SP Angel14 Oct 2016 17:08
DiamondCorp: Section 54 cliff hanger as shutdown closes mine at point of urgent funding
• Just as I was getting ready for an invite to the next mine tour, DiamondCorp report a fire in an underground dump truck, though it’s hard to envisage much of a fire in this relatively wet mine.
• Rather unfairly, the DMR, Department of Mineral Resources, has kindly slapped a Section 54 shut down notice on the mine, closing the operations in this most critical of financial phases.
• It sounds as if the fire was put out quickly without much incident and it may be that the DMR were waiting for an excuse to get inspectors into the mine
• The DMR say they want an external ventilation and audit team to inspect the mine. Management expect the mine to be shut for at least a week.
• Personally, I’m hoping to get an invite for a future next site visit. I’ve ordered a snorkel and flippers and was idly wondering if it’s better to pack board short or speedos for the underground tour, though hopefully standard issue wellingtons with those steel toes caps will be as much as anyone will need.
• Warmer weather in the region should at least mean that water from passing rainstorms is at least bearably warm by the time it flows through the old workings and into the lower levels of the underground mine. You never know, if the water flow is strong enough you might get a few micro diamonds washed through in the process.
• More seriously, we hope the Industrial Development Corporation ‘IDC’ is minded to restructure the finance payments and that investors / offtakers will stump up the cash to cover the cost of reduced diamond production while the miners clear the overhanging rocks.
• The recovery of some larger and more valuable diamonds indicates the mine should be worth rescuing and it’s not much of a surprise that the mine is suffering commissioning issues as it ramps up to target ore production in the lower levels.
• Management are looking to strengthen the team through the addition of diamond mining development and corporate finance expertise. We recommend Eric the Eel, as we know he can swim.
• Funding: DCP are going to need to find another £500,000 in short order to cover costs and £2.5- £3.0m in the medium term as previously announced to help get the mine to positive cash flow. Unfortunately for the company the investors who were looking at the provision of short term funding have walked away meaning that the company needs to find another investor in very short order to continue trading.
• We believe Paul Louden and his team have worked tirelessly to get the Lace mine into production and, given, geological challenges, they appear to have done a relatively good job. We hope investors will have the fortitude to back the company through this critical phase to ensure the survival and longer term success of the company.
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