liabilities but
did not involve cash flows
None
2.2 Details of outlays made by other entities to establish or
increase their share in projects in which the reporting entity
has an interest
None
Financing facilities available
Add notes as necessary for an understanding of the position.
Amount available Amount used
$A'000 $A'000
3.1 Loan facilities 8,500 8,500
3.2 Credit standby arrangements 2,000 -
* Short term funding of $500,000 was received during the December 2006 quarter
and is repayable on 1 February 2007.
Estimated cash outflows for next quarter
$A'000
4.1 Exploration and evaluation 230
4.2 Development -
Total 230
Reconciliation of cash
Reconciliation of cash at the end of Current quarter Previous quarter
the quarter (as shown in the
consolidated statement of cash flows) $A'000 $A'000
to the related items in the accounts
is as follows.
5.1 Cash on hand and at bank 938 837
5.2 Deposits at call 3,078 1,374
5.3 Bank overdraft - -
5.4 Other (provide details) - -
Total: cash at end of quarter 4,016 2,211
(item 1.22)
Changes in interests in mining tenements
Tenement Nature of interest Interest Interest
reference at at end
(note (2)) beginning of
of quarter
quarter
6.1 Interests in Refer covering
mining tenements quarterly report
relinquished, attached hereto
reduced or
lapsed
6.2 Interests in
mining tenements
acquired or
increased
Issued and quoted securities at end of current quarter
Description includes rate of interest and any redemption or conversion rights
together with prices and dates.
Total number Number quoted Issue price per Amount paid up
security (see per security
note 3) (cents) (see note 3)
(cents)
7.1 Preference + - - -
securities
(description)
7.2 Changes - - -
during
quarter
(a) Increases
through
issues
(b) Decreases
through
returns of
capital,
buy-backs,
redemptions
7.3 +Ordinary 94,446,003 94,446,003
securities
after (1) for
(3)
consolidation
7.4 Changes 297,949 297,949 Exercise of 12p (A$0.30)
during Options
quarter 7,713,830 7,713,830 $0.47
$0.47
(a) Increases
through
issues
(b) Decreases
through
returns of
capital,
buy-backs
7.5 +Convertible 496,612 - $3.60/
debt convertible
securities into 10 shares
(1) for (3) @ 36c
consolidation
7.6 Changes - -
during
quarter - -
(a) Increases
through
issues
(b) Decreases
through
securities
matured,
converted
7.7 Options 1,540,390 - Exercise price Expiry date
1,250,000 - Exercisable @ Expire 14/03/
75c 2007
1,250,000 -
Exercisable @ Expire 30/11/
333,334 - 40c 2009
8,266,985 - Exercisable @ Expire 30/11/
60c 2009
101,547 -
Exercisable @ Expire 3/09/
6,250,000 - 45c 2008
400,000 - Exercisable @ Expire 31/8/
12p 2007
2,000,000 -
Exercisable @ Expire 31/8/
200,000 - 12p 2007
200,000 - Exercisable @ Expire 30/9/
40c 2008
250,000
Exercisable @ Expire 30/11/
35c 2009
Exercisable @ Expire 31/05/
90c 2010
Exercisable @ Expire 31/05/
$1.20 2010
Exercisable @ Expire 31/12/
65c 2009
Exercisable @ Expire 31/12/
65c 2009
7.8 Issued during 200,000 - Exercisable @ Expire 31/12/
quarter 65c 2009
250,000 -
Exercisable @ Expire 31/12/
65c 2009
7.9 Exercised 297,949 297,949 12p (A$0.30) 12p (A$0.30)
during
quarter
7.10 Cancelled 166,668 166,668 Exercisable @ Expired 31/12/
during 75c 2006
quarter
7.11 Debentures - -
(totals only)
7.12 Unsecured - -
notes(totals
only)
Compliance statement
1 This statement has been prepared under accounting policies which comply with
accounting standards as defined in the Corporations Act or other standards
acceptable to ASX.
2 This statement doesgive a true and fair view of the matters disclosed.
Sign here:
Date: .*. 25 January 2007*....
--(Director/Company Secretary)
Print name: .........Max D.J. Cozijn...............
END
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