Diamondcorp Plc : Lace Mine development activities commence

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24 January 2013

NOT FOR DISTRIBUTION IN OR INTO AUSTRALIA, CANADA, JAPAN OR THE UNITED STATES OR ANY OTHER JURISDICTION IF TO DO SO WOULD CONSTITUTE A VIOLATION OF THE LAWS OF SUCH JURISDICTION

DiamondCorp plc

JSE share code: DMC & AIM share code: DCP

ISIN: GB00B183ZC46

(Incorporated in England and Wales)

(Registration number 05400982)

(SA company registration number 2007/031444/10)

("DiamondCorp", "the Group" or "the Company")

Lace Mine development activities commence

·      Company fully financed for Lace Mine development

·      Group cash in accounts £5.5m  

·      First diamonds from kimberlite expected Q3 2014

·      Peak funding for 47 level block cave estimated at £20.3m

·      Investment in 1.2 mtpa plant and underground development to date c.£18m

·      Estimated resource contains 13.4m cts of diamonds, open at depth

DiamondCorp, the Southern African diamond development and exploration company, is pleased to announce that development activities have commenced for the 47 level block cave at the Lace mine, following receipt of the first US$3 million (£1.9 million) tranche of loan funds from Laurelton Diamonds, Inc., a wholly-owned subsidiary of Tiffany & Co.

The second US$3 million tranche is scheduled to be paid on 10 April 2013. The combination of funding through the Tiffany loan, £4.2 million of convertible bonds (issued in December 2012) and R220 million (£15.6 million) from the Industrial Development Corporation of South Africa (as announced on 21 September 2012) completes the R320 million (£23 million) Lace project financing package.

The Main Pipe at the Lace mine contains 33.1 million tonnes of kimberlite indicated and inferred to a depth 855m containing approximately 13.4 million carats in both resource categories at an average grade of 40.1 carats per hundred tonnes. The resource has an in-ground value in excess of $2 billion at $160 per carat.

The deposit will be mined by block cave mining, with three caves planned over the 25 year life of mine on the 47, 67 and 85 levels (at depths of 470m, 670m and 850m respectively). The kimberlite is open at depth, and also contains a significant bulge between 250m and 360m depth with the potential to add additional tonnage and diamonds not currently included in the resource statement.

The SRK Independent Engineering Report on the 47 level block cave development published in March 2012 estimated the total development cost (including working capital and a 15% contingency on capital and development costs) at R384 million (£27 million).The first diamonds from development are expected to be recovered in Q3 2014, and the peak funding requirement (including working capital) is expected in April 2015 at R286 million (£20.3 million) when blasting of the slot drive and doming starts to deliver significant tonnage 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.

Approximately 600,000 tonnes of kimberlite is expected to be extracted and processed during this period. Anticipated revenue from the mine is forecast at R421 million (£30 million) during the 43 months of development before full production of 100,000 tonnes per month is achieved. The 1.2 million tonne per annum Lace mine is expected to produce more than 500,000 carats of diamonds per annum at peak production.

Investment to date

DiamondCorp has invested approximately £18 million into the Lace project with equity raised from shareholders since it acquired the project in 2005. These funds have been advanced as shareholder loans from the parent company to the 74%-owned South African operating subsidiary Lace Diamond Mines (Pty) Limited.  The funds have been used for construction of a 1.2 mtpa processing plant, the underground mining fleet and tunnel development to the 260m level.

The shareholder loans and accumulated interest represent an asset to the Company of approximately 6.6p per share as they must be repaid from mine cashflow before any dividend distributions to the Company and its broad-based black economic empowerment partners, Shanduka Resources (Pty) Limited (13%) and Sphere Investments (Pty) Limited (13%).

Development activities scheduled over the next four months include:

·      Excavation of a new 66,000 bank cubic metre boxcut providing the surface entrance to the twin conveyor belt and men and materials declines for the life of mine (LOM).

·      Completion of a vent raise from the 16 level to provide sufficient interim ventilation for continuous blasting decline development until LOM vent shafts are raise bored.

·      Installation of a tipping arrangement on the 24 level to allow loading of waste generated from the twin decline development down to the 47 level. Until 2.6 km of conveyors are installed, development waste will be hauled out of the mine by low profile dump trucks.

·      Complete rebuild of another underground loader and two dump trucks required to meet the scheduled development ramp up.

·      Essential upgrades to the dense media separation plant to alleviate front-end bottlenecks in the re-crush circuit at full-scale production. Completion of these upgrades will also allow tailings retreatment to recommence.

·      Completion of detailed design drawings for the underground conveyor belts.

·      Definition drilling of the bulge from within the kimberlite bulk sampling area on the 260m level.

DiamondCorp's CEO, Paul Loudon said: "We are delighted to be underway with the 47 block cave development which will mark the transition of DiamondCorp from explorer to underground diamond producer. Diamond production from tailings re-treatment will recommence during Q2, initially on one shift while the upgraded processing plant is re-commissioned. We will then have the capacity to ramp up to three shifts in the second half of the year if diamond prices strengthen for small goods."

Contact details:

DiamondCorp plc

Paul Loudon, Chief Executive

Tel: [phone]

[phone]

SP Angel Corporate Finance LLP

AIM Nomad and Broker

Ewan Leggat/Laura Littley

Tel: [phone]

Ocean Equities Limited

Guy Wilkes

Tel: [phone]

PSG Capital (Pty) Limited

John-Paul Dicks

Tel: [phone]

Russell & Associates

Charmane Russell/Marion Brower

Tel: [phone]

This information is provided by RNS

The company news service from the London Stock Exchange

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