Paragon Diamonds (LON:PRG) is preparing to start work on stage 1 production at its Lemphane kimberlite project after finalising a mining lease with the Lesotho government.
The lease has been granted for an initial ten years, renewable for three consecutive ten year periods.
Stage one production will target a minimum 500,000 tonnes per annum production to recover around 10,000 carats per year at a minimum average value of US$750/ct.
Martin Doyle, Paragon’s chairman, said he was delighted that the terms of the mining lease had been finalised.
“Having previously recovered stones of up to 8.9 carats with values in excess of US$2,400/ct, we have already demonstrated Lemphane's potential to yield large high-value diamonds.
“As well as generating significant revenues, Stage 1 production is expected to increase the average value per carat (a consequence of the higher amount of tonnage mined), build on the robust economics already identified and also provide a bankable Mineral Resource.“
Stage one is also intended to produce a maiden inferred resource at Lemphane and definitive feasibility study for the second stage.
The mining lease for Lemphane will be held by Meso Diamonds, which is currently 85% owned by Paragon and 15% owned by local Basotho shareholders.
The new lease will see the Lesotho government also take 20% in the project, of which 10% will be free carried with the other 10% to be funded through project dividends. The mining lease also includes provisions to maintain a 15% local Basotho shareholding.
An initial royalty of 4% will be payable to the government on production and is subject to review within five years.