JOHANNESBURG (miningweekly.com) – DiamondCorp’s developing Lace diamond mine, in the Free State, is likely to come into production in the second half of this year, despite a six-week strike by members of the Association of Mineworkers and Construction Union (AMCU) in October and November.

Following the implementation of a revised underground development schedule by 74%-owned subsidiary Lace Diamond Mines (LDM) in early 2014, dual-listed DiamondCorp announced in July last year that the ramp-up of commercial production from underground kimberlite mining could be brought forward by six months to the first half of 2015.

Although LDM was no longer expected to start commercial production from underground kimberlite mining in the first half of this year, production would still start four months ahead of the original mine schedule.

DiamondCorp said on Thursday that the strike by AMCU members had revealed several underground workplace inefficiencies, which were addressed when the workforce returned to work.

As a consequence of these changes, a 15% improvement in development productivity had, thus far, been achieved and first commercial production from underground kimberlite mining was expected in the second half of 2015.

The company had, meanwhile, continued with the implementation of a revised underground development schedule and budget in the three months ended December 31.

Tunnel development costs, to date, were averaging R40 764/m against a revised budget of R37 000/m.

“The overspend continues to be the result of increased operating costs on the company's underground mining fleet and delays resulting from the AMCU strike.

“The benefits of maintenance and repair cost-saving initiatives reported previously are currently being offset by cost increases on spare parts resulting from the weaker rand,” DiamondCorp outlined in a statement.

It added that the mine had remained unaffected by the electricity supply constraints in South Africa, but cautioned that there had been a growing delay in value-added tax refunds from the South African Revenue Service.

Despite this, the overall mine development expenditure remained “close” to budget.

DiamondCorp, meanwhile, took delivery of its new Sandvik 421 drill rig over the quarter, which had the capacity to drill longholes up to 54 m in length and 127 mm in diameter and would be used to complete all the longhole drilling on the production levels in the Upper K4 (UK4) and 47L block cave.

Operator and artisan training was now under way, and the rig would shortly go underground, where it would be tested and commissioned ahead of drilling the slot drive and troughs for the first stope in the UK4 block.

Underground core drilling of the UK4 block continued to delineate significant volumes of high-grade kimberlite above the 365 m level.

The drilling, bulk testing and release of an updated resource statement would now be completed in the second quarter, rather than the first quarter, as previously planned.

TAILINGS RETREATMENT
In the year ended December 31, the company processed 308 047 t of tailings and recovered 18 534 ct of diamonds at an average recovered grade of 5.96 carats per hundred tons (cpht), compared with a budgeted recovered grade of 5 cpht.

Tailings retreatment processing ceased in September, as the surface earthmoving fleet was relocated to build a 150 000 m3 surface process water storage dam in preparation for kimberlite mining.

“This activity was successfully completed in the dry winter months ahead of the summer rains. The construction of the new dam, plus additional surface drains has allowed the mine to capture all of the water required for 2015 kimberlite processing,” DiamondCorp outlined.

An additional large surface dam was planned for construction this year, which would store sufficient water for full production requirements during low rainfall years.

The timing of the restart of tailings retreatment this year would be determined by the dam building schedule.

DIAMOND SALES, MARKET
Diamond sales for the 12 months totalled 21 700 ct for proceeds of $1.36-million at an average sales price of $63/ct – slightly ahead of the forecast for the year.

Profit share on two diamonds, which were beneficiated from a 15.2 ct stone recovered from tailings, and the sale of fine diamonds added a further $58 544 to income for the year.

“Short-term demand for rough diamonds continues to be soft in response to slower polished sales and tightening liquidity as a number of banks that finance the cutting and polishing sector reduce their exposure to the sector.

“[In the] longer term, the outlook remains positive as world economic growth recovers and demand for diamonds outstrips supply,” said the group.

The company said it had not factored diamond price increases into its Lace project model since the 250 m level bulk test diamonds were valued at $160/ct in 2012.

Nonetheless, in light of the current market weakness, DiamondCorp was currently modelling the Lace project at $150/ct.

At the current rand/dollar exchange rate, this gave cash operating margins of 81% on the UK4 block and 71% on the deposit overall.