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DiamondCorp (LON:DCP) expects to start to sell tailings diamonds from September as development work on its Lace mine in South Africa continues on track.
The miner said treatment plant modifications were completed on schedule and within budget, while plant commissioning is now underway with tailings retreatment to re-commence next week with the aim of first sales in September or October.
DiamondCorp, which is opening a new block cave at the 47 level at Lace, said the ramp up of its underground development activities is also on schedule and under budget.
The underground operations will move to three shift working from next month following new staff recruitment, it added. The diamond drill rig has been delivered and 2,000m of underground core drilling is planned before year end, including definition of the bulge.
Excavation of a new 66,000 bank cubic metre (bcm) boxcut, which will provide the surface entrance to the twin conveyor belt and services declines for the life of the mine, is 75% complete.
The boxcut is three weeks behind schedule but DiamondCorp said this was would not impact the development schedule, while costs were 40% under budget.
Once up and running fully Lace is expected to produce 500,000 carats per year, with first revenues anticipated in the second half of 2014.
Agreements with American jewellery firm Tiffany and IDC are funding the development work. Debt facilities total R320 mln (£21.3 mln).
Brokers said DiamondCorp has made significant progress with its Lace development through the completion of the modification of the tailings plant and the commencement of tailings retreatment.
Northland estimates that around 300,000t of tailings will be treated this year leading to recoveries of about 15,000cts, with the funds generated to be treated as a credit to capex.
Next year, Northland expects 600,000t of tailings to be treated, recovering 30,000cts. With development excavations likely to recover a further 28,000cts, the total for 2014 should be 58,000cts.
“The pre-Run of Mine (ROM) production 2013-2015 is expected to result in the recovery and sale of around 300,000cts, worth around USD$42mln (£27mln), double DiamondCorp’s current market cap, before the mine begins ROM production in late 2015.”
Panmure Gordon added that underground development is also progressing well and operational efficiencies of the owner-operated fleet are providing cost savings.
Good cost control, the weakness of the rand and strong diamond prices may provide further funding headroom, it said.
House broker SP Angel added: “The sale in September will give a good indication of pricing for the diamonds. The current valuation reflects very little prospective value for the production from Lace and we remain buyers.
“The rough diamond market has shown good recovery this year with both small and large diamonds performing well. The recent weakness in the Indian rupee may have taken some of the sparkle out of the market but the overall fundamentals remain good.”