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Firestone Diamonds

Firestone Diamonds - Bulk Sampling Results

RNS Number : 5664X Firestone Diamonds PLC 26 June 2008 Firestone Diamonds plc Positive bulk sample results from BK11 Acquisition of BK16 Botswana operations update LONDON: 26 June 2008 Firestone Diamonds plc, ('Firestone' or 'the Company'), the AIM-quoted diamond mining and exploration company (ticker: AIM:FDI), today announces results from bulk sampling at its BK11 project, the acquisition of a controlling interest in BK16 and an update on evaluation and exploration work at its Orapa and Tsabong projects in Botswana. HIGHLIGHTS Orapa BK11 * Positive results from bulk sampling of crater unit * * Sample grade of 10 cpht, with high grade zones up to 33 cpht * Modelled grade of 15-20 cpht * High quality diamonds recovered; value estimated at $200/carat * Robust economic potential, with estimated gross value of $30/t and operating costs of $7-8/t * Estimate of 17 million tonnes to 120 metres depth * Development decision expected by end 2009 BK16 * Firestone to acquire 87.5% interest in BK16 kimberlite * Brings total kimberlites in Firestone's Orapa licence areas to 10 * Good economic potential * Historic grades up to 15 cpht * High quality diamonds recovered from sampling * Bulk sampling to be undertaken in H2 2008 Satellite Mining Project * Scoping study commenced * Targeting exploitation of BK11 and BK16 with combined 4M tonne per annum operation Tsabong MK1 * Grade estimate increased to 25 cpht based on additional microdiamond recoveries * Bulk sampling progress * * Two large diameter drill holes completed * 3 macrodiamonds recovered from initial sampling * Processing hampered by high clay and concentrate yields * Concentrates being sorted off site Bulk sampling * Bulk sampling programme continuing on 13 other high interest kimberlites Exploration * 2 new kimberlites discovered, bringing total in Tsabong to 85 * New prospecting licences granted for 2,500 square kilometres Philip Kenny, CEO of Firestone Diamonds, commented: 'The bulk sampling results from BK11 are very encouraging and are the highlight of our recent activities in Botswana. With an estimated value of $30 per tonne for the upper portion of BK11 and operating costs in the Orapa area of $7-8 per tonne, the economic potential looks very good. Based on these results we have decided to establish a second bulk sampling plant in Botswana to support evaluation and development work at Orapa. With the operational capability we have put in place in Botswana we expect to be able to fast track BK11 to a development decision by the end of 2009. This is the first of 15 kimberlites selected for bulk sampling from our Botswana portfolio and we believe that the prospects for identifying further economic kimberlites are very good.' Orapa BK11 Firestone's 80% owned BK11 kimberlite is situated approximately 20 kilometres south east of Debswana's Orapa Mine and 5 kilometres north east of the AK6 kimberlite, on which De Beers and African Diamonds are developing a new mine. BK11 has a surface area of 8.5 hectares and overburden ranges from 0 to 17 metres. Bulk sampling completed The first stage bulk sampling programme on BK11, which commenced in Q1 2008, has been completed, with very good results. Three 24 inch diameter large diameter drill ('LDD') holes were completed and 348 tonnes of drill sample material were processed at the Company's bulk sampling plant at Tsabong. A total of 197 diamonds weighing 17.0 carats were recovered. Details of the sampling results are provided below: Geological unit Average depth (m) Sample size (t) Diamonds recovered Sample grade Modelled grade (carats) (cpht) (cpht) Crater 0 to 120 135 13.6 10.0 15-20 Basalt breccia 120 to 250 213 3.4 1.6 nc Note: nc = not calculated The most significant result came from the crater unit, which extends to a depth of approximately 120 metres. This material produced 155 diamonds weighing 13.6 carats, which represents a sample grade of 10.0 cpht, and had a number of high grade zones with grades of up to 33 cpht. With the relatively small sample size taken to date, the Company believes that the sample grade is likely to be understated. This is supported by analysis of the size frequency distribution of microdiamonds and macrodiamonds recovered from the crater unit, from which a modelled grade of 15-20 cpht has been calculated. This estimate is consistent with the historical reported grade