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DIAMONDCORP PLC - Lace Diamond Mine Project Update

Release Date: 30/04/2015 08:00
Code(s): DMC     PDF:  
Wrap Text
Lace Diamond Mine Project Update

DiamondCorp plc
(Incorporated in England and Wales)
(Registration number 05400982)
(SA company registration number 2007/031444/10)
AIM share code: DCP JSE share code: DMC
ISIN: GB00B183ZC46
("DiamondCorp" or “the Group” or “the Company”)


LACE DIAMOND MINE PROJECT UPDATE

DiamondCorp, the Southern African diamond 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 remains on schedule for
       commencement of mining operations in H2 2015, four months ahead of the
       original plan.
   -   A total of 3,321m of underground core drilling in 21 holes has delineated 2.6
       million tonnes of K4 (high grade) kimberlite above the 370m level, an increase
       of more than 2 million tonnes over the original Lace geological model.
   -   The drilling of the UK4 block provides the volume data required for an
       updated resource statement. The final resource statement will require grade
       data from the bulk testing currently scheduled to be completed by the end of
       Q2.
   -   Processing of K6 kimberlite recovered from the production level drives has
       commenced, including recovery of a 19.83 carat clear white gem diamond,
       being the largest gem diamond recovered from underground development so
       far.
   -   The underground conveyor system is 91% fabricated and on site, 51%
       installed and on schedule for commissioning ahead of the mining ramp-up.
   -   Mine development costs to date are averaging R38,961 per metre against a
       budget of R37,000 per metre.
   -   Detailed technical and legal due diligence for the US$7 million royalty
       financing facility with Acrux Resources, as well as finalisation of detailed
       terms, is nearing completion and preliminary consents from lenders have
       been received. Subject to Board approval and signing of a satisfactory final
       facility agreement, it is anticipated that the drawdown of funds could be
       completed in the current quarter.


Underground Development

During the three months ended 31 March 2015, the Company’s 74%-owned
subsidiary Lace Diamond Mines (Pty) Limited (LDM) continued with the
implementation of the revised development schedule and budget which aims to bring
forward the ramp up of commercial production from underground kimberlite mining by
four months from the original schedule in H2 2015.

Tunnel development costs to date are averaging R38,961/m against a budget of
R37,000/m (reduced from R40,764/m as at end Q4 2014).The overspend continues
to be the result of increased operating costs on the Company’s underground mining
fleet. In particular, dump truck breakdowns and repairs have been high due to the
long haul distances from UK4 Block development levels to surface.

For this reason, completion of the tunnels and an underground loading chamber
required for commissioning of the underground conveyor belt system is the priority
development activity currently underway.

The conveyor belt is 91% fabricated, on site, and 51% installed, with the installation
contractor now completing the fourth of five transfer arrangements required to link the
belt to surface. The conveyor belt commissioning schedule has moved by several
weeks into July but without impacting the critical path as it will still be commissioned
ahead of the mining ramp up from the UK4 Block. The conveyor belt will handle both
kimberlite and development waste and has the capacity to bring 400 tonnes per hour
to surface (an average of 8,000 tonnes per day) compared with a maximum of 975
tonnes per day which can currently be hauled by the Company’s five dump trucks.
Load and haul costs are expected to be around R6,200 per metre of development
using the conveyor belt compared with R13,000 per metre using trucks.

The impact of international oil price falls has had little impact on diesel costs in rand
terms. The mine continues to be unaffected by Eskom load shedding and pleasingly
VAT refunds are now being handled by the South African Revenue Service in a more
timely manner.

Resource definition drilling

A total of 3,321m of resource definition drilling of the UK4 Block has been completed,
providing the volume data required for a forthcoming resource statement update. The
drilling has delineated 2.6 million tonnes of high-grade K4 kimberlite above the 370m
level to the new top of the model at the 230m level, an increase of more than 2
million tonnes over that contained in the original Lace geological model which topped
at the 345m level. This volume is significantly more than was initially expected.

