12 Jul 2010 07:00
Firestone Diamonds plc
Mining licence granted and production commenced at BK11
LONDON: 12 July, 2010
Firestone Diamonds plc, ("Firestone" or "the Company"), the AIM-quoted diamond mining and exploration company (ticker: AIM:FDI), is pleased to announce that following the granting of a mining licence for the BK11 kimberlite in Botswana to the Company's 90% owned subsidiary, Monak Venture (Pty) Limited ("Monak"), commercial production has commenced at the mine.
HIGHLIGHTS
| • | Mining licence granted | |
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| - | Valid for 12 years to 30 June 2022 |
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| - | Standard diamond royalty of 10% |
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| - | Standard mining company corporation tax |
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| - | Unlimited carry forward of tax losses and 100% depreciation of capital expenditures |
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| - | No government equity participation |
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| - | Production to be sold by open tender in Botswana; tenders can also be held outside Botswana up to 2013, with possible extension to 2015 |
| • | Commercial production commenced | |
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| - | Phase 1 production plant (650,000tpa capacity) now in operation |
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| - | Phase 2 production plant (850,000tpa additional capacity) targeted for completion on schedule in Q3 2010 |
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| - | Mine plan of 11.5 Mt of kimberlite at average grade of 8.5 cpht and diamond value of $155/carat |
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| - | Expected 10 year mine life |
| • | Orapa satellite kimberlites | |
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| - | Company has 21 other kimberlites in the Orapa area, of which 13 are proven to be diamondiferous, and BK16 is the most advanced |
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| - | BK11 infrastructure to be used to evaluate, develop and exploit economic potential of these kimberlites rapidly and at relatively low cost |
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| - | Evaluation of satellite kimberlites to commence once BK11 is in full production |
Philip Kenny, CEO of Firestone Diamonds, commented: "The commencement of production at BK11 is a major milestone for Firestone as the company is now one of only three listed kimberlite producers worldwide outside of the major mining companies. It is an exceptional achievement to have reached this point in just over 3 years from being granted a prospecting licence, which is a reflection of the significant capability of our management and staff in Botswana and South Africa, and of the valuable cooperation that we have received from the Botswana Geological Survey, Department of Mines, and Ministry of Minerals, Energy & Water Resources. The combination of cash flow from production at BK11, an extensive portfolio of kimberlites in the Orapa and Tsabong kimberlite fields and exciting toll treatment opportunities positions Firestone very well for significant growth in Botswana, and with the substantial shortfall in rough diamond supply projected in the coming years we are confident about Firestone's future prospects."
Terms of Mining Licence
Following the successful completion of the final phase of evaluation work in December 2009, a mining licence application was submitted on behalf of the Company's 90% owned subsidiary, Monak Venture (Pty) Limited, to the Ministry of Minerals, Energy & Water Resources during Q1 2010. Processing of the application has been completed and the mining licence has now been granted. The key terms of the mining licence are as follows:
| • | Valid for 12 years to 30 June 2022, with right to renew if required |
| • | Standard diamond royalty of 10% on the gross market value of production |
| • | Standard mining company corporation tax according to Twelfth Schedule of the Income Tax Act |
| • | Unlimited carry forward of tax losses and 100% depreciation of capital expenditures |
| • | Government of the Republic of Botswana elected not to exercise option to acquire an equity stake in Monak |
| • | Production to be sold by open tender in Botswana; approval also granted for tenders to be run outside Botswana up to December 2013, with possible extension to December 2015 |
Commencement of commercial production
Development work commenced at BK11 at the beginning of 2010 and Phase 1 of the production plant, which has a capacity of approximately 650,000 tonnes per annum, was completed on schedule in Q2 2010. Phase 1 of the production plant has now commenced operation following grant of the mining licence. Work on Phase 2 of the production plant, which will increase capacity to 1,500,000 tonnes per annum, is on target for completion as originally scheduled in Q3 2010, and full production is expected to be reached in Q4 2010.
Under the BK11 mine plan approximately 11.5 Mt of kimberlite will be mined at an average grade of 8.5 carats per hundred tonnes ("cpht"), giving total production of approximately 1 million carats over a 10 year mine life at an average price of $155/carat (March 2010 valuation). In the KW area, where the current mining pit is located, approximately 5.4 Mt of kimberlite is expected to be mined at an average grade of 12.6 cpht, and at a diamond value of $175/carat (March 2010 valuation).
Orapa satellite kimberlites
Firestone controls 21 other satellite kimberlites in the Orapa kimberlite field, of which thirteen have been proven to be diamondiferous. The Company intends to use the infrastructure that has now been established at BK11 to evaluate the economic potential of these kimberlites rapidly and at relatively low cost, and believes that it has the potential to develop a sizeable satellite mining operation based around BK11 and multiple other kimberlites in the Orapa area.
The BK16 kimberlite is at the most advanced stage of evaluation, with high quality diamonds and encouraging grades recovered from historical work, and will be the first of the satellite kimberlites to be evaluated. The Company intends to commence evaluation work, which will initially consist of core drilling and large diameter drill bulk sampling, on the satellite kimberlites once BK11 reaches full production.
For further information, visit the Company's web site or contact:
| Philip Kenny, Firestone Diamonds
| +44 20 8834 1028/+44 7831 324 645 |
| Simon Edwards / Tim Redfern, Evolution Securities (Joint Broker)
| +44 20 7071 4330 / 4312 |
| Rory Scott, Mirabaud Securities (Joint Broker)
| +44 20 7878 3360 |
| Alexander Dewar / Neil McDonald, Brewin Dolphin Corporate Advisory & Broking (Nominated Adviser)
| +44 131 529 0276 |
| Jos Simson / Leesa Peters, Conduit PR
| +44 20 7429 6603/+44 7899 870 450 |
Background information on Firestone Diamonds:
Firestone Diamonds plc ("FDI.L") is an international diamond mining and exploration company with operations focused on Botswana. Botswana is the world's largest and lowest cost producer of diamonds, with annual production worth over $2.5 billion, and is considered to be one of the most prospective countries in the world to explore for diamonds.
Firestone is the largest holder of mineral rights in Botswana's diamondiferous kimberlite fields, controlling over 16,500 square kilometres around the major Orapa and Jwaneng mines and the entire Tsabong kimberlite field. Firestone has 108 kimberlites in its portfolio, including BK11, which commenced production in July 2010, and 31 other kimberlites that have been proven to be diamondiferous.