African Diamonds PLC : Interim Results for six months ended 31 December 2009
Highlights:
. AK6 diamond mine expected to come on stream in Q4 2011
· Feasibility study will be completed in late May 2010
. Mine development operations will start in September 2010
· OPEX, CAPEX and revenue are in line previous guidance
. Value of AK6 diamonds expected to be in the region of $200 a carat
. At an advanced stage in completing financing to cover expenditures in 2010 and 2011
· Proportion of Type II stones in AK6 could be larger than previously estimated
John Teeling, Chairman of African Diamonds, commented:
“The pace of development at AK6 is accelerating. The mine will come on stream in 2011, within the cost parameters that we have previously set.
Our new Partner, Lucara, has the same objectives as us to bring the mine on stream as quickly and efficiently as possible. The mine will come on stream at the perfect time; prices and demand are high. The recent valuation report has also vindicated our view that AK6 will produce high quality beautiful stones.
This is an exciting time for African Diamonds and its shareholders as we move forward and develop AK6.”
18 March 2010
Enquiries:
African Diamonds
John Teeling, Executive Chairman
+353 1 833 2833
James Campbell, Managing Director
+27 83 457 3724
Finncap
Matthew Robinson
+44 207 600 1658
College Hill
Nick Elwes
+44 207 457 2020
www.afdiamonds.com
Interim Results for the Six Months Ended 31st December 2009
This is a very interesting and positive time for the shareholders of African Diamonds. The pace of the AK6 development is accelerating. We expect the mine to come on stream in the last quarter of 2011. The final feasibility study will be completed in late May, and site development will start by September 2010. The indications on OPEX, CAPEX and revenue are in line with what has previously been reported.
Among the positive indications are:
· the per carat value of AK6 diamonds is expected to be in the region of $200 a carat compared to the $138 used in existing studies;
· throughput in Phase 1 of up to 3 million tonnes instead of 2 million tonnes;
· a change in the sieve size from 1 mm to 1.5 mm, thereby decreasing the flow to the final diamonds recovery, but increasing the average size of diamonds recovered;
· increasing the size of material which escapes crushing. This enables diamonds up to 350 carats be recovered. This is critical to recover large Type II diamonds.
Add to this a rapid improvement in world diamond demand and prices, and the future looks bright.
Your directors are at an advanced stage in completing financing to cover expenditure in 2010 and 2011. We are particularly mindful of equity dilution given our low share price. African Diamonds has the right to market their percentage of AK6 output; up to 400,000 carats of good quality diamonds at full production. In a market of growing scarcity, this is a valuable asset and is helping in our funding.
The feasibility study is progressing as planned. Following a detailed assessment of the ore types and equipment, the plant flowsheet has been restructured. Three significant changes were proposed and accepted by the board of Boteti. The first is that the Autogenous Mill will treat between 2.5-3.0 million tonnes of ore per annum as opposed to the originally specified 2 million tonnes per annum and this at no additional cost. Second, the bottom cut-off size for the plant has been elevated from 1.0 mm to 1.5 mm. Not only will this increase the dollars/hour revenue generated through the plant, but it will also lead to a lower per tonne plant operating cost. Finally, the top cut off size has been increased from 24mm to 32mm so as to capture the large, high quality diamonds which are known to be prevalent in the AK6 kimberlite.
The average diamond value (+1mm) has improved to a modelled $162/carat, but when in production this is expected to be in the range of $200/carat. More recent studies have looked at detailed modelling of the diamond size frequency distribution. This suggests values in excess of $200/carat once the diamond breakage which was so prevalent in the drill sampling has been modelled out. There is also an emerging view that the grade of the southern lobe could be as much as 40% under-estimated again due to the high-level of diamond breakage in the drill samples taken from the southern lobe.
There is a high ratio of Type II diamonds in AK6. These are very rare, maybe 2% of all diamonds. They contain no nitrogen and tend to be large. They command very high prices. Some experts believe that the proportion of Type II stones in AK6 may be larger than previously estimated. We have reconfigured the treatment plant to allow for the recovery of these stones. Their presence could have a very favourable impact on revenue.
Aside from technical and economic activity, the project team has been working on stakeholder engagement in the vicinity of the AK6 site. All the assets belonging to the previous operator have also now been transferred to the new joint venture. Office space has been taken at Gaborone’s Diamond Technology Park, which will also be used as a venue to sort the AK6 diamonds. We are currently in discussion with a number of diamantaires on the best diamond marketing regime.
The world recession, while hurting many, is a boon to the AK6 development. Equipment prices have stabilised or fallen, delivery times shortened and skills are available. These facts help CAPEX and OPEX, both of which are expected to be within the parameters of our earlier studies.
While the focus is clearly on AK6, other opportunities are not being neglected. We are considering joint venture proposals on two other Botswana kimberlites in our portfolio. We hope to begin detailed exploration of a third kimberlite and we are developing ideas on how to expand our Botswana presence.
John Teeling
Chairman
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