The Lace Project

DiamondCorp’s primary asset in South Africa is the Lace Diamond Mine, an historic operation located some 200 kilometres south-west of Johannesburg, near the town of Kroonstad in Free State Province. DiamondCorp was awarded a mining right to the Lace property in February 2009. Additionally, the Company has the prospecting rights over two other properties, Silverbank and the Moregroet, both of which adjoin Lace.

History

Lace was first mined between 1901 and 1931, with some 4.5 million tonnes of material having been extracted down to a level of about 240 metres below surface. Approximately 750,000 carats were recovered from Lace during this period, at an average grade of 16 carats per hundred tonnes. Records showed that the grade increased at depth, with up to 21 carats per hundred tonnes having been recovered at the deepest level.

In addition to the surface mining operation, a vertical shaft was sunk between 1928 and 1930 to a depth of some 340 metres, but this was never used to access the kimberlite as the mine was shut down in 1931.

Geology

Two main types of kimberlite exist at Lace – an upper level Volcanoclastic Kimberlite (at an average grade of 24 carats per hundred tonnes) and the deeper Coherent Kimberlite Facies (at an average grade of around 55 carats per hectare). The latter (Coherent Kimberlite Facies) becomes volumetrically dominant at depth, so that the grade of the pipe is expected to increase over the life of mine. See diagram alongside.

Infrastructure

Lace is well resourced to become an operating mine. Infrastructure at Lace comprises the existing and unused shaft which, when refurbished, will be capable of hoisting 4,000 tonnes per day, or 1.2 million tonnes per month.

The 1.2 million tonne per annum recovery plant constructed by DiamondCorp in 2008 has sufficient capacity for the current expected life-of-mine of +25 years. The plant uses Dense Media Separation (DMS) and a hands-free grease belt recovery system and both its capacity and recovery efficiency have been tested witharound 1 million tonnes of tailings and 100,000 tonnes of kimberlite from surface dumps and the satellite pipe were processed in this plant in 2008/2009.

Further, DiamondCorp owns a significant surface and underground vehicle fleet required for the completion of the decline development and the establishment of underground mining operations.

It should also be noted that Lace is serviced by good, tarred roads, and has sufficient water supply and electricity from two sources.

Diamond’s from Lace

Along with white diamonds of above average quality, historically Lace was known for its fancy pinks and purples, which had become a signature gem from this mine. More than 80% of Lace’s diamonds are of gem quality, with some very clear white stones being founds. While historically the bulk of Lace’s value curve has been in the 1 carat to 4 carat range, the pipe has produced a number of large stones, up to 122 carats.

DiamondCorp’s plans for Lace

DiamondCorp has contracted independent mining consultant, Snowden, to assist in the development of the decline and the mine plan.

A 4.5 metre by 4.5 metre decline is currently being developed down to the 240 metre level, so as to access the kimberlite at this level, below any old workings. Once the pipe has been accessed, the kimberlite will be bulk-tested to determine the mining grade. On confirmation of the grade, mining will commence, eventually extending to a depth of some 850 metres below surface. Current planning is to use sub-level caving at Lace, incorporating some 10,000 metres of development drives already in place between 240 metre and 330 metre levels. Kimberlite will initially be hauled to surface through the decline at a mining rate of about 12,000 tonnes per month.

At the same time the existing vertical shaft will be refurbished for full-scale ore hoisting.

Full-scale mining is expected to achieved by the end of 2011 at a rate of 4,000 tonnes per day, or 1.2 million tonnes per annum. At peak production, to be reached in 2016, Lace is expected to produce around 400,000 carats per annum.

Sufficient funds have recently been raised by DiamondCorp, with £4 million (R45 million) allocated to complete the decline development. The key development contractor has been appointed and blasting activities commenced on site in early May 2010.

Resources

The Lace pipe has been drilled to a depth of some 855 metres. Indications are that 35 million tonnes of kimberlite exists between the 240 metre level and 855 metres.

Resource statement prepared September 2009 by VP3 Geoservices (Pty) Limited in accordance with the SAMREC Reporting Code.