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DiamondCorp brings diamond project to JSE
Allan Seccombe
Posted: Thu, 22 Nov 2007

[miningmx.com] -- DIAMONDCORP will list on the main board on the JSE, possibly raising about R42m, in February to put towards a R100m underground kimberlite project at its Lace mine in South Africa.

The AIM-traded diamond producer was expected to come to the South African market in October but there were unexpected delays in releasing the pre-listing statement. Those issues have been resolved, but CEO Paul Loudon said there was no point in listing at year-end.

“We’ll do a placement on the JSE in February, probably about ₤3m. That’s not a final figure. We’ll take a look at that closer to the time,” Loudon told Miningmx on the sidelines of a visit to the company’s mine near Kroonstad.

The reason for the placement is to ensure liquidity in the stock on the Johannesburg bourse.

DiamondCorp is approaching the Lace kimberlite mine project, which was last exploited in 1930, in two phases. The first phase is treating up to 4,000 tonnes/day of tailings grading 10 carats per hundred tonnes for two years.

Output should total 360,000 carats at an average $70/carat over the life of the tailings.

During that time an 80,000 tonne bulk sample will be taken from a barely touched satellite kimberlite and fed through the plant at about 1,000 tonnes/day from the second half of 2008.

The raw kimberlite is estimated to have a grade of 27 carats per hundred tonnes, possibly up to 40 carats in the harder rock.

The benefit is that raw material containing larger diamonds – something lacking in the tailings – will be fed through the plant, accelerating the cash flow.

The tailings generate between 10,000 and 12,000 carats a month, but by including the underground material, this could be boosted to 16,000 to 17,000 carats a month and include a fuller spectrum of diamond sizes.

The tailings treatment is forecast to generate R100m in cash.

The second R100m second phase will involve digging a decline from surface to 330 metres below surface as well as rehabilitating an existing vertical shaft that is already sunk to that depth. Fairly extensive underground development into the kimberlite already exists. The vertical shaft will be used to hoist ore.

Full production from the underground mine will start in 27 months and should produce some 400,000 carats a year.

The mine will eventually go down to 850 metres, giving it a 20-year life.

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Diamonds from Lace would be unlikely to attract much interest from the State Diamond Trader because they are on the small side. Lace diamonds are generally bought by Indian and Israeli cutters who can profitably handle smaller stones, said Loudon.

Diamond producers are obliged to offer 10% of their output to the SDT, which is seeking larger carat stones to be cut and polished in South Africa to boost employment in the sector and generate more wealth within the country.

Power outages have plagued the project, causing 12 days of lost production in the first month. The plant was commissioned at the start of October.

Lace will secure power from a dedicated electricity line feeding De Beers’ Voorspoed mine just nine kilometres away. The existing power feed is erratic caused by heavy use on the nearby railway shunting yard in Kroonstad.

DiamondCorp is spending R10m on a substation and transmission lines. The outlay forms part of the R100m second phase capex.

DiamondCorp had an option to buy the privately owned alluvial diamond company Sonop for $60m in cash and shares from Chris Potgieter, the same person who sold them Lace.

The option has been downgraded to a first-right of refusal because Sonop has had delays in bringing production on line. DiamondCorp’s shares were suspended on AIM while it had the option, part of the decision to exit the option was to resume share trading.

Sonop have its production niggles resolved in six to nine months. The price will be renegotiated then.