Shares in Firestone Diamonds (AIM:FDI) were on the move again this morning, up 15% to 19.5 pence, after the company reported a inferred resource at the BK11 kimberlite in Botswana, and also confirmed higher than anticipated diamond grades and values on the west side of the pipe.
Shares in Firestone Diamonds rallied on Friday after the company reported the discovery of macrodiamonds at a number of kimberlites it is evaluating in the Tsabong Kimberlite Field in Southern Botswana.
Today’s news emanated from the BK11 kimberlite, which is situated in the heart of Botswana’s thriving diamond industry. The company reported an initial resource of 12 million tonnes containing approximately 830,000 carats at BK11. More encouraging, it also reported that recent large diameter drilling (‘LDD’) on the west side of the pipe, which is estimated to contain 7 million tonnes of kimberlite, had returned higher grade and diamond values.
4 LDD holes drilled into the western side returned grades between 9 and 15 carats per hundred tonnes (cpht) and a diamond value of $175 per carat. Firestone noted that the discovery of a higher grade zone on the western side of the pipe was not dissimilar to similar discoveries at the Orapa and Damtshaa mines, operated by Debswana (Debeers and Botswana Government).
“The Company is very encouraged by these results and believes that it is likely that the development of a new mining operation on BK11 will be justified on the basis of the KW resource alone and intends to accelerate evaluation work, with the objective of establishing a mineable resource and making a mine development decision in Q3 2009,” Firestone said.
Firestone has previously calculated that the operating costs for BK11 will be around US$6.50 per tonne, compared to a modelled revenue of US$20 per tonne on the western portion of the pipe. This would produce operating margins of 60 to 70%, even when taking into consideration the 50% drop in rough diamond prices in the past six months.
“At revenues of $20 per tonne, BK11 could produce annual revenues of approximately $30 million per annum and reach payback in less than 6 months.”
Firestone now plans to process an additional 20,000 tonnes of material from the western zone to further evaluate the grade and value of the diamonds.
Philip Kenny, CEO of Firestone Diamonds said today’s news was a major achievement for the company:
“It is a major achievement for us to have identified significant economic potential at BK11 despite current low rough diamond prices. If we make a mine development decision in Q3 2009, production could commence by the middle of 2010. We are also making progress in contract negotiations with Debswana in relation to the recently announced Jwaneng tailings project. If we achieve our targets for these projects we expect to start generating significant long term cash flow from both projects in 2010, and the Company will be well positioned to take advantage of opportunities that arise when the rough diamond market recovers.”