In the media

Lace diamond mine on schedule for mid-2015 start

20 August 2013


Author: Brendan Ryan

London and JSE-listed DiamondCorp is on budget and schedule with development of the Lace diamond mine near Kroonstad in the Free State, which is due to start commercial production in the first half of 2015.

This was confirmed on Monday by CEO Paul Loudon when the company announced it had drawn down the first R30m of the R220m project finance facility arranged with the Industrial Development Corporation (IDC). The IDC put the money up on condition that DiamondCorp provides the R100m balance of the R320m required to complete the mine. DiamondCorp did that by issuing R59m of convertible bonds in South Africa and raising a R54m loan from upmarket diamond retailer Tiffany in exchange for a life-of-mine off-take agreement.

The Lace mine originally operated between 1901 and 1931, going down to a depth of 240m.

DiamondCorp acquired a mining right to the property in February 2009 and will reopen the mine with an underground operation at a depth of 470m, with the aim of producing 300,000 carats of diamonds annually for the first 10 years.

The mining plan indicates production could rise to 500,000 carats annually as higher grade sections of the mine at deeper levels are exploited.

DiamondCorp has already fully commissioned the processing plant and is recovering diamonds through the treatment of surface tailings dumps created by the original mining operations. The first 5,000 carat parcel of diamonds will be sold in October.

Mr Loudon, who is based at the mine, said on Monday that DiamondCorp had also relocated its finance function from London to the mine, which would result in "significant cost savings".

Asked about diamond market conditions, Mr Loudon said the health of the diamond business depended on the state of the US economy, the biggest consumer of diamond jewellery.

"We are very happy with the current level of rough diamond prices and would love to have the mine already in full production. If you cannot make money out of current diamond prices then you don’t have a viable diamond project," he said.

De Beers CEO Philippe Mellier said last month, when the group released its interim results, that "we remain cautiously optimistic that the growing strength exhibited in the polished market, particularly in the US, will translate to overall global growth for the year".

"In the longer term, the fundamentals of the industry remain strong as growing demand will continue to outpace flat to declining production."

Lace will be the second old diamond mine to be resuscitated in the Kroonstad area following De Beers’ rehabilitation of the Voorspoed mine in 2008 after it was shut down in 1912.

When it was reopened De Beers said operations were likely to run for 12 to 16 years, reach a depth of 360m to 420m, and the mine should produce about 800,000 carats a year. Production from Voorspoed was 611,000 carats in calendar 2012.

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