| Thu 3 Jul 2008, 8:30 | | DMC - DiamondCorp Plc - Market update - July 2008 |
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DMC
DMC
DMC - DiamondCorp Plc - Market update - July 2008
DiamondCorp Plc
JSE share code: DMC & AIM share code: DCP
ISIN: GB00B183ZC46
(Incorporated in England and Wales)
(Registration number 05400982)
(SA company registration number 2007/031444/10)
("DiamondCorp" or "the Company")
MARKET UPDATE - JULY 2008
DiamondCorp plc, the South African diamond mining company, is pleased to provide
the following update on its activities for the six months ending 30 June 2008.
Highlights
* 27,103 carats of diamonds were recovered from Lace tailings re-treatment in
the first six months of 2008, including a 34.84 carat non-gem diamond.
Recoveries averaged 6.1 carats per hundred tonnes and approximately 70% of
diamonds recovered were gem quality.
* 19,214 carats of gem diamonds sold at tender in Johannesburg for US$1.163
million, at an average price of US$61 per carat.
* Accelerated development of Phase Two underground mining at the Lace Diamond
mine is now 14 months ahead of original schedule.
* A new 4m x 4m decline advancing at a rate of 120m per month, with the Lace
Satellite kimberlite pipe expected to be reached in the next three months.
* Connection to a second Eskom power supply from a new power line servicing
the nearby De Beers Voorspoed diamond mine was completed. As a result, the
impact of power outages and load shedding is expected to be significantly
reduced.
* Approximately 200,000 tonnes of re-crush material has been stockpiled
awaiting purchase and commissioning of new re-crush crusher. The existing
re-crush cone crusher, which has proved to be unsuitable for this purpose,
is being relocated to a secondary crushing function for the underground
material. Alternative re-crush crushers are being tested.
* Up to 40 per cent of expected revenues from tailings are contained in the
re-crush material, which will not be realised until the re-crush crusher is
replaced.
Commenting on the period, DiamondCorp CEO Paul Loudon said: "DiamondCorp`s
operations have progressed significantly over the past six months. First pass
recoveries from the tailings re-treatment operation are now in line with
original estimates and issues with power supply and the re-crush circuit have
been addressed.
"At the same time, the development of the Lace underground project is now 14
months ahead of the original schedule, with initial kimberlite recovery from the
Lace Satellite pipe expected by September 2008."
South African Operations - Lace Diamond Mine (DiamondCorp 74%)
DiamondCorp`s 74%-owned Lace diamond mine is located 200km southwest of
Johannesburg in the Free State Province of South Africa. The project comprises
the Lace kimberlites which have the potential to support a +20-year underground
mining operation, and tailings re-treatment activities which are being
undertaken while access to the underground is established.
Since the start of 2008, management has focused on accelerating development of
Phase Two underground mining at the Lace mine. Phase Two involves capital
expenditure of approximately R100 million (US$12.8 million) over two years to
achieve underground production of 4,000 tonnes of kimberlite per day. Current
year expenditure will be funded from the recent R26 million (US$3.3 million)
equity placement to South African institutions. The balance of funding is
expected to be debt, as the Company is currently ungeared.
This year`s expenditure will fund extraction of the initial bulk sample and
achieve trial mining at a rate of 1,000 tonnes per day from the underground
operations.
Approximately 35 million tonnes of kimberlite have been outlined in the main
Lace pipe between the 240m and the 855m level. Up to a further 7 million tonnes
of kimberlite exists above the 240m level, but is not taken into account in the
Company`s resource estimates due to the existence of old workings. Nonetheless
this remnant kimberlite, much of which is expected to be high-grade hypabyssal
material, will be mined once access to the old workings is achieved. A further
3.5 million tonnes of kimberlite also exists in a Satellite pipe 30m to the west
of the main pipe. The Satellite pipe was historically a lower diamond grade than
the main pipe, and no tonnage from this pipe has been incorporated into resource
estimates.
A new 4m x 4m decline is now being sunk between the Lace pipes and the existing
6m x 2.7m vertical shaft using the Company`s own underground mining fleet. This
decline is advancing at the rate of 120m per month and will access the Satellite
pipe within the next three months. A 20,000 tonne bulk sample will be extracted
from the Satellite pipe while the decline continues down to access the main pipe
during the first quarter of 2009.
