Name and Location
Project Kholo, Lesotho.

Client
Gem Diamonds owns 70% of Letšeng Diamonds, in partnership with the government of Lesotho, which owns the remaining 30%.

Project Description
The Letšeng diamond mine is characterised by extremely low-grade ore (less than 2 ct/100 t). It is renowned for producing large diamonds, having a higher percentage of large diamonds (greater than 10.8 ct) than any other kimberlite diamond mine, giving it the highest dollar value per carat of any kimberlite diamond mine.

The mine, located in the Maluti mountains, currently has the capacity to treat about seven-million tonnes of ore a year to produce about 100 000 ct.

The Letšeng expansion project, known as Project Kholo, proposes to: increase throughput to at least ten-million tonnes a year from 5.6-million tonnes, double the carat output to 200 000 ct/y, increase revenue through a reduction in diamond damage and an improvement in recovery, as well as a reduction in real operating costs of $2/t.

Value
$280-million. The project will be funded out of existing and future cash flow.

Duration
Ramp-up to full production is expected by July 2014.

Latest Developments
As a result of the impact of weaker diamond prices on revenues and cash flows in 2012, Gem Diamonds scaled back the capital expenditure earmarked for Project Kholo. Those elements of Project Kholo, which are more capital efficient and offer near-term returns, have continued to be implemented.

For example, four crushing units have been installed in Letšeng’s existing processing plants to reduce diamond damage and have thus minimised the loss of revenues. Effective delivery and implementation of these key workstreams should provide a stronger operating platform for the company, enabling it to expand carat production and significantly enhance profit margins, even in the current uncertain economic environment, and to increase the positive effect of any strengthening in diamond prices.

A prefeasibility study is under way with regards to a potential underground operation for the Satellite pipe to eliminate high costs associated with increased waste stripping and to determine the most appropriate and cost-effective mining method from several options. The Satellite pipe's relatively high 7:1 average waste stripping ratio suggests potential for eliminating up to 400-million tonnes of waste by a rapid start to an underground operation.

Key Contracts and Suppliers
None stated.

On Budget and on Time?
Too early to state.

Contact Details for Project Information
Gem Diamonds public and media relations, Sherryn Tedder, tel +27 11 560 9600 or email stedder@gemdiamonds.com.