Name and Location
Lace diamond mine development project, Free State, South Africa.

Client
Lace Diamond Mines (LDM) a 74% subsidiary of DiamondCorp.

Project Description
The 1.2-million-tonne-a-year Lace mine is expected to produce more than 500 000 ct/y of diamonds at peak production.

The Main pipe at Lace mine contains 33.1-million tons of kimberlite, indicated and inferred to a depth of 855 m, containing an estimated 13.4-million carats in both resource categories at an average grade of 40.1 ct per hundred tonnes (cpht).

The resource has an in situ value of more than $2-billion at $160/ct.

The deposit will be mined using block-cave mining, with three caves planned over the 25-year life-of-mine (LoM) on the 47, 67 and 85 levels at depths of 470 m, 670 m and 850 m respectively.

The kimberlite is open at depth, with a significant bulge between 250 m and 360 m. The kimberlite can potentially add additional tonnage and diamonds not currently included in the resource statement.

Value
The total development cost of the project, including working capital and a 15% contingency on capital and development costs, is estimated at R384-million.

The peak funding requirement of R286-million is expected in April 2015, when blasting of the slot drive and doming will start to deliver significant tonnages of kimberlite.

The costs of establishing the block cave thereafter are offset by revenues from the sale of diamonds, recovered from kimberlite mined during development.

Duration
The Lace mine is due to start production in the first half of 2015.

Latest Developments
The Lace diamond mine is likely to come into production in the second half of this year, despite a six-week strike by members of the Association of Mineworkers and Construction Union (AMCU) in October and November 2014,DiamondCorp has reported.

Following the implementation of a revised underground development schedule by LDM in early 2014, dual-listed DiamondCorp announced in July last year that the ramp-up of commercial production from underground kimberlite mining could be brought forward by six months to the first half of 2015.

Although LDM is no longer expected to start commercial production from underground kimberlite mining in the first half of this year, production will still start four months ahead of the original mine schedule.

The strike by AMCU members had revealed several underground workplace inefficiencies, which were addressed when the workforce returned to work.

As a consequence of these changes, a 15% improvement in development productivity has, thus far, been achieved, with first commercial production from underground kimberlite mining expected in the second half of 2015.

The company had, meanwhile, continued with the implementation of a revised underground development schedule and budget in the three months ended December 31.

Tunnel development costs, to date, were averaging R40 764/m against a revised budget of R37 000/m.

“The overspend continues to be the result of increased operating costs on the company's underground mining fleet and delays resulting from the AMCU strike.

“The benefits of maintenance and repair cost-saving initiatives reported previously are currently being offset by cost increases on spare parts resulting from the weaker rand,” DiamondCorp outlined in a statement.

It added that the mine had remained unaffected by the electricity supply constraints in South Africa, but cautioned that there had been a growing delay in value-added tax refunds from the South African Revenue Service.

Despite this, the overall mine development expenditure remains “close” to budget.

Meanwhile, DiamondCorp took delivery of its new Sandvik 421 drill rig in the December quarter. It has the capacity to drill longholes up to 54 m in length and 127 mm in diameter and will be used to complete all the long-hole drilling on the production levels in the Upper K4 (UK4) and 47L block cave.

Operator and artisan training is under way, and the rig will shortly go underground, where it will be tested and commissioned ahead of drilling the slot drive and troughs for the first stope in the UK4 block.

Underground core drilling of the UK4 block continues to delineate significant volumes of high-grade kimberlite above the 365 m level.

The drilling, bulk testing and release of an updated resource statement will be completed in the second quarter, rather than the first quarter, as previously planned.

In the year ended December 31, 2014, the company processed 308 047 t of tailings and recovered 18 534 ct of diamonds at an average recovered grade of 5.96 carats per hundred tons (cpht), compared with a budgeted recovered grade of 5 cpht.

Tailings retreatment processing ceased in September, as the surface earthmoving fleet was relocated to build a 150 000 m3 surface process water storage dam in preparation for kimberlite mining.

“This activity was successfully completed in the dry winter months ahead of the summer rains. The construction of the new dam, plus additional surface drains has, allowed the mine to capture all of the water required for 2015 kimberlite processing,” DiamondCorp outlines.

An additional large surface dam is planned for construction this year, which will store sufficient water for full production requirements during low rainfall years.

The timing of the restart of tailings retreatment this year will be determined by the dam-building schedule.

Key Contracts and Suppliers
None stated.

On Budget and on Time?
The mine’s ramp-up is expected to start four months ahead of the original mine schedule.

Contact Details for Project Information
DiamondCorp, tel +44 20 3151 0970, fax +44 20 3151 0971 or email info@diamondcorp.plc.uk.