Name of the Project
Lace diamond mine development project.

Location
Free State, South Africa.

Client
Lace Diamond Mines (LDM), a 74% subsidiary of DiamondCorp.

Project Description
The 1.2-million-tonne-a-year Lace mine is expected to produce more than 500 000 ct/y of diamonds at peak production.

The deposit will be mined using block-cave mining, with three caves planned over the 25-year life-of-mine on the 47, 67 and 85 levels at depths of 470 m, 670 m and 850 m respectively.

The kimberlite is open at depth, with a significant bulge of between 250 m and 360 m. The kimberlite can potentially add additional tonnage and diamonds not currently included in the resource statement.

The Upper K4 (UK4) block is being mined using long-hole open stoping while development of the first block cave on the 50 m level continues.

Net Present Value/Internal Rate of Return
Not stated.

Value
The total development cost of the project, including working capital and a 15% contingency on capital and development costs, is estimated at R384-million.

Duration
The production ramp-up from the Upper K4 (UK4) block started in December 2015.

Latest Developments
The future of the Lace diamond mine hangs in the balance as DiamondCorp has again delayed its share placement to give the State-owned Industrial Development Corporation (IDC) time to meet conditions precedent, as well as provide the Association of Mining and Construction Union (AMCU) a chance to document and finalise an in-principle agreement.

DiamondCorp will admit the placing shares and the free shares to raise much-needed funds on the London bourse on February 28. This will be effective on the AltX by March 7.

The previous extension gave the parties until January 30 to conclude agreements and approvals.

The continued delays to the agreements sought by the business rescue practitioner, AMCU and the IDC are causing commensurate delays in starting the care and maintenance and remediation programme of the Lace mine.

This means that the Lace diamond mine remains nonoperational – without mine water pumping, zero roadway, electrical rehabilitation and a longhole drill rig remaining underground – and its effective idling could be compromised if these agreements are not finalised in the very near future.

“The in-principle agreement reached with AMCU is now being subjected to material amendments by AMCU; and it is currently unclear whether . . . final terms, and the associated documentation that are consistent with the terms that had previously been agreed upon, will be able to be entered into between the parties,” DiamondCorp has explained.

In addition, discussions continue with the IDC on modifications to loan terms and the approval for the provision of immediate post-commencement funding, in advance of the longer-term restructuring necessary and funding for a successful business rescue plan.

“No assurances can be made that such IDC approval will be forthcoming, either in time for post-commencement funding to be sought, to be raised promptly, or at all,” DiamondCorp has warned.

The business rescue practitioners, Deloitte & Touche, has also started seeking expressions of interest for strategic investors for the Lace diamond mine.

DoamondCorp’s wholly owned subsidiary Soapstone Investments has obtained a standstill agreement from South African bondholders until the conclusion of the business rescue proceedings, or March 13, whichever happens first.

“The delays in obtaining agreements with the IDC and AMCU place a doubt over the timing of the payment of the next bond payment due on March 14. JSE rules require notice of whether . . . the payment is to be made to be announced by February 23,” the group has explained.

Accordingly, discussions with bondholders to obtain an extension to this standstill will now start.

“The board reiterates that, without agreement on the above points, it is likely that the business rescue will not be concluded successfully and, therefore, that the group will be subsequently placed into administration.”

The mine has, however, received net insurance proceeds of R1.36-million from the successful conclusion of an insurance claim for an incident prior to the mine flood that brought operations to a halt in November and resulted in DiamondCorp embarking on the business rescue process.

Key Contracts and Suppliers
None stated.

On Budget and on Time?
The project is on time.

Contact Details for Project Information
DiamondCorp, tel +44 20 3151 0970, fax +44 20 3151 0971 or email info@diamondcorp.plc.uk.