JOHANNESBURG (miningweekly.com) – An independent study undertaken at Aim-listed diamond development company Stellar Diamonds’ 100%-owned Tongo kimberlite Dyke-1 project, in Sierra Leone, has shown attractive economics for concurrent surface openpit mining and underground mine development, the company announced on Wednesday.
Stellar CE Karl Smithson said the possibility of generating early cash flow from surface mining at Tongo Dyke-1 in conjunction with underground mine development was a “very attractive financial option”.
“Using a grade of 120 carats per hundred tonnes (cpht) and [a] diamond value of $270/ct in the financial model, generates a net present value (NPV) of $75-million for Dyke-1,” he said.
This represented a 42% increase on the project’s previous NPV of $53-million, translating into a pretax internal rate of return of 55%.
Further, Smithson noted that if the project’s recently increased diamond grade of 165 cpht was applied in the financial model, while maintaining the $270/ct modelled value, the project’s NPV estimate was almost doubled to $146-million.
“The directors believe the NPV compared to the company's current market capitalisation provides significant potential value upside,” Smithson said.
The study further found potential for 120 000 ct to be mined from the project’s openpit during the first three years of mine life, with more than one-million carats expected from the total 16-year life-of-mine.
The capital expenditure to develop the mine was estimated at $16-million.
"Having recently started trial mining at our Baoulé project, in Guinea, to generate cash flow before the end of 2014, we are delighted that we believe we have also found a route to early cash flow for Tongo and believe we are demonstrating our ability to deliver optimum value from our projects,” he concluded.