Stellar Diamonds PLC (LON:STEL) has made the strategic decision to fast-track development of its hard rock kimberlite portfolio in light of the strong rebound in diamond prices.
The group achieved record diamond prices from the recent sale of a parcel of diamonds from its Bomboko project in Guinea, and has seen other diamond producers do the same.
A 10,048 carat parcel of diamonds from Stellar's operations was recently sold in Antwerp for US$361,000, comprising 9,767 carats from Mandala in Guinea and 281 carats from Bomboko.
The Mandala goods were sold for an average price of US$31 per carat, against a 2010 average of US$32 per carat. The Bomboko goods, however, sold for a record average price for the project at US$201 per carat, compared with a 2010 average of US$116.
The lower than average price at Mandala is a reflection of a weaker diamond parcel based on the lower than normal gem diamond content from the area mined. The excellent value achieved at Bomboko was driven by some high value gem stones in the 2 to 4 carat range, Stellar said.
The projects the company want to fast-track include the Droujba kimberlite pipe in Guinea and the Tongo kimberlite dyke in Sierra Leone.
“If proven economic, the board considers that these projects have the potential to generate substantial revenues over long mine lives and in turn have the potential to transform Stellar into a significant diamond production company in Africa,” it said.
Only last week, Stellar reported encouraging initial diamond grades from bulk sampling at the Tongo kimberlite project, where it recovered an in-situ kimberlite grade of 130 carats per hundred tons (cpht) from the first 69 tons processed during the commissioning of the Dense Media Separation (DMS) plant. Of the 59.25 carats recovered from the bulk sample 53.46 carats, 90 percent, are classified as being of gem quality.
And at the Droujba kimberlite pipe in south east Guinea, Stellar reported at the beginning of February encouraging initial diamond recoveries from drill core samples. It recovered 538 diamonds from 291 kilos of kimberlite, of which 5 were commercial sized larger than 0.85 millimetres. The majority of diamonds are classified as white, colourless and transparent.
Stellar has also recently embarked on a bulk sampling exercise of the Bouro North kimberlite dyke, located 1 kilometre from the Mandala diamond processing plant. Previously announced grades from Bouro suggest it has the potential to be significantly diamondiferous, with grades of up to 500 cpht reported which potentially make it one of the most diamondiferous kimberlites globally.
While the production levels at the Mandala alluvial diamond project have realised the expected increase in tonnage throughput since the end of the rainy season, the mining grade has not achieved averages above 30 cpht.
This has impacted negatively on forecast cash flow from the project and as a consequence the project has not realised an operational profit for the October 2010 to January 2011 period.
Once the current Bouro bulk sample is completed Stellar plans to focus on an as yet un-mined area in the N'Keliyani River valley, once access has been established. This extensive area has modelled higher grades based on previous evaluation work.
However, should this area not realise a significant increase in grade then the Mandala project will be placed on care and maintenance and the plant will be modified to process bulk samples from the high-grade Bouro North kimberlite, if warranted by results.
Bulk sampling at the Bomboko alluvial diamond project resumed in December 2010 after a prolonged rainy season. Further areas remain to be tested and a final report will be assembled within two months on the delineated resource, the results of which will determine whether or not the area is subjected to future commercial scale mining.
Chief executive Karl Smithson said: "Over the last three years Stellar has established an exciting portfolio of key kimberlite diamond projects in Guinea and Sierra Leone, in line with the company's long term strategy.
“With the recovery in global diamond prices, the board of Stellar considers that superior and potentially transformational value may be created for the company's shareholders by focusing on the exploration and development of its hard rock assets, which include potentially some of the highest grade and highest value kimberlites globally.”
Stellar has a portfolio of projects in West Africa. Tongo, Kono, Droujba and Bouro are all potentially high grade kimberlites that are at various stages of development. Stellar is currently focusing on a bulk sampling project at Tongo in Sierra Leone and completing an initial drill project and diamond evaluation of the Droujba kimberlite pipe in Guinea.