Smoother than ex­pected

Finweek English Edition - - Companies & Markets - AL­LAN SEC­COMBE al­lans@fin­

DIAMONDCORP IS BRING­ING an old De Beers-owned kim­ber­lite mine back into pro­duc­tion 14 months ahead of sched­ule and it has over­come the last threat to the project by rais­ing US$5m, says CEO Paul Loudon. While that’s not an enor­mous amount of cap­i­tal when com­pared with the R5,6bn Wesizwe Plat­inum has to raise to de­velop a mine, it’s a wel­come step in a mar­ket where it’s be­come much more dif­fi­cult to raise money for min­ing ven­tures.

“Bankers and in­vestors are now look­ing for any rea­son to say no,” Loudon says. “The big­gest dan­ger to this project was fi­nanc­ing – but we’ve dealt with that now.” The $5m was raised from Africa Op­por­tu­nity Fund, a sub­sidiary of a Lon­don AIM-traded in­vest­ment com­pany.

Pamodzi Gold had hoped to have a $50m loan in place in May. That was pro­gres­sively shifted out to end-July to be in­cluded in an­nual fi­nan­cial state­ments. It ap­pears off­shore fi­nanciers and their le­gal teams are go­ing over the pro­posed fi­nanc­ing with ex­treme dili­gence.

Pamodzi’s state­ments had to be sub­mit­ted to the JSE be­fore end-July or trade in Pamodzi shares would be sus­pended. The fi­nal­i­sa­tion of the loan is still not com­pleted, but Pamodzi is re­leas­ing its re­port.

Le­sego Plat­inum is an­other ex­am­ple: fail­ing to raise R315m and de­lay­ing in­def­i­nitely its de­but on the JSE sched­uled for end-July. It even looked at a lower price for its ini­tial pub­lic of­fer­ing but the mar­ket still wasn’t in­ter­ested, di­rec­tor Mike Scott says.

For DiamondCorp, which is build­ing a de­cline shaft to ex­ploit the kim­ber­lite at the Lace mine, the re­main­ing fi­nance of R26m should come in equal parts from its two em­pow­er­ment part­ners – Shan­duka Re­sources

and Sphere Hold­ings – with the com­ple­tion of a bank­able fea­si­bil­ity study in first half 2009.

The JSE- and AIM-traded com­pany has ad­vanced its de­cline 120m and should hit the satel­lite kim­ber­lite in Septem­ber be­fore loop­ing around the main pipe and con­nect­ing with old work­ings. “That’s 14 months ahead of sched­ule,” Loudon says. “We’ll break into the old work­ings at the 145m level in the first quar­ter of next year and start haul­ing 1 000t of ore a day.”

It’s part of the bulk sam­ple needed to com­plete the fea­si­bil­ity study and trig­ger the pay­ment of R26m from the em­pow­er­ment firms. From there it will be a seam­less tran­si­tion into com­mer­cial min­ing, build­ing up ca­pac­ity to 4 000t/day of ore by year-end 2009.

The old ver­ti­cal shaft will be re­fur­bished by that point and ore will be hauled through it. DiamondCorp is hunt­ing for head­gear and a win­der for the shal­low shaft.

A de­ci­sion will be made on whether to also mine the satel­lite pipe from its own de­cline once a bulk sam­ple has been taken from that nar­row, stake-like pipe neigh­bour­ing the tubu­lar main pipe, Loudon says. The grade of the satel­lite pipe is yet un­known.

The for­mer open­cast mine is be­ing de­wa­tered, as well as the old tun­nels, which are also be­ing de-slimed – a colour­ful term that means very fine mud will be pumped out, mak­ing it safe to mine again.

The first phase of the Lace project, which was com­mis­sioned in Oc­to­ber last year, will pro­duce an es­ti­mated 370 000 carats from tail­ings. The sec­ond phase will gen­er­ate a fore­cast 13,7m carats, with peak pro­duc­tion top­ping 500 000 carats/year. The mine will em­ploy a method called sub-level cav­ing, which will drop pre­vi­ously mined and un­mined ar­eas into draw points from where the ore will be ex­tracted and hauled to the sur­face. Us­ing that method DiamondCorp will ex­tract an es­ti­mated 7m t of kim­ber­lite that’s not fea­tured in its re­sources state­ments. That’s made up of up­per kim­ber­lite, a softer rock that ear­lier min­ers tack­led, and the much harder hy­pabyssal kim­ber­lite rock, which was left largely un­mined in early work be­cause it couldn’t be ef­fec­tively pro­cessed.

DiamondCorp has reached a “very ad­vanced stage” in ne­go­ti­a­tions with the State Di­a­mond Trader, which may un­der new leg­is­la­tion buy up to 10% of run-of-mine di­a­mond pro­duc­tion. “We feel we’ll have con­cluded a sat­is­fac­tory sup­ply and sales agree­ment within the next month,” Loudon says. “It’s been a much smoother process than I’d an­tic­i­pated.”

Fi­nanc­ing dealt with. Paul Loudon

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