Firestone to develop Botswana mine

Brendan Ryan | Thu, 10 Dec 2009 11:37
[miningmx.com] -- AIM-listed Firestone Diamonds is to go ahead with development of a mine at its BK11 kimberlite pipe in northern Botswana.

The BK11 pipe is situated close to Debwana’s Orapa and Letlhakane mines, as well as African Diamonds’ AK6 kimberlite project.

According to Firestone CEO Philip Kenny, the BK11 mine should be in operation during the second quarter of 2010 and Firestone will fund the development costs from existing cash reserves.

Firestone has also agreed with its Botswana partners to fund their share of the development costs in return for an increase in Firestone’s stake in BK11 to 90% from the current 80%.

Firestone raised ₤7.2m through a share placement in July. The recovery plant to be used will be relocated to BK11 from Firestone’s closed Bonte Koe mine in South Africa.

Full production capacity of 1.5 million tonnes (mt) per year is expected during the third quarter of next year.

Kenny said the decision to go ahead was taken after good results from the final phase of bulk sampling. These increased the overall diamond value to $137/carat and the diamond value in the initial section of the pipe to be mined to $157/carat.

He added the estimated revenue from BK11 was $16/t of ore, while estimated operating costs were $6.50/t.

Kenny said: “The BK 11 mine will give us a very solid foundation from which to further develop our exciting portfolio of projects and opportunities in Botswana. With the projected shortfall in rough diamond prices expected to drive diamond prices higher in coming years, we believe that prospects for Firestone are extremely good.”

Firestone controls six other kimberlite pipes in the Orapa region and is in negotiations for ownership of a number of others.

Given current funding constraints, Firestone had opted to focus its attention on BK11. This is far closer to production than its other prospects, including the extensive Tsabong kimberlite pipe complex in southern Botswana.

AIM-listed African Diamonds is carrying out a feasibility study on its AK6 pipe in the Orapa region and could have a mine there in operation by the end of 2011.

That was announced in mid-November after De Beers agreed to sell its controlling stake in AK6 to TSX-listed Lucara, which is part of the $10bn international Lundin natural resources group.

African Diamonds is in partnership with Lucara and will increase its stake in AK6 from the present 29% to 40% through buying additional shares from Lucara.

The two developments could signal the start of a revival of the diamond sector in Botswana, which took a hammering from the global financial and commodities meltdown at the end of 2008.

ASX-listed Diamonex was forced to put its just-opened Lerala diamond mine on care and maintenance. It subsequently sold its 80% shareholding to its bondholders to meet its financial commitments.

Development of Gem Diamonds’ proposed Gope mine in central Botswana is on hold because the group remains focused on cash preservation at this stage.