| Tue 20 Mar 2012, 9:00 | | DMC - DiamondCorp - Lace Mine Independent Engineering and resource reports |
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DMC
DMC
DMC - DiamondCorp - Lace Mine Independent Engineering and resource reports
DiamondCorp
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`)
LACE MINE INDEPENDENT ENGINEERING AND RESOURCE REPORTS
DiamondCorp plc, the African diamond mine development and exploration company,
is pleased to announce the receipt of an Independent Engineering Report on the
proposed 47 Level Block Cave development at the Lace mine prepared by SRK
Consulting South Africa ("SRK").
HIGHLIGHTS
SRK`s key conclusions are that:
The continuous trough block caving method proposed for the 47 level (470m depth)
mine development is an appropriate mining method for the Lace mine to achieve
1.2 million tonnes a year of kimberlite production.
The proposed twin decline access and conveyor system is a sound approach which
will be quicker and cheaper than refurbishing the collapsed shaft system.
The existing mine engineering infrastructure has been designed, installed and
operated to a high standard.
Certain modifications will be required to the existing DMS (dense media
separation) processing plant recrush circuit to ensure 200 tph of kimberlite can
be treated without the scrubber section being overloaded. These modifications
are budgeted for in the current capital costs.
The capital and operating costs in the Lace financial model for a 1.2 million
tonne per annum mining operation are reasonable and within industry norms for
block caving operations worldwide. The model forecasts mining costs at R82.65
per tonne, processing costs at R33.44 per tonne and general & administration at
R7.61 per tonne. Total cost of R123.7 per tonne ($16 per tonne).
Kimberlite will be accessed first on the anti-socket (or slot drive) level, 30m
above the production level, 12 months after development commences.
The anti-socket level tunnels will be developed across the entire pipe by month
15 and initially allow final cave footprint delineation, the geotechnical model
and grade distribution to be finalised. They are later utilised for physical
observation of the blasted slots. The total cost to reach this stage of
development is estimated at R169 million ($22.2 million).
The total development cost (including working capital and a 15% contingency on
capital and development costs) is estimated in the Lace financial model at R384
million ($50 million).
The peak funding requirement (including working capital) is estimated to be in
month 25 at R286 million ($37.6 million) when blasting of the slot drive and
doming starts to deliver significant tonnage of kimberlite.
The costs of establishing the block cave thereafter are offset by revenues from
the sale of diamonds recovered from kimberlite mined and processed during the
doming level and production level developments.
Approximately 600,000 tonnes of kimberlite will be extracted and processed
during the block cave development. Anticipated revenue from this kimberlite is
R421 million ($54.7 million) during the 43 months of development before 100,000
tonnes per month of production is achieved.
The peak funding requirement is only moderately sensitive to diamond price and
grade.
A high level review and sensitivity analysis of the life of mine plan and
financial model provides positive returns under most scenarios from a project
that shows robust cashflows.
The project net present value in the agreed LoM financial model using a 10%
discount rate is R1,452 million ($188 million). (DiamondCorp 74% share $139
million).
Commenting on the report, DiamondCorp CEO, Paul Loudon said: `Our development
plan has now been validated by SRK which paves the way for discussions with a
range of potential project financiers to progress. The key driver for management
in these discussions will be to find the optimum financing method which is the
least dilutive for existing shareholders.`
A copy of the SRK report will be available for download from the DiamondCorp
website, www.diamondcorp.plc.uk.
In conjunction with the SRK report, a geological resource review was undertaken
by VP3 Geoservices which has updated the Resources Statement for the Lace Mine
in accordance with the SAMREC Code of Diamond Resource reporting. The review
concludes that:
The Lace Main Pipe contains 33.121 million tonnes of kimberlite indicated and
inferred to a depth 855m.
The Main Pipe contains approximately 13.291 million carats in both resource
categories.
LACE MINE RESOURCE STATEMENT
Resource Depth Category Tonnes cpht Carats $/carat
--------- ------- ---------- ------------ ----- ------------- --------
Tailings Dumps ------------ ------------
Surface Measured 3 310 000 5.00 165 500 80
============ ============
Main Pipe
VK* 73-345 Indicated 5 879 000 24.4 1 434 000 160
345-855 Inferred 11 163 000 24.4 2 724 000 160
CK** 345-855 Inferred 16 079 000 56.8 9 133 000 ?
