Mining to kick off at Lace mine ahead of schedule in H2

26th May 2015 By: Natalie Greve - Creamer Media Contributing Editor Online

JOHANNESBURG (miningweekly.com) – Diamond developer DiamondCorp says development of the Upper K4 (UK4) mining block, at its flagship Lace diamond mine, in the Free State, is on schedule for mining operations to start in the second half of the year – several months ahead of the original development schedule.

Underground core drilling of the UK4 block had delineated 2.6-million tons of high-grade kimberlite above the 370 m level – an increase of more than two-million tons over the original Lace geological model.

The final resource statement would require grade data from the bulk testing programme, which was currently scheduled to be completed by the end of the second quarter.

“This is a very exciting year for DiamondCorp, as underground development progresses at the Lace mine to extract high-grade kimberlite from the UK4 block in the coming months.

“We are all waiting in eager anticipation to see the diamonds which we believe will generate positive cash flow, and enable repayments for us all once the mine is in full commercial production,” chairperson Euan Worthington said in a results statement for the year ended December 31.

The announcement followed the adoption of a revised underground development schedule and budget in 2014 that aimed to bring forward the ramp-up of commercial production from underground kimberlite mining by six months.

The company outlined that the main challenges to achieving this schedule and budget had been rising input costs, the more than 25% devaluation of the rand against major currencies and a climate of industrial relations unrest in the South African mining industry.

“The former have been managed by careful attention to cost control, but the latter, regrettably, resulted in the mine suffering a six-week strike by members of the Association of Mineworkers and Construction Union (AMCU) in October and November. 

“However, a number of positives came out of the strike, including identification of underground workplace inefficiencies which were addressed when the workforce returned to work,” said CEO Paul Loudon.

In February, the Lace mine signed a four-year wage agreement with AMCU based around 8% yearly increases in basic salary for most categories, along with a progressive lift in the lowest categories to a R12 500 a month basic salary over the life of the agreement.

“This unprecedented long wage agreement will help provide industrial relations stability at the Lace mine during the critical mine start-up years and demonstrates a solid maturing of relationships between the union and management,” he commented.

DiamondCorp added that tunnel development costs to the year-end averaged R40 764 a month against a revised budget of R37 000 a month, with the overspend the result of increased operating costs on the company’s underground mining fleet and delays resulting from the labour strike.

Meanwhile, processing of K6 kimberlite recovered from the production level drives had started and had seen the recovery of a 19.83 ct clear white gem diamond – the largest gem diamond thus far recovered from underground development.

The installation of the 400 t/h underground conveyor system, which would bring ore to surface for the life of the mine was on schedule for commissioning ahead of the mining ramp-up.  

Diamond recoveries from tailings for the year totalled 18 354 ct at a recovered grade of 5.96 carats per hundred tonnes (cpht) against a budget of 5 cpht, while diamond sales for the year totalled 21 700 ct recovered from tailings at an average price of $6/ct – slightly ahead of budget.

DiamondCorp posted a loss for the 12 months of £3.25-million, which included administrative expenses of £1.6-million.  

Post year-end, the company signed a term sheet with South African resources financing group Acrux Resources for a royalty financing facility for the rand equivalent of $7-million, which should cover Lace’s working capital requirement.