Processing of kimberlite from development tunnels in the UK4 Block has
commenced, with tonnage currently coming from lower grade K6 kimberlite. The
plant is operating efficiently and diamond recoveries have included a 19.83 carat
clear white gem, the largest gem diamond recovered from underground development
so far. The recovery of this stone underlines the potential of Lace to produce larger
gems and will have a positive impact on the average carat value of diamonds
recovered.

Processing of kimberlite from development tunnels in the UK4 Block is being
monitored by MPH Consulting Limited as a controlled bulk test, with individual
batches of ~1,000 tonnes being processed separately and augmented with
representative microdiamond sampling. These results combined with previous
microdiamond analysis, which has predicted grades from the K4 unit of at least 60
carats per hundred tonnes, will provide the grade data required for the resource
statement update by late Q2 2015. Subsequent valuation and sale of the recovered
diamonds will provide the carat value required to complete the updated resource
statement.

The potential for significant volumes of additional high-grade kimberlite above the
370m level was the catalyst for the UK4 mine plan. Mining of the UK4 Block will
extract 30,000 tonnes of kimberlite per month by the longhole open stoping bottom
up method. The extraction will commence in the centre of K4 unit and stoping will
then progress north and south simultaneously until the contact with lower grade K6
kimberlite is encountered. A total of 1.6 million tonnes is planned to be extracted from
the UK4 block while the first block cave is developed, the majority of which will be
high-grade K4 kimberlite. The unmined balance of the UK4 tonnage will then fall into
the first cave for extraction in the later years of the cave.


Plant and tailings retreatment

The Company’s metallurgical consultants have commenced preliminary test work on
the potential for installing a high volume optical and x-ray waste sorter ahead of the
dense media separation plant. Such a unit could remove large volumes of internal
waste from the kimberlite before processing. The K6 kimberlite contains up to 85%
waste in places and the higher grade K4 kimberlite has up to 25% internal waste.
Installation of a waste sorter has the potential to significantly reduce plant water and
electricity consumption and could also allow the kimberlite to be processed faster
than the current planned 220 tonnes per hour. If the test work is successful a unit
could be installed before the mining ramp-up from the first block cave.

Tailings re-treatment processing stopped in September 2014. As tailings retreatment
is a break-even proposition, there are currently no plans to resume processing until
sufficient process water storage has been finalised. The mine currently has sufficient
water in storage to meet all of its kimberlite processing requirements for 2015.


Acrux royalty

During the period, the Company’s 74%-owned subsidiary Lace Diamond Mines (Pty)
Limited (“LDM”) signed a term sheet with Acrux Resources (Pty) Limited (“Acrux”)
pursuant to which Acrux will advance the South African equivalent of US$7 million
interest free to LDM (the “Advance”) in exchange for LDM granting to Acrux a 3% net
revenue royalty (the “Royalty”).

The Royalty is conditional on completion of satisfactory legal, financial and technical
due diligence by Acrux, consents from existing lenders to LDM, and satisfactory
completion of legal documentation as is usual in a transaction of this nature.

The Royalty shall be payable on the first 12 million carats of diamonds recovered
from the Lace diamond mine and will be calculated on the net diamond revenue
received by LDM after the deduction of diamond marketing costs. The Royalty also
incurs a 2% structuring fee on the Advance. After eight years LDM will have the right
to repurchase the royalty at independent valuation at that time.

The proceeds of the transaction will be used by LDM to strengthen treasury at the
operating company level and provide working capital cover during the
commencement and ramp-up of mining operations at Lace during H2 2015.

Technical and legal due diligence, as well as finalisation of detailed terms, is nearing
completion and preliminary consents from lenders have been received. Subject to
Board approval and signing of a satisfactory final facility agreement, it is anticipated
that the drawdown of funds could be completed in the current quarter.

Competent Person
Mr. Paul Sobie, P.Geo., President of MPH Consulting Limited, being an Independent
Qualified Person and a member in good standing of the Association of Professional
Geoscientists of Ontario, Membership #0374, has reviewed and approved the
technical content of this news release.


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)
Megan Young
Tel: +27 11 445 8068

SA Corporate Advisor
Qinisele Resources Proprietary Limited
Dennis Tucker / Andrew Brady
Tel: +27 11 883 6358

30 April 2015

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