The accelerated development of Phase Two means kimberlite will now be accessed
14 months ahead of the original schedule.
Re-treatment of Lace tailings continued during the past six months, with 447,774
tonnes treated for the recovery of 27,103 carats of diamonds, of which
approximately 70% were gem quality. Total recovery over the period averaged 6.1
carats per hundred tonnes (cpht) and were lower than anticipated due to
continued failures in the re-crush circuit. Re-crush is estimated to recover
another 3 cpht from the tailings when a new re-crush crusher is installed within
the next three months.
During June a 34.84 carat non-gem diamond was recovered, the largest diamond yet
recovered from the tailings. While this diamond was not of significant value, it
underlines both the potential for sizeable stones in the Lace kimberlites and
the efficiency of the Lace recovery systems.
In addition to high quality white diamonds, the Company continued to recover
significant numbers of fancy yellow, pink and lilac stones from the dumps. The
quality of the diamonds in the tailings and the presence of large stones
underpins management`s decision to accelerate Phase Two underground development.
Four diamond tenders were held in Johannesburg during the six months, with
19,214 carats of gem diamonds being sold in the period for total revenue of
US$1.163 million (US$61 per carat average). Non-gem diamonds are held in
inventory and sold once a year.
Operations for the period continued to be hampered by power outages and repeated
breakdowns in the re-crush circuit, though the impact was not as severe as in
the previous period. Operating costs have been impacted by rising diesel prices
and unplanned repairs and maintenance resulting from power spikes. Management
has moved to address the power and re-crush issues, and accelerating Phase Two
will deliver higher margin kimberlite to the processing plant.
With respect to power, a 9km power line has been built to access the new Eskom
power line supplying De Beers Voorspoed diamond mine. This second power source,
which will be switched on next week, comes from Bothaville in the western Free
State, and services only the Voorspoed and Lace mines.
It is expected that this supply will be cleaner and subject to less load
shedding and power outages than Lace`s original power source from Heunigspruit
in the eastern Free State. Both power sources will be active, providing Lace
with flexibility during load shedding.
With respect to the re-crush circuit, management has concluded that the cone
crusher specified by the plant process designers is not able to achieve the
desired crushing size on a continuous production basis. As a result, it has been
decided to move the cone crusher from its current re-crush position and
recommission it as the secondary crusher for primary kimberlite.
A new re-crush crusher is anticipated to be installed in the next three months
following detailed testwork.
In the meantime, approximately 200,000 tonnes of treated tailings material is
stockpiled awaiting re-crush to liberate diamonds locked up in 6mm to 28mm
kimberlite particles. This stockpile grows each day as approximately 35 per cent
of run of mine tailings reports to re-crush. The Company estimates that up to 30
per cent of the diamonds and 40 per cent of the revenue in the tailings is
contained in re-crush diamonds, so the failure of this circuit has had a
significantly negative impact on revenues. The Company is currently
investigating legal action against the plant process designers to recover this
loss.
Operations - Other
During the past six months, the Company assessed a number of other diamond
production opportunities but none of these achieved the Company`s hurdle rates
for project scale or profitability. No activities were undertaken on the
Company`s exploration properties during the quarter.
Discussions took place during the period with both the Department of Mines and
Energy towards finalisation of the Lace mining right for the Phase Two
underground operation, and with the State Diamond Trader with respect to
reaching a suitable agreement for the mechanism by which the SDT has the
statutory right to purchase up to 10 per cent of the Lace Mine production. The
Company anticipates being granted the underground mining right for Lace before
the end of the year and that an agreement with the SDT will be finalised
shortly.
On behalf of the board
Euan Worthington
Chairman
3 July 2008
London
Sponsor:
Investec Bank Limited
For further information, please contact:
Paul Loudon
DiamondCorp plc
+44 20 7256 2651
Joe Nally/Liz Bowman
Cenkos Securities plc
+44 20 7397 8900
Robert Smith/Tanis Crosby
Investec Bank Limited
+27 11 286 7662
Charmane Russell
Russell & Associates
+27 11 880 3924
Jane Stacey/Jos Simson
Conduit PR
+44 20 7429 6606/+44 7922 923 306
Date: 03/07/2008 08:30:01 Produced by the JSE SENS Department.
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