Diamondcorp Plc : Financing allows DiamondCorp to begin development of Lace mine

Financing allows DiamondCorp to begin development of Lace mine 25 January 2013 Source: www.iol.co.za

Development of DiamondCorp's Lace mine near Kroonstad in the Free State was under way, the gem exploration firm reported yesterday.

The company said the Lace mine would help it transform from being an explorer to a developer of diamonds.

DiamondCorp will use the R320 million financing it secured last year for the project.

The 1.2 million ton a year mine is expected to produce 500 000 carats of diamonds annually at peak production and create 200 jobs.

The deposit will be mined using the block cave mining method, with three caves planned over the 25 year life of the mine on the 47, 67 and 85 levels. The company expects to recover the first diamonds in the third quarter of next year.

Paul Loudon, the chief executive of DiamondCorp, is optimistic about the future of the mine despite the recent gloomy climate in the diamond market.

"Prices have bottomed out. We hope there will be a good recovery by the time we come into production. If the market stays at these levels, the mine will still make a lot of money because it is a high margin operation. The grade is above average," he said.

The diamond sector had recovered from a difficult patch, but the developments in the industry were irrelevant as production was expected only in the third quarter of next year, analyst Kieron Hodgson of London-based Charles Stanley Securities said yesterday.

He added that the mine would be beneficial for the area and was likely to generate jobs.

Lace, which was last mined in the 1930s, contains an average grade of 40 carats of diamond for every 100 tons of kimberlite ore. It has an estimated $2 billion (R18bn) in-ground value at $160 a carat.

"Diamond production from tailings re-treatment will recommence during the second quarter, initially on one shift while the upgraded processing plant is re-commissioned.

"We will then have the capacity to ramp up to three shifts in the second half of the year, if diamond prices strengthen," Loudon said.

The SRK Independent Engineering Report on the 47 level block cave development published in March last year estimated the total development cost at R384 million.

The shares were untraded at 80c on the JSE yesterday.