Smoother than expected
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