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, which 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, the revalidation of 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 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 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 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.  The owner's team’s costs and contingency allowances were also included.

Duration
Initial production is expected to start in late 2016.

Latest Developments
Firestone’s has reported that its Liqhobong mine was 68% complete at the end of February and remains on track for initial production in the fourth quarter. All critical civils and earthworks were complete and the focus is now on erecting the main plant.

The company has updated Liqhobong’s diamond resource and reserve based on a new geological model, increasing bottom cutoff (BCO) and excluding boart carats. The new mine plan has confirmed enhanced project economics.

Further, the revised capital budget of R2.1-billion for the project remains within the original $185.4-million budget, owing to the depreciation of the South African rand against the US dollar.

The company has added that R1.3-billion, or 63%, has been spent on the project against the revised capital budget.

Meanwhile, R1.67-billion in orders out of the total revised budget of R1.77-billion in engineering, procurement, construction and management (EPCM) contracts had been placed at the end of December 2015, representing 94% of the total EPCM budget. This was done to remove cost escalation risk.

“The six months to December 31, 2015 saw substantial development at Liqhobong and, importantly, we have continued this into 2016. The project remains on budget and on target to achieve first production during the fourth quarter of this year,” Firestone CEO Stuart Brown has said.

The mine’s grid power project was completed within budget and ahead of schedule in October last year and the mine is connected to grid power, which allows for “a consistent supply of electricity at site for the remainder of construction and to production”.

Brown has noted that all significant civils and earthworks that were on the critical path have been completed and that the site has been handed over to the structural, mechanical, plate and pipework (SMPP) contractors for the erection of the main plant.

As part of the project team's plans to accelerate construction and recover time lost at the beginning of the project, fabrication of SMPP has started ahead of the original planned timeline to ensure that there are no delays resulting from the manufacturing process.

Subsequently, the erection and fabrication processes are ahead of schedule, with fabrication progress at 98.7%, compared with the 96.2% revised baseline, while erection progress is at 22.6%, compared with the 21.3% revised baseline as at the end of February 2016. 

During the period, the project team began to prepare for operational readiness ahead of the expected fourth-quarter production.

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 firmly on track, 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.