of 16 cpht and is very encouraging. The highly diluted basalt breccia unit below the crater contains very little kimberlite and produced a low grade of 1.6 cpht. No further work is planned on this unit at this time. A diatreme unit consisting of fragmental kimberlite breccia was intersected below the basalt breccia. Very little of this material was sampled by the LDD drilling and further investigation of this unit is planned. Diamond value The quality of diamonds recovered was very good, comprising mostly clear white gemstones. No industrial diamonds were recovered in the coarse fractions, compared to the more typical average of 20% to 50% from Botswana's current kimberlite mines. The parcel contained three stones of approximately 1 carat in size, which is also very encouraging in relation to diamond value. The value of diamonds recovered is estimated at approximately $200 per carat, although a larger parcel will be required to develop a higher confidence estimate. Economic assessment Based on a minimum modelled grade of 15 cpht and a diamond value of $200 per carat, the BK11 crater unit has an estimated gross value of $30 per tonne. With operating costs in the Orapa area estimated at $7-8 per tonne and with the crater unit estimated to contain approximately 17 million tonnes of kimberlite material, this clearly indicates that BK11 has significant economic potential. Evaluation and development plans The Company intends to accelerate its evaluation work, with the objective of establishing a mineable resource in the BK11 crater. A 36 inch diameter LDD programme is planned for the second half of 2008, on the basis of which the Company expects to be able to define an Inferred Resource. Material from this programme will be processed at the Tsabong bulk sampling plant. Additional 36 inch LDD drilling and bulk sample trenching will then be undertaken with the objective of being able to define an Indicated Resource and commence mine development by the end of 2009. As this work will require a new bulk sampling plant to be established in the Orapa area, the Company has decided to relocate the processing plant from its Avontuur Mine in South Africa, which is currently on care and maintenance, to Orapa. Using the Avontuur plant will save 6 to 9 months in construction time for the new plant and will also reduce capital costs. The Avontuur plant has a capacity of 25 tonnes per hour headfeed and will allow large bulk samples to be processed rapidly. It is expected that the plant will be on site in Orapa by the end of 2008 and ready to process material in early 2009. BK16 The Company is pleased to announce that it has entered into agreements with SouthernEra International Limited ('SouthernEra'), a wholly owned subsidiary of Mwana Africa plc, and SouthernEra's Botswana joint venture partner, under which Firestone can acquire an 87.5% interest in the BK16 kimberlite in return for carrying all costs to completion of bankable feasibility and a cash payment of #60,000. This will bring the number of kimberlites in Firestone's Orapa licence areas to 10. BK16 is situated approximately 22 kilometres north east of BK11 and 12 kilometres north of the Letlhakane Mine. SouthernEra will retain a carried 12.5% interest in the project to completion of bankable feasibility. Past evaluation work BK16 was discovered by De Beers in the 1970's and a grade of 15 cpht was reported from bulk sampling. Limited work has been carried out on BK16 since then, until SouthernEra acquired control of the project in 2007. SouthernEra has carried out high resolution ground geophysical surveys and drilled 19 core and percussion holes totalling approximately 2,300 metres. Based on this work BK16 is estimated to be a minimum of 3.5 hectares in size and to contain approximately 17 million tonnes of kimberlite to a depth of 200 metres. Economic assessment Grades from sampling of BK11 and AK6 (being developed by African Diamonds/De Beers) that was carried out around the same time as the BK16 sampling have been shown by more recent work by Firestone and De Beers, respectively, to be reliable estimates. The Company believes that a grade of 15 cpht is achievable on BK16. Diamonds recovered by the limited sampling carried out by SouthernEra and others has recovered predominantly high quality, white gemstones, with few industrial diamonds. This indicates that diamonds from BK16 are likely to have a high average value, possibly similar to BK11. Evaluation plans