Name and Location
Liqhobong diamond project, Lesotho.

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

Project Description
The Liqhobong mine development project’s 8.6 ha orebody contains a probable reserve of 11.4-million carats. It has a total indicated and inferred resource of 90-million tonnes, containing an estimated 29.6-million carats (down to 510 m) and is still open at depth.

The project envisages a potential openpit mine plan to a depth of 390 m below surface, producing 17.6-million carats, with a life-of-mine of 15 years.

Firestone updated Liqhobong’s October 2012 definitive feasibility study (DFS) in November 2013. The updated DFS reaffirmed the project’s robust economics and secured its funding. The updated study was based on additional work for Firestone’s ongoing project-finance process, which also incorporated the benefits of the company's updated diamond price assumptions, revalidating its operating and capital cost assumptions, and its updated foreign exchange rates.

The updated DFS envisages the construction of a new 500 t/h main treatment plant and supporting infrastructure to treat 3.6-million tonnes of ore and recover more than one-million carats a year, which would place it in the top tier of diamond mines globally.

The main treatment plant comprises a purpose-built crushing, scrubbing, screening and recovery technology.

The mining and processing will be contractor operated.

Net Present Value/Internal Rate of Return
The updated DFS, which assumes a 3% growth in the diamond price with all costs being kept flat, sets out a base case project-level post-tax net present value (NPV) – using $107/ct and applying an 8% discount rate – of about $379-million and a post-tax internal rate of return (IRR) of 30%. An upside project-level post-tax NPV, taking into account the potential revenues from stones larger than 100 ct and using $156/ct and applying an 8% discount rate, is estimated at about $728-million, with a post-tax IRR of 45%.

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%, compared with the October 2012 DFS.

The revised and revalidated initial capital cost estimate includes an additional $5-million to provide grid power for the project, with the project carrying the full cost of power infrastructure ($15-million). 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’s costs and contingency allowances were also included.

Duration
Initial production is expected to start at the end of the first half of 2016.

Latest Developments
Firestone reported in December 2014 that it had spent R400-million on the development of Liqhobong mine to date, with the project remaining on track and within budget.

The company further reported that orders valued at R1.28-billion out of the R1.43-billion budget for the engineering, procurement and construction management (EPCM) contract had been placed.

The three largest contracts under the overall EPCM contract, totalling R943-million, had been agreed upon on a fixed-price basis to remove the escalation risk.

The project team's budget of R280-million, which included, besides others, the escalation, contingency and project team salary costs, were in line with the budget.

In addition, Firestone also said at the time that the earthworks were progressing on schedule and that it had thus far created more than 400 jobs.

The provision of electrical infrastructure to connect the mine to grid power is progressing as planned, with all the equipment and long-lead item orders placed, with deliveries imminent, and site preparation for the substations completed.  All 80 pylon tower bases have been completed, with all towers erected on the ground and three fitted into position. The power project is expected to cost R165-million and the mine is expected to be connected to the grid by the second half of 2015.

Investec commented that Liqhobong looked set to be one of the few new diamond mines to enter production in the foreseeable future and that it was likely to come on stream as the outlook for diamonds became “increasingly robust” amid rising demand and supply struggling to “keep pace”.

Meanwhile, Firestone said the final conditions precedent for the drawdown of the $82.4-million Absa facility were progressing on schedule and were expected to be completed well before the need to draw down on the facility, which was likely to be in late March 2015.

Key Contracts and Suppliers
DRA Projects (EPCM); Stefanutti Stocks (earthworks and civils); Turnkey Civils Lesotho (residue storage facility) and S.M.E.I Projects (structural, mechanicals, platework and piping).

On Budget and on Time?
The project is on time and within budget, with initial production currently on target to start at the end of the first half of 2016.

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