30 Mar 2009 07:00
Firestone Diamonds plc
BK11 update
LONDON: 30 March 2009
HIGHLIGHTS:
Inferred Resource of 12 million tonnes defined containing approximately 830,000 carats
High grade and diamond values recovered on west side of BK11
Sample grades of 9-15 cpht
Diamond value of $175/carat
Contains 7 million tonnes
Grade and diamond values independently modelled
Overall modelled value of $126/carat
Modelled grades of 9-12 cpht and value of $130/carat on west side of BK11
High value area identified
Approximately 3 million tonnes at revenue of $16-20/t
Operating costs of $6.50/t
Potential revenue of up to $30M per annum at margins of 60-70%
Evaluation and development plans
Bulk sample trench planned to define mineable resource
Mine development decision to be made based on trench results in Q3 2009
Use of existing Bonte Koe plant would allow production to commence in mid 2010
Substantial upside as diamond prices recover
Firestone Diamonds plc, ("Firestone" or "the Company"), the AIM-quoted diamond mining and exploration company (ticker: AIM:FDI), today announces results from evaluation work on its BK11 kimberlite in Botswana. BK11 is situated approximately 20 kilometres south east of Debswana's Orapa Mine and 5 kilometres north east of the AK6 kimberlite, on which De Beers and African Diamonds plan to develop a new mine.
The Company commenced its Phase 2 evaluation programme on BK11 in July 2008. Approximately 2,300 metres of percussion, core and 36 inch large diameter drilling ("LDD") was completed by the end of 2008, and processing of material from the six LDD holes drilled was completed in Q1 2009.
High grade and diamond values recovered
The highlight of the results is the delineation of a high value area on the western side of BK11 ("KW") from which high grades (4 LDD holes with grades of 9-15 cpht) and high value diamonds (independent valuation of $175 per carat, March 2009) were recovered. The KW area contains a series of high grade grain flow deposits similar to those on the western side of the nearby Orapa and Damtshaa mines, where they represent the highest grade deposits at both mines.
Geostatistical modelling of the grade and value of diamonds recovered from sampling was carried out by Zstar Mineral Resource Consultants ("Zstar"), a highly experienced independent diamond mineral resource consultancy. The Zstar modelling provided the following results:
| KW Area | Sample results | Modelled results |
| Grade (cpht) | 9-15 | 9 |
| Diamond value ($ per carat) | $175 | $130 |
| Revenue ($ per tonne) | $16-26 | $12 |
The Company believes that grades and diamond values from mining in the KW area are likely to exceed the modelled values and that selective mining is likely to produce revenue of around $20 per tonne. The KW area is estimated to contain approximately 7 million tonnes of kimberlite.
The Zstar modelling also identified a high grade zone of approximately 3 million tonnes close to surface in KW (the "KWU Zone"), with the following results:
| KWU Zone | Sample results | Modelled results |
| Grade (cpht) | 11 | 12 |
| Diamond value ($ per carat) | $175 | $130 |
| Revenue ($ per tonne) | $19 | $16 |
On the basis of these results, and with operating costs at BK11 estimated to be $6.50 per tonne, the KWU zone would produce operating margins of between 60 to 70%. These results are particularly significant as they are based on current rough diamond prices, which have fallen by approximately 50% over the past 6 months. Any recovery in diamond prices, which the Company believes is likely to occur by 2010, would add substantially to the potential profitability of BK11.
The Company is very encouraged by these results and believes that it is likely that the development of a new mining operation on BK11 will be justified on the basis of the KW resource alone and intends to accelerate evaluation work, with the objective of establishing a mineable resource and making a mine development decision in Q3 2009.
Philip Kenny, CEO of Firestone Diamonds, commented: "It is a major achievement for us to have identified significant economic potential at BK11 despite current low rough diamond prices. If we make a mine development decision in Q3 2009, production could commence by the middle of 2010. We are also making progress in contract negotiations with Debswana in relation to the recently announced Jwaneng tailings project. If we achieve our targets for these projects we expect to start generating significant long term cash flow from both projects in 2010, and the Company will be well positioned to take advantage of opportunities that arise when the rough diamond market recovers."
Evaluation and development plans
A 20,000 tonne bulk sample trench is planned for the KW area. This trench is expected to produce approximately 2,000 carats and to allow higher confidence grade and diamond value estimates to be made. A 25 tonne per hour containerised pilot production plant is currently being mobilised from the Company's Avontuur Mine in South Africa to process the trench samples at BK11. Processing of the samples is expected to be completed by the end of Q3 2009.
