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Gem to spend $85m on Gope mine

Brendan Ryan | Tue, 15 Mar 2011 10:53

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[] -- GEM Diamonds (Gem) intends accessing the Gope kimberlite pipe in central Botswana initially through a decline shaft to reduce start-up capital costs.

Gem CEO Clifford Elphick said in the company’s 2010 results announcement, published on Tuesday, that “a design for an underground mine was modelled in 2010, eliminating the costly overburden stripping of the open pit mine model.

“A decline was determined as being the most cost effective access method, noting that excavating through Kalahari sand will present a number of challenges. “

The cost of the first phase development at Gope has been estimated at $85m, of which $22m has already been committed for 2011.

Camp construction is planned to start in the second quarter of 2011, with mobilisation for the underground access expected to start early in the third quarter of the year.

Construction of the processing plant will begin in the third quarter of 2012 and production is forecast to begin in the third quarter of 2012.

This will build up to 720,000 tonnes per year from which 180,000 carats of diamonds will be produced annually.

Elphick said: "After an initial four-year mining period, the mine will step up production output over a period of time to a steady state production of 3.4 million tonnes (mt) per annum producing approximately 780,000 carats per annum.”

The mine is situated in Botswana’s Central Kalahari Game Reserve (CKGR), which has triggered criticism from various wildlife and social non-governmental organisations.

Elphick said: "The company is cognisant of the environmental and social sensitivities of operating within the CKGR region and is committed to implementing a fully integrated life-of-mine rehabilitation plan from the outset, in order to minimise any environmental impact of the mining operation and to develop a positive and long-term sustainable legacy for the project-affected communities.”

Elphick noted Gem’s other major project to grow the company was the planned expansion of the flagship Letseng mine in Lesotho, which could cost $250m. About $35m of this will be spent in 2011.

He said a prefeasibility study was started during 2010, along with a “conceptual study” looking at moving to underground mining in the Letseng satellite pipe to eliminate the high level of waste stripping at the satellite pipe.

“This study has now been completed, and indicates that starting an underground operation prior to the completion of the currently planned open pit will be value enhancing for Letseng.”

Elphick said the main objectives of the project are to increase production at Letseng to at least 8.5mt/year, increase revenue through the use of appropriate technology to reduce diamond damage and reduce real operating costs by $2/t.

Letseng treated 7.6mt of ore during 2010 from which 90,933 carats were recovered and 88,564 carats were sold, generating sales revenues of $190m.

More than 72% of that revenue came from the sale of 500 rough diamonds recovered which were larger than 10.8 carats in size. Elphick pointed out a total of 104 diamonds were sold at prices of greater than $20,000 per carat, contributing revenue of $103.5m.

Elphick said the Cempaka mine in Indonesia remained on care and maintenance and Gem is looking to sell it. Gem acquired Cempaka in 2007 at a cost of $78.2m.

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