LONDON (Alliance News) - BlueRock Diamonds PLC Thursday said it has launched a wider strategic review of the business as it tries to resolve ongoing issues with recovery levels and throughput rates at its two processing plants, warning it will need to raise further funds in the near-term.
The mining company with activities in the Kimberley region of South Africa appointed a specialist mining consultancy firm, VBKom, back in January to review its mining strategy and produce a life-of-mine plan for the Kareevlei operation.
BlueRock said that process is still ongoing and it is expecting the review to be finalised "over the next couple of months."
In addition, the miner Thursday launched a wider strategic review of the business. BlueRock said the first action to be taken is sourcing an experienced mine manager to run its operations, adding it has identified a suitable individual, who was not named, that it expects to appoint "in the coming weeks."
One of the reasons a review has been launched is cash. BlueRock conceded that its cash resources "remain tight," adding it will have to raise additional funds in the near-term, with the board currently evaluating its options.
On a more positive note, the throughput of its two processing plants at the Kareevlei operation has increased significantly since late last year, when BlueRock said production levels at the mine were below capacity. However, the miner is still facing issues at both plants.
The operation originally only had the Kareevlei processing plant, but a second processing plant called Diacar was constructed by Diacar Mining and Plant Hire Pty Ltd under a deal struck in November last year which has allowed BlueRock to increase its throughput.
Back in December, the company said the combined throughput at the two processing plants was around 14,000 tonnes of ore per month, but revealed Thursday that throughput has now exceeded 20,000 tonnes per month.
BlueRock's throughput had been hampered by water shortages last year due to the very dry summer, but said that has now been alleviated by rain and by the actions taken by the company, including changing its processing method which has improved the efficiency of its water usage.
However, although throughput has increased in 2016, the Kareevlei processing plant is still yielding recovery levels that are below expectations. BlueRock said the plant recovered around 2.0 carats per hundred tonnes of ore in the first quarter of 2016, which is lower than the estimation provided in the competent persons report.
"Limited testing of our tailings has shown that our plant is not recovering a significant quantity of diamonds and that the dense media separation as it is currently set up is unable to process effectively the increased throughput," said the miner.
It is a similar story at the Diacar processing plant. Whilst it is achieving throughput rates in line with expectations, the recovery levels are below expectations and at a similar level to the Kareevlei plant.
BlueRock said it is working with VBKom to identify a resolution to the issues at the Kareevlei plant and said dense media separation is being added to the Diacar plant in an attempt to improve recovery grades.
"Despite the recent lower grades, the board believes that the results to date continue to support the findings in the competent persons report published at the time of our initial public offering," said BlueRock.
"In particular, now that we are starting to process level three ground (20.0 metres to 30.0 metres below the surface), albeit in limited quantities to date, there are signs that grades are improving despite the current inefficiencies of the plants. Further production at this level is required to establish how consistent this proves to be the case," the company added.
Despite the ongoing headwinds, BlueRock said the average value of each carat in the first quarter of 2016 was USD263 for Kareevlei and USD469 from Diacar, "both significantly higher than anticipated," it said.
However, until both plants are operating at their optimum efficiency, BlueRock will be unable to be certain of its run-of-mine average value per carat.
BlueRock shares were down 8.6% to 16.0 pence per share on Thursday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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