Name and Location
Liqhobong diamond project, Lesotho.

Client
Liqhobong Mining Development Company (LMDC), comprising Firestone Diamonds (75%) and the government of Lesotho (25%).

Project Description
The Liqhobong deposit has a total indicated and inferred resource of about 90.82-million tonnes, containing an estimated 29.75-million carats (down to 510 m).

An updated definitive feasibility study (DFS) on Liqhobong has confirmed the robust economics of the project. The updated study is an internal review of the study completed in October 2012. It is based on additional work associated with Firestone’s ongoing project finance process, and incorporates the benefit of the company's recently announced updated diamond price assumptions, revalidated operating and capital cost assumptions and updated foreign exchange rates.

The study shows that the project could recover 1.15-million carats a year at an in situ grade of about 32 carats per hundred tonnes and an average stripping ratio of 2.28.

The main treatment plant (MTP) has been designed to treat 500 t/h of ore, which equates to 3.6-million tonnes a year, and comprises purpose-built crushing, scrubbing, screening and recovery technology. Mining and processing will be contractor operated.

Value
The updated DFS includes a revalidation of the total project capital scope and cost requirement. Total initial capital costs are estimated at $185.4-million. The project capital has increased from $167-million to $185.4-million – an increase of 11% when compared with the October 2012 DFS.

The revised and revalidated initial capital cost estimate includes an additional $5-million for the provision of grid power to the project, with the project carrying the full cost of power infrastructure. Previously, this had been modelled on the basis of shared infrastructure with other neighbouring mines.  In addition to the increased power cost, the owner's team costs and contingency allowances have also increased.

Duration
According to the updated DFS, construction and early works for the MTP are expected in early 2014, when funding for the project is finalised. Thereafter, the project is planned to take two years to construct and commission, with full production scheduled to begin in early 2016.

The power component of the project is expected to take 13 months to complete, with grid power expected to be in place by July 2015.

Latest Developments
Absa Bank has received approval from its credit committee to provide Firestone’s 75%-owned subsidiary LMDC with up to $82.4-million in debt finance.

The initial infrastructure and capital costs of the Liqhobong project have been estimated at $185.4-million, with the Absa debt facility to support the development of the MTP.

The facility will have a total term of 6.5 years, with an 18-month drawdown period for construction, with the repayment of capital occurring in the final 4.5 years of the loan term.

Firestone will be required to fund its contribution to the project, which is the balance required to complete the project, prior to first drawdown of the facility.

The Firestone board is evaluating a range of options to fund the balance of capital required to complete the project, which it expects to conclude in the near future.

The debt facility is also conditional on, besides others, the approval of commercial and political risk insurance by an export credit agency and other customary conditions, standard for facilities of this nature, including the completion of legal and environmental due diligences, documentation and the signing of material contracts.
Meanwhile, the pilot plant has ceased operation, according to Firestone’s revised strategy for the development of Liqhobong, to allow for site preparation before the construction of the MTP.

Firestone expects to mobilise the early-works contractors early next year, subject to the completion of financing and of a due diligence, as well as standard internal approval processes and debt insurance provision by the Export Credit Insurance Corporation of South Africa.

The required early works include the construction of a new access road, an accommodation camp for contractors and the construction of the starter wall for the residue slimes facility.

Price-validation exercises and early-works schedules are in progress as part of the front-end engineering and design, which is well under way, in parallel with financing arrangements to facilitate the construction of the more than one-million-carat-a-year MTP.

During 2013, the pilot plant has produced 156 131 ct of diamonds, achieving an average price of $93/ct, compared with the 164 000 ct produced, which were sold for an average price of $86/ct during 2012.

The pilot plant has provided confirmation of the quality, grade and size of the mine’s stones, as well as information on the characteristics of the orebody.

The presence of nine 100-ct-plus stones was confirmed, but they were damaged during the recovery process. The MTP has been designed to recover stones of this size intact.

Key Contracts and Suppliers
DRA Projects (DFS).

On Budget and on Time?
None stated.

Contact Details for Project Information
Firestone Diamonds, tel +44 20 8741 7810, fax +44 20 8748 3261 or email info@firestonediamonds.com.