DiamondCorp revises cost of Lace mine

Brendan Ryan | Mon, 30 Jan 2012 11:14

[miningmx.com] -- DEVELOPMENT of DiamondCorp’s Lace diamond mine in the northern Free State will cost 11% more than previously estimated, but the revised plan is expected to more than double initial revenues.

The change results from the discovery that the rock strength of the diamond-bearing kimberlite is higher than that of normal kimberlites.

That’s good news in terms of reducing any major secondary support required for the tunnels, but it also means the first block cave operation will have to be located 130m deeper than previously thought.

The reason is that the stronger rock will need higher pressure from a greater overhanging mass of kimberlite to start the block caving operation, which extracts the ore through gravity.

DiamondCorp CEO Paul Loudon said the first block cave will now be located on 47 levels and will cost R450m, including a contingency of about R60m which is 11% more than previously estimated.

But the greater size of the initial operation will nearly double the initial volume of ore mined to 12mt from 6.5mt and will generate R432m in revenue.

Loudon added that further underground drilling at Lace had located a bulge in the kimberlite pipe between 24 and 33 levels, which has pushed up the size of the pipe at the 33 level to 50% more than at the 24 level.

This additional tonnage did not form part of the current mine plan and Loudon said DiamondCorp was investigating mining it through “rim loading” – a process used by De Beers at its Finsch mine – which could potentially generate earlier cash flow.

Loudon said negotiations with "numerous" parties were underway to arrange the debt facilities required to fund development of the mine.

"The indicative terms suggest that equity dilution for existing shareholders can be minimised," he said.

"Discussions range from partial debt financing and convertible structures to complete debt financing and off-take agreements. Ultimately, the financing path chosen will be determined on the basis of the least dilutive route for existing shareholders."

"I would expect that the preferred financing option will be determined shortly after SRK deliver our independent engineering report this quarter, and that full scale mine development should commence by the middle of the year."