Firestone intends to carry out 36 inch LDD bulk sampling in the second half of 2008 in order to confirm representative grades and diamond values for BK16. Subject to the results of this work, a resource development programme would be undertaken on BK16 similar to that planned on BK11. Satellite Mining Project Firestone has commenced work on a scoping study to evaluate the feasibility of establishing a low cost satellite mining project ('SMP') in the Orapa area to exploit multiple kimberlites using smaller independent mining operations and processing plants at each kimberlite, with final recovery carried out at a larger central facility. The SMP study will initially be focused on the exploitation of BK11 and BK16 with a 4 million tonne per annum operation. Following the completion by De Beers of their initial exploration programme over some of Firestone's prospecting licences in the Orapa region, De Beers and Firestone have agreed to terminate the Orapa joint venture. Firestone intends to reprocess geophysical data acquired by De Beers under the joint venture to identify geophysical targets that were too small for De Beers to select as drilling targets. This work has already commenced and a number of high interest targets have been selected for drilling in the second half of 2008. The Company is confident that it will be successful in discovering new kimberlites in the Orapa area. Firestone also intends to re-evaluate the known kimberlites in these licence areas, including the 6 new kimberlites discovered by De Beers under the joint venture, as they could provide additional material for exploitation by the SMP. Formal termination of the De Beers joint venture is expected to take place in the next few weeks after final handover of exploration data to Firestone. Tsabong MK1 Microdiamond results MSA Geoservices in South Africa has completed processing material from core hole MK1-102 and additional material from core hole MK1-101, from which initial results were announced in February 2008. A total of 133 microdiamonds were recovered, bringing the total number of microdiamonds recovered to date to 250. Analysis of the size frequency distribution of the microdiamonds has been undertaken, from which a high confidence macrodiamond grade estimate of 25 cpht has been made. These results are very encouraging and continue to indicate that MK1 has the potential to have a significantly higher grade than was previously estimated based on the shallow drilling and limited evaluation work carried out in the 1980's. Details of the samples and diamonds recovered are provided in the table below: Core hole Sample weight (kg) Microdiamonds Stones per Stones per Macrodiamond grade recovered tonne 20 kg estimate (cpht) MK1-101 898 182 203 4.1 25 MK1-102 280 68 243 4.9 35 Total 1,178 250 212 4.2 25 Note: MK1-101 data includes results reported in February 2008 Bulk sampling Two LDD holes were drilled during Q2 2008. Details of the drilling are provided in the table below: LDD hole Depth (m) Material recovered (t) MK1-301 404 79 MK1-302 514 91 Processing of bulk sample material commenced following completion of the BK11 bulk samples, but was severely hampered by high clay content, high concentrate yields of up to 7% and large quantities of zircon, of up to 20 carats per tonne. Zircon has similar density and luminescence to diamond and reports to the X-ray concentrates making final recovery on site extremely difficult and time consuming. No diamonds were recovered from initial sorting on site and the concentrates from holes 301 and 302 have been sent to laboratories in South Africa for specialised processing and picking. Three macrodiamonds have been recovered to date from picking of concentrate from hole 301, but no picking of concentrate from hole 302 has been undertaken yet. These results are inconclusive pending completion of picking of the concentrates and review of plant efficiency. Further bulk sampling on MK1 has been suspended pending modifications to the plant to allow it to process MK1 material more effectively. This is expected to take 6-8 weeks to complete. In the meantime, the LDD rig and bulk sampling plant will continue to work on the other 13 high interest kimberlites in Tsabong. Potential new kimberlite cluster MK45 is one of the high interest kimberlites that has been selected for LDD drilling. Age dating of material recovered from MK45 has indicated an age of 670 million years, compared to an age of 60-90 million years