AMI.L Regulatory News (AMI)

24 Jan 2006 07:00

Sierra Leone Diamond Company Ld24 January 2006 For immediate release 24 January 2006 Sierra Leone Diamond Company ("SLDC" or the "Company") Grant of Mining Lease, Commencement of Bulk Sampling and Alluvial Mining Production Sierra Leone Diamond Company (AIM : SLD), the diamond exploration company withlicence interests wholly focussed in the country of Sierra Leone, is pleased toreport the grant of a large mining lease. The Company has upgraded exclusive prospecting licences 16/96 and 17/96,covering approximately 506 square kilometres in the Kono area of Sierra Leone,into one exploration licence. This licence lies just to the west of and downstream of the well known Koidu diamond kimberlite pipes. Further, 160 squarekilometres of this new exploration licence has been converted into a mininglease. The Company is currently negotiating the final costs of the mining leaseand will update the market shortly. The grant of the new mining lease will allow the Company to immediately commencelarge scale alluvial diamond mining production on the Bagbe and Bafi rivers andterraces which run through the Kono mining lease. The Company has recentlyagreed terms to acquire a dense media separation ("DMS") diamond processingplant with various earth moving equipment for a payment of US$ 2,000,000 and theissuance of 1,666,666 shares. This plant, which has a capacity to processapproximately 2,000,000 tons of alluvial gravels per annum, will allow theCompany to immediately commence production in the mining lease area. Currently,the Company operates a smaller DMS plant, which has been used to bulk sample thearea, and has a capacity to process 100,000 tons of alluvial gravels per annum. Further, the Company has commissioned the manufacture of a large DMS plant,costing US$ 3,500,000, with a capacity to process 1,500,000 tons of alluvialgravels per annum and should commence production by the middle of the year. Thecombined DMS plants will provide the Company with a large scale mining andprocessing capacity of 3,500,000 tons of alluvial gravels per annum by the yearend. Previous Alluvial Mining Sierra Leone was mined from the 1930's until 1965 by Sierra Leone SelectionTrust ("SLST"), a British colonial alluvial diamond mining company holding theexclusive mineral rights to Sierra Leone. It is documented that up to 1965 theyrecovered approximately 20 million carats from the Kono area of operations andthat official total production from the 1930's until now is in excess of 50million carats. The only reliable data on production comes from a report "TheDiamond Fields of Sierra Leone" produced in 1968 by P K Hall. The reportindicates that diamond recovery from alluvial production from the Bafi river andterraces has averaged approximately 50 carats per hundred tons of alluvialgravels mined. Independent consultants confirm that Sierra Leone produces thesecond highest quality diamonds in the world, the average value of Sierra Leonediamonds being well above the world average, many experts place it at overUS$250 per carat. Based on historical production, this gives SLDC a level ofconfidence that it will progressively generate cash flows with the increase incapacity of the mining operations by the middle of the year. David Gadd-Claxton, Chief Executive Officer commented: "This is excellent news for the Company, the grant of this large scale mininglease means the Company can fulfil one of the stated objectives at the AIMlisting in February 2005 of becoming cash generative from the commencement ofalluvial diamond production." For further information, please contact: Sierra Leone Diamond CompanyDavid Gadd-Claxton, Chief Executive Officer 01442 257246Martin Dunham, Chief Financial Officer Buchanan Communications 020 7466 5000Bobby MorseBen Willey This information is provided by RNS The company news service from the London Stock Exchange