There has been steady newsflow from emerging diamond producer DiamondCorp (LON:DCP) recently, including the validation of its longstanding $50 million (£31 million) project to reopen the Lace mine in South Africa’s Free State province. We find out more on the future plans of this mining junior.
Q: How pivotal for the company was the recent engineering report, which endorsed the Lace mine project?
DiamondCorp: The SRK Independent Engineering Report was very important for us, both in terms of validating the proposed mine plan as well as giving potential project financiers independent comfort with respect to the capital and operating costs for the proposed 47 Level Block Cave development at Lace.
Q: What are the key milestones that must be reached before production at Lace begins and can you outline a timeline for these events for us?
DiamondCorp: First of course is project finance. It is our desire to largely fund the R285m ($37m) capital requirement with project debt. I would hope that we will have debt facilities in place around the middle of the year, allowing us to re-commence underground development in the second half of 2012.
The second milestone will be cashflow from kimberlite in month 18, and then, finally, positive cashflow by month 25.
Q: Do you think that any niggly difficulties have now been overcome with this current mine plan?
DiamondCorp: I believe so. While it is deeper than we originally planned, it puts us immediately into much higher value kimberlite because the grade gets better as you go deeper.
Q: At what stage are project financing talks currently and what are your hopes in this regard for the next few months?
DiamondCorp: Discussions are at an advanced stage, and we hope we can reach heads of terms in the next month.
Q: Is it possible for you to say when the Lace Mine will be at the full production rate of 4,000 tonnes per day?
DiamondCorp: Full production is reached 43 months after development starts.
Q: Will the mine be in production in a limited capacity before the project is fully completed. If so, how?
DiamondCorp: Yes. We reach about 2000 tonnes per day after month 25, then approximately 600,000t of kimberlite is extracted during the undercut phase for the block cave.
Q: What are the fundamentals of the diamond market and how do you see the market behaving at the time that Lace is expected to go into production?
DiamondCorp: The long term metrics for the diamond industry are very strong. The biggest mines in the world have reached their peak production and many of them will be out of reserves in the next 30 years or so. Even with modest economic growth forecasts for China and India, the world cannot possibly produce as many gem diamonds as the world will be wanting to consume. Therefore prices in the medium and long-term can only go in one direction - up.
Q: Can you please explain a little bit more about why the exploration play in Botswana was dropped?
DiamondCorp: The grades from our mini bulk test were very disappointing and in our view there is little likelihood of those kimberlites ever becoming a mine. Therefore we dropped them. We do not fall in love projects, but are always focussed on whether or not they will be mines.
Q: Are there any plans for other projects in the pipeline?
DiamondCorp: We are currently assessing a number of other potentially interesting opportunities, but Lace is the main focus.