Firestone Diamonds (LON:FDI) told investors that it may potentially generate up to US$150m in additional toll treatment revenues, as the Debswana Diamond Co - a JV between De Beers and the government of the Republic of Botswana - has decided to proceed with the Modular Tailings Treatment Project (MTTP) at the Jwaneng Mine.
The Jwaneng mine is the largest diamond mine in the world by value. In 2008, Jwaneng produced approximately 13 million carats, with an estimated value of US$1.8bn. The tailings resource at Jwaneng is estimated at over 30 million tonnes (Mt). In Q109 Firestone was selected as a preferred bidder to finance, construct and operate a tailings plant at the mine, however the project was later shelved by Debswana as the JV decided to scale back its operations.
Now with a significant improvement in the diamond market, Debswana has decided to proceed with the MTTP with Firestone, subject to contractual arrangements.
"We are very pleased that Debswana has decided to move forward with the Jwaneng Tailings Project, for which Firestone was selected due to its track record in financing, building and operating diamond processing and toll treatment plants,”Firestone Chief Executive Philip Kenny commented.
The company highlighted that the contractual arrangements are at an advanced stage and they are currently being finalised. Firestone said that suitable financing arrangements are being made for the capital costs of the project, construction is expected to commence in H1 2011 with full production scheduled for 2012.
The estimated capital cost of US$55m, and Firestone intends to finance the project, through a special purpose vehicle, via debt financing against the contract with Debswana. The company noted that discussions have already been held with a number of interested lenders, and it is confident that suitable financing arrangements will be made available.
“Based on contract rates from the company's previous toll treatment operations in South Africa, the Directors anticipate that the Jwaneng tailings project has the potential to contribute up to US$150m in toll treatment revenue for the company.”
Firestone also noted that the Jwaneng plant is intended to serve as a pilot facility to demonstrate the economics and capability of the modular plant concept and the deal could potentially lead to the deployment of similar plants, to exploit additional tailings resources at other Debswana mines. The plant will be developed alongside Firestone’s strategic partner ADP Projects.
“[The Jwaneng Tailings] project is a key component of our strategy of developing toll treatment opportunities to supplement our own mining operations at BK11 and the evaluation and development of our other kimberlites in the Orapa and Tsabong kimberlite fields", Philip Kenny.
In the Orapa kimberlite field in northern Botswana, Firestone aims to bring the BK11 kimberlite into production during Q2 2010. Earlier this year, the company raised £9.45m to cover certain costs of mines first year of production, and for the continued development of the wider project portfolio.
Firestone expects to produce approximately 1 million carats from BK11, based on plans for selective mining and the presence of high grade grain flow deposits - with approximately 11.5Mt of kimberlite at an average grade of 8.5cpht.
According to Firestone, with over 25,000 square kilometres around the major Orapa and Jwaneng mines and the entire Tsabong kimberlite field, it is the largest holder of mineral rights in Botswana's diamondiferous kimberlite fields. Botswana is believed to be the world's largest and lowest cost producer of diamonds, with annual production worth over US$2.5bn, and is considered to be one of the most prospective countries in the world to explore for diamonds, Firestone said.