The Company is also continuing with its plans to relocate the processing plant and infrastructure from the Company's Bonte Koe Mine in South Africa to BK11, subject to results from trench sampling. The availability of this plant will substantially reduce the time and cost to develop a new mining operation at BK11 and further enhance the economics of the project. Development costs are estimated to be approximately $7.5 million and production could commence in mid 2010 with an initial capacity of approximately 1.5 million tonnes per annum. At revenues of $20 per tonne, BK11 could produce annual revenues of approximately $30 million per annum and reach payback in less than 6 months.
Diamond valuation
The quality of diamonds recovered from sampling was very good, comprising mostly clear white gemstones and very little boart. The parcel contained 4 stones of over 1 carat in size, which is very encouraging in relation to diamond value, with the biggest stone recovered being 1.93 carats and valued at $910 per carat. The diamonds were valued in March 2009 by Johan Erikson, an independent diamond valuator with 28 years' experience in diamond valuation, resulting in a raw value of $92 per carat for the overall parcel, and $175 per carat for the KW area.
Zstar has used the valuation data to carry out a modelling exercise on the BK11 diamond population. The overall modelled value of BK11 diamonds is $126 per carat. The KW area has a slightly higher modelled value of $130 per carat, with 90% upper and lower confidence limits of US$210 and US$50 per carat, respectively.
These are very high values for kimberlite production - by comparison, the value of diamonds produced from the nearby Orapa and Letlhakane Mines (prior to the 50% drop in rough diamond prices that occurred at the end of 2008) was estimated to be $50 per carat and $180 per carat, respectively.
Grade and tonnage estimates
A total of 616 diamonds weighing 63.52 carats were recovered from approximately 900 tonnes of kimberlite sampled, giving an overall sample grade of 7 carats per hundred tonnes ("cpht"). An Inferred Resource of 12 million tonnes of kimberlite containing approximately 830,000 carats has been defined on the basis of logging and interpretation of the 8,600 metres of percussion, core and LDD drilling that have been carried out to date. This data has been modelled by Zstar, and the results are shown below:
| Resource Area | Average sample grade (cpht) | Modelled grade (cpht) | Tonnage (million tonnes) |
| KW | 11 | 9 | 7 |
| KE (BK11 east side) | 5 | 4 | 5 |
For further information, visit the Company's web site at www.firestonediamonds.com, or contact:
| Philip Kenny, Firestone Diamonds | +44 20 8834 1028/+44 7831 324 645 |
| Gareth Tredway, Jos Simson, Conduit PR | +44 20 7429 6603/+44 7899 870 450 |
| Mike Jones/Ryan Gaffney, Canaccord Adams (Joint Broker) | +44 020 7050 6500 |
| Jerry Keen, Blue Oar (Joint Broker) | +44 20 7448 4492/+44 777 069 7358 |
| Alexander Dewar, Brewin Dolphin (Nominated Adviser) | +44 131 529 0276 |
Background information on Firestone Diamonds:
AIM quoted Firestone Diamonds plc ("FDI.L") is an international diamond mining and exploration company with operations in Botswana and South Africa. 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 29,000 square kilometres around the major Orapa and Jwaneng mines and the entire Tsabong kimberlite field. Firestone has 95 kimberlites in its portfolio, of which 24 have been proven to be diamondiferous. Sixteen of Firestone's kimberlites are at the bulk sampling stage, of which BK11 is the most advanced.
Background information on Zstar Mineral Resource Consultants:
Zstar Mineral Resource Consultants (www.zstar.co.za) is an independent mineral resource consultancy specializing in sample optimization, geostatistical estimation and mineral resource classification for diamond deposits. The Zstar team of four geologists were employed by De Beers until 2008 as Principal Mineral Resource Analysts, where they were responsible for directing and reviewing resource evaluation, modelling and classification activities for De Beers' mines, development projects and resources worldwide. Zstar are currently preferred suppliers of mineral resource consultancy services to the De Beers group of companies.
Notes:
1. The information in this statement has been reviewed by Mr. Tim Wilkes, B Sc, Pr Sci Nat, who is a qualified person for the purposes of the AIM Guidance Note for Mining, Oil and Gas Companies. Mr. Wilkes is Chief Operating Officer of Firestone Diamonds plc and has over 27 years experience in diamond exploration, mineral resource management and mining. Mr. Wilkes is a member of the sub-committee for diamonds of the South African Mineral Resource Committee (SAMREC).
2. All grades and diamond values are based on a bottom cut off of 1mm.
3. The resource estimates in this statement have been compiled in accordance with the SAMREC code.