In the media

Underground diamond production by year-end, says DiamondCorp CEO Loudon

04 April 2008

Source: Mineweekly

Author: Martin Creamer

London Aim-listed DiamondCorp, now also JSE-listed, is essentially a South Afri-can operating company.

The company is at the very early stages of putting the historic Lace diamond mine, in the Free State, back into production for the first time since it shut in 1930.

What it has shown to date is that Lace has more than 35-million tons of kimberlite and more than 13-million carats.

“Enough to support a long-life mine of probably 20 years or more,” DiamondCorp CEO Paul Loudon tells Mining Weekly.

A large 4 000-t/d dense-media separation plant, able to handle 220 t/h at the front end, is currently being used to recover diamonds from tailings, but will also ultimately process underground kimberlite material.

DiamondCorp will gain access to kimberlite in the next three to six months and produce from underground before Christmas, to augment its current production from tailings.

“We are starting off by putting tailings through, and we are very excited by the quality of the diamonds being recovered,” says Loudon.

“What we see in the tailings is a window into the main pipe and our white diamonds are very white, and we jump almost straight away to fancy colours, lemon yellow, golden yellow and, most exciting, the Lace lilacs, which are intense purplish-pink diamonds. Fantastic colours,” he says.

While price premiums are enjoyed for coloured diamonds, this is not necessarily so for the small sizes that are currently being recovered from the tailings.

But if DiamondCorp can mine larger-carat coloured diamonds in the main kimberlite, the company will be able to command “quite a premium”, says Australian-born Loudon, a former investment banker now based in London.

De Beers owned Lace for 75 years and chose to sell it when South Africa introduced new minerals legislation.

DiamondCorp was able to buy it in conjunction with its black economic-empowerment (BEE) partners, Cyril Ramaphosa’s Shanduka Resources, with 13%, and another 13% by BEE company Sphere.

The company itself has invested R100-million in the project and its BEE partners will each contribute R13-million to maintain their equity, once the feasibility study on the underground operation is complete.

The company will need a new cash injection for phase two of the Lace project and, currently debt free, will be looking to raising that cash by way of debt or an equity raising.

“We are in a good position of not needing any new cash immediately, but we will need to raise some in the short term, and our preference, definitely, will be to raise that cash in South Africa,” says Loudon, who moved to London in the midnineties, putting together many mining companies as head of equities, including DiamondCorp. “I liked it so much, I joined the company,” he says.


Since the start of this year, DiamondCorp has suffered fewer power outages than in the second half of last year.

It has negotiated access to the new powerline that De Beers has put in place for its Voorspoed mine, which is close to Lace.

This will give Lace a second source of power from another side of the Free State, which should mitigate the down time from power outages.


New legislation gives the State Diamond Trader the power to buy 10% of production from all South African diamond-miners.

“We absolutely welcome the State Diamond Trader and the growth of a profitable cutting and polishing industry. Beneficiation of any mineral is important for mineral-rich countries like South Africa and we welcome the State Diamond Trader to buy our diamonds,” says Loudon.

A few years down the line, Dia-mondCorp expects to be mining a bulk underground mining oper- ation and producing more than 500 000 ct/y.

It hopes to make further diamond-producing acquisitions in South Africa and Southern Africa.

The company looked at Cullinan when De Beers announced its disposal, but decided not to diversify management attention while it was bringing Lace into production.

“There are still some other assets in De Beers and we keep regular contact with them,” he says.

Acquiring more diamond assets in South Africa is the company’s primary intention, after which its preferences will be Botswana and Lesotho. The Democratic Republic of Congo and Angola are further down on its acquisition list.


Loudon sees the outlook for diamonds as being “very strong” as a result of the world consuming more diamonds than mines are producing.

He says that the world is down to 20 years’ mine supply of natural diamonds coming from known mine operations.

In the short term, however, the economic downturn in the US will affect diamond prices, as the US still dominates the jewellery end of the market, accounting for half of diamond end use.

But at the same time, there is continued growth in demand from China and India. DiamondCorp’s own experience in tendering diamonds so far this year is that prices continue to strengthen.


Lace Mining Company, floated by Dale Lace, mined diamonds at Lace mine as long ago as 1901, but this went into receivership in 1908, when the London-listed Crown Diamond Mining & Exploration Company took it over and produced 800 000 ct from opencast and underground mining operations.

In 1930, diamond prices collapsed worldwide with the economic depression and the mine was put on care and maintenance and dewatered until 1939.

When the Second World War broke out, it was the final blow for Crown, which sold the project to De Beers, which bought every shutdown diamond operation it could and kept them shut as part of its control of the supply side of the industry.

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