In the media

DiamondCorp sells first batch from Lace mine

04 December 2013

Source: Business Day

Author: Brendan Ryan

AIM- and JSE-listed junior miner DiamondCorp has sold the first batch of diamonds recovered from tailings dumps at its Lace mine, which is under development near Kroonstad in the Free State.

A total of 6,442.04 carats were sold for $278,574.30, which equates to an average price of $43 per carat. SP Angel analyst John Meyer said: "The carat value from the tailings is lower than expected. We had $80 per carat in our model. This does not impact our valuation significantly as recovery from tailings is small."

DiamondCorp CEO Paul Loudon said 1,415.32 carats were recovered after modifications were made to the plant to increase the "bottom screen cut size", which resulted in a coarser stone-size distribution and achieved a price of $63 per carat.

"Management considers this price to be a fair benchmark for the economics of the tailings retreatment plant in 2014," Mr Loudon said. He said "overall, diamond market conditions are subdued and prices are soft in small size fractions. Nonetheless, management forecast that tailing re-treatment operating costs can be reduced from R32 a tonne to R22 a tonne once three shifts are operating and the company is proceeding with a ramp-up to a three-shift operation by the end of January 2014."

Plans are to increase tailings throughput to more than 150,000 tonnes per month during the first half of next year, which has the potential to push production to 7,500 carats per month "which will allow a significant proportion of the tailings to be re-treated prior to the underground mine achieving full production", Mr Loudon said.

According to Investec Securities, "DiamondCorp is doing well to generate cash flows from the tailings once again.

"The plant adjustments lower the overall recovery and production level but should make tailings treatment more profitable due to less processing required since the smaller, less valuable stones will not be recovered.

"The main mine development is fully financed and cost savings have allowed refinancing to support corporate overheads to be deferred to 2014," the firm said.

SP Angel’s Mr Meyer said: "While all the funds are in place for the development programme, the company have said they may need to raise funds to cover corporate costs next year."

DiamondCorp will restart mining operations at a depth of 470m during 2015 to target 300,000 carats a year for the first 10 years.

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