Firestone Diamonds (LON:FDI) has now begun commercial production at the BK11 kimberlite in Botswana, following the granting of a 12-year mining licence to the company’s 90%-owned subsidiary Monak Venture Pty Ltd.
At BK11, the Phase One 650,000tpa (tonne per annum) production plant is now in operation, and the development of the Phase Two plant remains on target for completion in Q3 2010. Firestone expects full production, to reach a 1.4m tonnes per annum capacity, in Q4 2010.
"The commencement of production at BK11 is a major milestone for Firestone as the company is now one of only three listed kimberlite producers worldwide outside of the major mining companies”, Firestone chief executive Philip Kenny commented.
“It is an exceptional achievement to have reached this point in just over 3 years from being granted a prospecting licence ... The combination of cash flow from production at BK11, an extensive portfolio of kimberlites in the Orapa and Tsabong kimberlite fields and exciting toll treatment opportunities positions Firestone very well for significant growth.”
Under the terms of the Mining License which runs until 30 June 2022, Firestone will pay a standard diamond royalty of 10%, standard mining company corporation tax, and the license allows for unlimited carry forward of tax losses and 100% depreciation of capital expenditures.
Notably, there is no government equity participation under the license.
BK11’s production will be sold by open tender in Botswana, and tenders can also be held outside Botswana up until 2013 (potentially extended to 2015). At present, BK11’s mine plan has a 10-year life, with 11.5Mt (million tonnes) of kimberlite at an average grade of 8.5cpht (carats per hundred tonnes), for a total of 1 million carats at a diamond value of $155 per carat.
With commercial production now underway, and BK11’s facilities becoming operational, Firestone aims to rapidly move forward with its evaluation of surrounding kimberlites in the Orapa field. “The company intends to use the infrastructure that has now been established at BK11 to evaluate the economic potential of these kimberlites rapidly and at relatively low cost, and believes that it has the potential to develop a sizeable satellite mining operation based around BK11 and multiple other kimberlites in the Orapa area,” Firestone stated.
In addition to BK11, the company controls 21 other satellite kimberlites in the Orapa kimberlite field and, according to Firestone, thirteen of them have been proven to be diamondiferous. The most notable being the BK16 kimberlite, which is at the most advanced stage of evaluation, with high quality diamonds and encouraging grades recovered from historical work.
The company said that BK16 will be the first of the satellite kimberlites to be evaluated. The work program, initially consisting of core drilling and large diameter drill bulk sampling, will begin once BK11 reaches full production.