DiamondCorp (AIM DCP, JSE: DMC) has recommenced mine development at the Lace Mine in South Africa and resumed its exploration activities in Botswana, following the successful completion of its recent £7.1 million capital raising.
In the Free State Province of South Africa, the development of the Lace Diamond mine has resumed, with 2010’s work program focused on the completion of a 4.5x4.5m decline to access kimberlite resources below the sub-240m level, the lowest level of the mine's historical workings.
“Following one of the most difficult years on record for the diamond sector, we have been able to keep the 1.2 million tonne per annum recovery plant and full underground mining fleet in place and in good working order”, DiamondCorp MD & CEO Paul Loudon commented.
“We look forward to accessing the potential 13 million carats in resource at Lace in early 2011, and building up to a potential production of between 400,000 and 500,000 carats per annum at the same time as the long-term metrics for the diamond industry continue to improve”.
The decline is budgeted to cost £4 million, and is scheduled to be completed in the first quarter of 2011. The company said the decline will be used for the initial haulage of kimberlite from below the sub-240m level. Kimberlite will be used for bulk testing purposes and for the implementation of the sub-level caving mine plan, devised by Snowden Mining Industry Consultants.
Production at Lace is scheduled to increase to 1.2 million tonnes per annum, once the existing 6x2.7m vertical shaft is re-equipped during 2011 for primary ore hoisting. Subsequently the decline will then be utilised for men, materials and ventilation for the remainder of the +25-year life of the mine.
DiamondCorp also noted that it has retained the key individuals on its management, as well as its main shaft sinking contractor. Furthermore the company said that its core technical competencies have been strengthened with the signing of a contract with Snowden Mining Industry Consultants - as leading technical consultant on the decline development and sub-level caving mine plan.
Elsewhere, DiamondCorp is earning a 77.5% interest in various exploration licenses in Botswana from Geoperspectives Pty, by funding exploration activities. The company said that preparations are being finalised for the start of a six-hole diamond drilling program on two kimberlite targets – J-05 and J-12.
Diamondcorp highlighted that the J-05 and J-12 kimberlite targets are located approximately 5.5km southeast of De Beers Jwaneng mine, which it noted was the world’s richest diamond mine measured by value.
The 2010 program follows the successful delineation of a 10 hectare diamondiferous kimberlite J-01 during the an initial drilling program in late 2009.
“The results of the next drilling program will determine the priority of drilling large diameter holes for extraction of mini bulk samples for grade modeling. Prior to siting of drill holes, ground gravity data on J-05 and J-12 are being re-interpreted”, DiamondCorp stated.
Following the successful fundraising, a number of brokers have been keeping an eye on DiamondCorp in the run-up to the company’s 2010 work schedule. Last week, on 15 April, Cenkos Securities noted that Diamondcorp has constructed and commissioned a highly efficient diamond recovery plant.
The broker highlighted that the Lace diamond mine is projected to generate cash-flows of £3m from 2012, rising to approximately £15m from 2015 - assuming annual production of 230,000 carats from 2012 and 400,000 carats by 2015 with a total 25 year mine life.
Similarly, on 14 April, Fairfax initiated its coverage on DiamondCorp, describing the company’s flagship Lace Diamond Mine as a long-life mid-tier asset that could potentially turn the company into a takeover target.
Fairfax values the Lace Diamond pipe based on conservative assumptions provided largely from independent consultants Snowden and company data. "At this stage of development we are using a high discount rate of 15% which values the project at US$53m, which when factoring further equity dilution to complete the project leads us to a 17p price target. There is considerable upside potential in the value of the project as the grade, diamond value and dilution assumptions could be conservative," it said.
According to the Bankable Feasibility Study, the Lace main pipe contains 33.12 million tonnes of kimberlite in indicated and inferred resources to 855m at an average grade of 40.12 carats per hundred tonnes (cpht), for a contained resource of 13.29 million carats of diamonds.