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Africa|Aggregate|Diamonds|Efficiency|Mining|PROJECT|Project Management|Environmental|Operations
Africa|Aggregate|Diamonds|Efficiency|Mining|PROJECT|Project Management|Environmental|Operations
africa|aggregate|diamonds|efficiency|mining|project|project-management|environmental|operations

BlueRock secures £1.61m loan for Kareevlei expansion

21st May 2021

By: Schalk Burger

Creamer Media Senior Deputy Editor

     

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Aim-listed BlueRock Diamonds has agreed nonbinding heads of terms with investment company Teichmann Group to provide capital to deliver the expansion project at the Kareevlei mine, in the Kimberley region.

A £1.61-million loan note was agreed with the intention that it will be replaced by a convertible loan note, which will increase the aggregate shareholding of the Teichmann Group concert party to about 49% if converted.

“Teichmann is demonstrating its commitment by investing a further £1.61-million into the company, which will provide us with the capital to deliver the expansion project while providing the working capital to further develop mining operations,” BlueRock executive chairperson Mike Houston says.

“In addition, we will benefit from a further strengthening of our already close working relationship with Teichmann, which will provide a greater depth of expertise at the operational and management level in South Africa,” he adds.

BlueRock is focused on maximising the long-term profitability of the Kareevlei mine and has implemented an expansion project aimed at increasing production to one-million tonnes a year from about 400 000 t/y and increasing annual revenue to about $16-million assuming a grade of 4 carats per hundred tonnes and an average sales price of $400/ct.

The company has completed 80% of the expansion project at Kareevlei, which is on track to be commissioned in July. It is conducting an ongoing review of the expansion of the Kareevlei operation including environmental and sustainability factors, leading to increased upfront costs.

Further development is being brought forward to provide increased mining flexibility, though requiring additional working capital, the company says.

“The project is progressing according to schedule and we expect to complete it in line with current timing expectations. The project will be transformational.

"Once complete, we expect annual revenue to more than double and our total South African per unit cost to reduce significantly to around $220/ct compared with our average sale price for the first three months of 2021 of $446/ct.”

The project management team estimates that the new wet circuit is 80% complete. Since the involvement of this new team, the company had undertaken a full review of the project and its costings, which has taken a much closer look at the capacity and flexibility in mining and the utilisation of the new plant, as well as environmental and sustainability issues. This has led to an increase in the overall upfront capital and development costs but with expected longer-term benefits to shareholders.

The increased costs of the project, the higher working capital linked to increased mine development, improved accommodation critical to securing skilled personnel and a general strengthening of the balance sheet will be met out of the expected new funds, BlueRock points out.

“If we have had one lesson from the Covid-19 period, it is the importance of having a structure in place that has ability to visit and support the operational team and ensure we have the right skillset and work culture as we expand production,” Houston says.

Rob Croll has joined as a nonexecutive director, and has also agreed to head up a technical committee of the board. With his mining experience and being South Africa based, Croll will be able to visit the operations regularly and provide the board with an independent view, Houston notes.

“We have also appointed Minexec, headed by Meiring Burger, to work alongside our Kareevlei CEO Gus Simbanegavi to provide additional management support and to ensure that the delivery of the increased tonnages is achieved with the maximum efficiency. Meiring has a strong operating mining background in Africa with a focus on a culture of accountability and skills development.

“All of the above will be further enhanced due to Teichmann’s presence in South Africa, whose continued support for the company has been demonstrated by the proposed Teichmann Financing and its investment in a second fleet of vehicles to mine the quantities required to meet our increased production targets,” Houston says.

“We are looking forward to cementing our relationship with BlueRock over the coming years. We firmly believe that Kareevlei is an exciting asset and will endeavour to assist BlueRock in completing its project as planned and achieving its production targets,” says Teichmann Group executive director Gary Teichmann.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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