Name of the Project
Liqhobong diamond project.

Location
The project is set in the hills of the Maluti mountains, in 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 the 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 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 the recovery of more than one-million carats a year. This will 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.

Potential Job Creation
The mine currently employs about 795 people.

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 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, compared with a 2012 forecast of $167-million.

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 shared infrastructure with other neighbouring mines. The owner's team’s costs and contingency allowances were also included.

Duration
Not stated.

Latest Developments
Firestone Diamonds has made a good start to mining at the Liqhobong mine, with all operational targets within management's control having either been met or exceeded after the mine development project was completed within budget.

However, lower-than-expected average diamond values have necessitated a revised mine plan to better mitigate the current environment and ensure sustainable mining.

The lower-than-expected diamond prices and subsequent assessment of the carrying value of the Liqhobong mine asset led to a $122.6-million impairment charge during the financial year ended June 30.

The revised mine plan dictates a temporary transition to a nine-year mine plan with higher near-term cash generation, while retaining the flexibility to revert to the original 14-year plan should diamond prices recover materially. The revised mine plan involves the stripping of 76-million fewer waste tonnes.

A far more representative area of the pit will be mined over the next 18 months, which could improve the likelihood of recovering higher-quality stones and, in turn, provide a truer representation of diamond quality and pricing than has been possible from production to date.

In line with the revised mine plan, Firestone is embarking on a potential $25-million (£18.5-million) capital raise and a restructuring of its Absa debt facility to unlock the financial strength and flexibility to continue developing the Liqhobong mine.

Firestone’s fundraising comprises a firm placing and a placing, subject to clawback under an open offer, through the issue of new ordinary shares at an issue price of 10p apiece.

The company has also reached an in-principle agreement with lender Absa to defer capital repayments under its debt facility for 18 months from January 2018 to June 30, 2019, and extend the final maturity date by 30 months to December 2023.

This is conditional upon completion of the fundraising and approval of commercial and political risk insurance by the Export Credit Insurance Corporation of South Africa.

The net proceeds of the fundraising will be used to fund mining activities and provide sufficient headroom while diamond market prices remain subdued, as well as for general ongoing working capital expenditure.

It will also be used to service the December 2017 capital repayment of $5.2-million under the Absa debt facility, and fund the debt service reserve account of the group with $4.6-million in respect of the interest due under the facility during the standstill period.

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?
Commissioning of the mine started in October 2016, with the mine construction completed on time and within the $185.4-million budget.

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