LONDON (Alliance News) - Paragon Diamonds PLC Tuesday said two independent studies have been carried out on the Mothae kimberlite project in Lesotho, which Paragon is in the process of acquiring.
The studies were carried out by The MSA Group and the results "exceed management's initial expectations," the company said.
Paragon secured the formal approval necessary from Lesotho's government to complete the acquisition of a 75% stake in the Mothae in early August from Lucara Diamond Corp. The mine is only five kilometres from the "world class" Letseng diamond mine and is close to Paragon's existing Lemphane site, it said.
The studies, which will be used as components for the pre-feasibility study and pre-economic study for the project, have concluded there is potential to "significantly increase" the project's net present value from original estimates and for average diamond values of up to USD2,000 per carat.
The studies also have shown an improved strip ratio of 1:1 from 1.5:1. The strip ratio refers to the ratio of the volume of waste material required to be handled in order to extract some volume of ore. That strip ratio means Paragon will have to mine one cubic metre of waste in order to extract one cubic metre of ore to process.
The reduction in the strip ratio is expected to result in cost savings of USD1 to USD2 per tonne of ore compared to original estimates, Paragon said.
"Further cost reductions could result from using extensive X-ray transmission recovery technology to reduce water and power consumption and waste generation and at the same time more reliable recovery of large diamonds with reduced breakage," it added.
The studies also analysed several mining scenarios, including the prospect of mining 2.0 million tonnes of ore per year to produce 40,000 carats. The project is thought to have over 20.0 million tonnes of ore, suggesting over a 10-year mine life.
Paragon still requires funding to complete the Mothae acquisition. The miner is already in the process of securing funding for the nearby Lemphane project and, on Tuesday, Paragon said it may complete a funding deal for both Lemphane and Mothae.
Paragon has already struck a conditional funding deal with International Triangle General Trading LLC for Lemphane, but said a deal that would cover both projects may be with another party if the terms are more attractive.
"Subsequent to the new and positive confirmations provided by The MSA Group reports on Mothae, the board has been intensively and positively refining the company's funding options with potential financing partners from an enhanced commercial position," it said in a statement.
Paragon shares were up 7.2% to 5.22 pence per share on Tuesday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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