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 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.

Net Present Value/ Internal Rate of Return
Not stated.

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 second half of 2015.

Latest Developments
DiamondCorp continues to advance development at the Lace diamond mine, with work on the Upper K4 (UK4) block focused on preparing the 310 m production level for production ramp-up by the end of the year.

Tunelling activities advanced in September from heavily diluted low-grade K6 kimberlite on the southern side of the kimberlite pipe to a transitional zone of higher-grade K4 kimberlite in the centre of the pipe.

As a consequence, ground conditions improved and kimberlite development rates exceeded the monthly call in October.

Challenging ground conditions reported previously on the 290 m doming level have been overcome with the installation of steel arched sets, which DiamondCorp believes provide a canopy to protect employees and equipment from potential falls-of-ground.

The void above the canopy is now being back-filled to cushion any potential falls-of-ground.

However, the time taken to install the sets and make the area safe has resulted in a delay to the blasting of the slot drive, from which the initial tonnage ramp-up starts, the company has noted.

This delay is expected to result in cash flow pressure on the company’s 74%-owned operating subsidiary Lace Diamond Mines in the first quarter of 2016, when debt repayments will be due.

As a result, the company has held detailed discussions with its primary lenders and black economic-empowerment partners regarding options to alleviate cash-flow pressures.

The conveyor belt system has, meanwhile, been fully installed and 80% commissioned, while final electrical connections are under way, with the belt having been scheduled to be fully commissioned by the end of this week.

Processing of K6 and K4 kimberlite recovered from the production level drives and bulk test sites continue, with further “encouraging” results.

The final drilling and microdiamond work requested by the company’s geological consultants to complete the resource statement update is under way. The additional work requested is expected to provide greater levels of confidence in the resource estimate and likely to be completed before year-end.

Development costs to date are averaging R49 993/m against a budget of R38 280/m, as a result of the challenges encountered, including a weaker-than-expected rand exchange rate.

The company has said that commissioning of the conveyors will have a positive impact on reducing development costs, as trucks will no longer be used in decline development to the block cave level.

Further, positive test results have been received from initial bulk tests undertaken on an optical/X-ray waste-sorting system for the processing plant to optimise processing of the Lace kimberlites.

Key Contracts and Suppliers
None stated.

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

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