for the other known kimberlites at Tsabong. MK45 also shows as a magnetic low on geophysical surveys, while nearly all of the other kimberlites discovered at Tsabong to date show as magnetic highs. This provides a good illustration of the geological diversity of the kimberlites in license area, and may indicate the presence of a cluster of much older kimberlites at Tsabong. Kimberlite age is considered significant, and it is interesting to note the three oldest kimberlites being mined in southern Africa - Jwaneng (250 million years), Venetia (500 million years) and Cullinan (1,200 million years) - are all significantly mineralised. MK45 is expected to be sampled in the second half of 2008. New kimberlites discovered Exploration for new kimberlites has continued in parallel with the evaluation programme. The Company is pleased to announce that two new kimberlites have been discovered, bringing the total in the Tsabong field to 85. New licences granted New prospecting licences have been granted to the Company over an area of approximately 2,500 square kilometres. The new licences adjoin the existing licence area to the north and east. The Company intends to expand its geophysical programmes in the Tsabong area to cover the new licence areas in 2008. For further information: Visit the Company's web site at www.firestonediamonds.com, or contact: Philip Kenny, Firestone Diamonds +44 20 8834 1028/+44 7831 324 645 Leesa Peters, Jos Simson, Conduit PR +44 20 7429 6600/ +44 7812 159 885 Mike Jones/Ryan Gaffney, Canaccord Adams (Joint Broker) +44 20 7050 6500 Jerry Keen, Blue Oar (Joint Broker) +44 20 7448 4492/+44 777 069 7358 Elizabeth Kennedy, Brewin Dolphin (Nominated Adviser) +44 141 221 7733/+44 777 161 1362 Note: The information in this statement has been reviewed by Mr. Tim Wilkes, B Sc, Pr Sci Nat, who is a qualified person for the purposes of the AIM Guidance Note for Mining, Oil and Gas Companies. Mr. Wilkes is Chief Operating Officer of Firestone Diamonds plc and has over 27 years experience in diamond exploration, mineral resource management and mining. Mr. Wilkes is a member of the sub-committee for diamonds of the South African Mineral Resource Committee (SAMREC). Background information on Firestone Diamonds: AIM quoted Firestone Diamonds plc ('FDI.L') is an international diamond mining and exploration company with operations in Botswana and South Africa. Botswana is the world's largest and lowest cost producer of diamonds, with annual production worth over $2.5 billion, and is considered to be one of the most prospective countries in the world to explore for diamonds. Firestone is the largest holder of mineral rights in Botswana's diamondiferous kimberlite fields, controlling over 29,000 square kilometres around the major Orapa and Jwaneng mines and the entire Tsabong kimberlite field. Firestone has 95 kimberlites in its portfolio, of which 24 have been proven to be diamondiferous and 16 are currently at bulk sampling stage. Firestone's mining operations in South Africa include a toll treatment operation in joint venture with De Beers at the Bonte Koe Mine. Background information on Orapa: The Orapa kimberlite field is located in northern Botswana and contains the Orapa, Letlhakane and Damtshaa mines. The Orapa Mine is the largest diamond mine in the world. With 8 economic kimberlites out of 75, the Orapa field has an economic ratio of more than 10%, one of the highest in the world. Access to the area is via tarred road from Gaborone and infrastructure in the area is very good. Background information on Tsabong: The Tsabong kimberlite field is located in south western Botswana, approximately 280 km south west of the Jwaneng Mine, which is the world's most profitable diamond mine. Tsabong is one of the largest diamondiferous kimberlite fields in the world, containing 85 known kimberlites, of which 18 have been proven to be diamondiferous. Tsabong is noted for the exceptionally large size of many of its kimberlites, in particular the 180 hectare MK1 kimberlite, which is one of the largest known diamondiferous kimberlites. The Tsabong field also contains 5 kimberlites larger than 50 hectares and 32 kimberlites between 20 and 50 hectares in size. Access to the area is via tarred road from Gaborone and infrastructure in the area is good. This information is provided by RNS The company news service from the London Stock Exchange END STREAFKSAAAPEAE

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