Firestone Diamonds' (LON:FDI) shares have jumped over 15% following an upbeat statement, ahead of tomorrow’s general meeting.
The company highlighted that it has made significant progress with the development of the BK11 kimberlite and production is ahead of schedule. Following the Phase 1 commissioning in July, the BK11 plant is currently running with the average throughput of 185 tonnes per hour (tph), 23% ahead of the initial 150tph target.
The mine began continuous operations at the beginning of August and diamond concentrates are now being shipped from BK11 to the diamond sorting facility in Gaborone.
Firestone described initial diamond recoveries as ‘very encouraging’ and highlighted the largest diamond recovery to date from BK11 - a high quality 13.74 carat diamond.
“This recovery is very significant and confirms our expectation that larger diamonds will be recovered at BK11, and we believe that the average value of production from BK11 will be significantly higher than previously expected,” Firestone Chief Executive Philip Kenny commented.
The 13.74 carat diamond has an estimated value of $5,000/carat and it also has positive implications for BK11’s current modelled value of $155/carat.
The find increases the raw value of diamonds from bulk sample excavation by 68% from $149/carat to over $250/carat, and as such Firestone expects a significant increase to BK11’s modelled value.
Based on the better-than-expected performance of the Phase 1 plant, Firestone believes it will comfortably exceeded BK11’s 1.5 million tonnes per annum (Mtpa) production target capacity once Phase 2 has been completed in Q4 2010.
“To have reached our target earthmoving and production plant capacity ahead of schedule and only seven weeks after the start of production is an exceptional achievement," Kenny added.
The phase 2 production plant, which will more than double production, is set to come online later this month.
Kenny also responded to the news that Debswana has delayed the start of the Jwaneng tailings project, by saying that Firestone will focus all of its development capability on returning the ‘exciting’ Liqhobong kimberlite into production - assuming the Kopane Diamonds (LON:KDD) takeover gets the go-ahead.
Firestone and Kopane’s shareholders will vote on the proposed takeover, at meetings on Friday 3rd September and Monday 6th September respectively.
Once the deal has been approved, Firestone’s kimberlite development activities will focus on the resumption of production at Kopane’s Liqhobong kimberlite. Furthermore, the company plans to complete the Definitive Feasibility Study for the development of a significantly larger scale operation at Liqhobong.
Firestone said its development plans for Liqhobong are at an advanced stage.
“The combination of the Firestone and Kopane project portfolios will enable Firestone to become one of the leading mid-tier diamond producers, with a target production level of one million carats by 2014,” the company stated.
Elsewhere in Botswana, Firestone and Deswana - a JV between De Beers and Botswana Government - have been planning a joint project, whereby Firestone would process tailings from Debswana’s Jwaneng mine.
The companies have been in ongoing contract negotiations since the end of June, when Debswana decided to proceed with a toll treatment project, to process the tailings from the Jwaneng Mine. It was anticipated that the construction phase would begin in H1 2011, with full production slated for late 2012.
However, Firestone told investors that a recent review of all Debswana’s current and proposed projects, has led to a delay in the implementation of the tailings project.
In the meantime, Debswana intends to focus its resources on a number of ‘significant projects’, which are already underway at the Orapa and Jwaneng mines.
Firestone emphasised that Debswana has confirmed that the project remains a ‘strategically important project’, and it expects to resume the tailings project as soon as its higher priority projects have been advanced.
“Despite this delay, Firestone plans to continue to pursue the development of its toll treatment opportunities, which provide a relatively low risk way of generating cash flow as such projects are not dependant on mining grade or rough diamond prices,” Firestone stated.