------------ -------------
33 121 000 13 291 000
============ =============
Satellite Pipe
VK 73-345 Indicated 1 375 000 7.1 98 000 160
VK & CK 345-600 Inferred 1 091 000 ? ? ?
------------
2 466 000
============
* VK = massive volcaniclastic kimberlite, previously referred to as TKB or
tuffisitic kimberlite breccia.
** CK = coherent kimberlite, previously referred to as hypabyssal kimberlite.
? $/carat on inferred CK and grade on inferred satellite pipe kimberlite cannot
be determined until underground mine development intersects these facies and a
bulk test is extracted.
BACKGROUND - LACE MINE, FREE STATE PROVENCE, SOUTH AFRICA
The Lace diamond mine is located 25km northwest of the town of Kroonstad within
the Free State Province of South Africa. The mine operated from 1896 to 1931,
and according to mine records produced approximately 700,000 carats of diamonds
from 4.5 million tonnes of kimberlite at a recovered grade of 16 cpht. The
production was reported to be high quality, white diamonds, with the biggest
stones recorded historically being 122 and 86 carats. The kimberlite was mined
by open pit to approximately 100m depth, then by underground methods to 240m
depth. In 1920s, higher grade kimberlite was encountered as the workings went
deeper, and a decision was taken to develop a 6.5m x 2.5m vertical shaft to the
36 level (360m) and pre-develop the kimberlite between the 24 level and the 33
level with 2m x 2m development drives.
The vertical shaft and development drives were completed in 1930, a year before
the mine closed when diamond prices collapsed in the Great Depression. The mine
was then kept dewatered until 1939, when it was acquired by De Beers
Consolidated Mines Limited. De Beers never operated the mine, but instead let it
flood, thereby sterilising the resource as part of their control of the supply
side of the diamond industry. Following progressive changes to the mining law in
South Africa, DiamondCorp acquired the property from the Christiaan Potgieter
Trust in 2006 in conjunction with Black Economic Empowerment partners Shanduka
Resources and Sphere Investments.
In 2007, DiamondCorp constructed a 1.2 million tonne per annum dense medium
separation plant at Lace and commenced treatment of approximately 3.4 million
tonnes of kimberlite tailings from the mining activities which took place
between 1896 and 1931. Approximately 1.1 million tonnes of tailings were treated
at a recovered grade of 8 cpht. At the same time, a 4.5m x 4.5m decline was
commenced to access and bulk test the kimberlite below the previous mining
levels. Decline development and tailings re-treatment ceased at the end of 2008
when diamond prices fell by 50 per cent during the credit crisis. Decline
development resumed in May 2009 and reached the kimberlite sampling level 25 in
May 2010.
London
20 March 2012
The Competent Person with overall responsibility for the Independent Engineering
Report is Mr M.L. Wertz (Pr Eng, Engineering Council of SA Registration Number
20010025), who is a partner with SRK Consulting and a mining engineer with more
than 20 years experience who has carried out numerous due-diligence reviews in
South Africa and internationally during the past 10 years. Mr Wertz and SRK have
reviewed the information contained herein and approved the contents of the news
release.
The Competent Person responsible for the resource statement contained in this
announcement is Mr Paul Zweistra (Pr. Sci. Nat., Registration number 400016/93)
a full-time employee of VP3 Geoservices (Pty) Ltd. VP3 and Mr Zweistra have
revieved the information contained herein and approved the contents of this news
release.
AIM Nomad: Fairfax I.S. plc
AIM Brokers: Fairfax I.S. plc, Ocean Equities Ltd
JSE Sponsor: PSG Capital (Pty) Limited
DiamondCorp plc, Paul Loudon +44 20 3151 0970/+27 56 212 2308
Ewan Leggat, Fairfax I.S. plc +44 207 598 5368
Guy Wilkes, Ocean Equities Limited +44 207 786 4370
John-Paul Dicks, PSG Capital (Pty) Limited +27 21 887 9602
Charmane Russell/Marion Brower,
Russell & Associates +27 11 880 3924
Date: 20/03/2012 09:00:03 Produced by the JSE SENS Department.
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