FDI.L Regulatory News (FDI)

10 May 2006 07:01

Firestone Diamonds PLC10 May 2006 Firestone Diamonds plc Buffels River mine development agreement signed with De Beers LONDON: 10 May 2006 SUMMARY • Development of new mining operation with De Beers on Buffels River in South Africa • Target production of over 600,000 carats over 6 years • Minimum estimated annual revenue to Firestone of £3.7 million and operating profit of £2 million • Significant upside potential through increased plant throughput, profit sharing arrangement and increase in mineable resources • First production and cash flow expected in June 2006 On 31 March 2006, Firestone Diamonds plc ("Firestone" or "the Company"), theAIM-quoted diamond mining and exploration company, announced that Firestone andits black-empowerment joint venture company, African Star Minerals ("AfricanStar"), had entered into a Memorandum of Understanding with De BeersConsolidated Mines ("De Beers") to cooperate on the development of a new miningoperation on the Buffels River in Namaqualand, South Africa. The Company ispleased to announce that a formal agreement has now been signed with De Beers.The new mining operation will be developed around Firestone's Bonte Koe Mine,which is operated by African Star, and will exploit the Buffels Inland Complex("BIC") deposits, over which De Beers holds mining rights. Philip Kenny, CEO of Firestone Diamonds, commented: "This agreement with DeBeers marks a major milestone for Firestone Diamonds and African Star Minerals.It provides us with significant assured revenue and cash flow for the durationof the Buffels River project and substantially extends the life of ouroperations at Bonte Koe. In addition, having proven that we have the capabilityto design, build and operate efficient, cost effective mining operations to thestandard required by De Beers, we intend to expand our relationship with DeBeers and investigate other known resources in the Namaqualand region that wecan jointly exploit with them." Project Overview The agreement has come about as a result of the substantial investment thatFirestone has made in plant and infrastructure at Bonte Koe, which includes a150 tonne per hour gravel processing plant, a 16 km power line and a 35 kmprocess water supply pipeline. Under the terms of the agreement, Firestone will use the plant andinfrastructure at Bonte Koe to process diamondiferous gravel mined by De Beersfrom the BIC. The BIC comprises two deposits located adjacent to Bonte Koe, andtwo located further downstream. Mining operations on the BIC are expected toproduce over 600,000 carats from approximately 5.5 million tonnes of gravel overa six year period. Financial arrangements Under the terms of the agreement, De Beers will be responsible for overburdenstripping and gravel mining and for the delivery of gravel from the BIC to BonteKoe. Firestone will be responsible for processing the gravel, producing a DMSconcentrate, and disposal and rehabilitation of tailings from the operation.The DMS concentrate will be transported for diamond recovery at De Beers'Kleinzee Mine, which is located at the coast 15 km downstream of Bonte Koe. African Star will be paid approximately R40/tonne per tonne of gravel processedfor the 5.5 million tonnes of gravel projected to be mined over the life of theproject. This rate will cover Firestone's capital and operating costs inrespect of the project. With an agreed minimum gravel delivery rate of 950,000tonnes per annum, this will provide estimated annual revenues to Firestone ofapproximately £3.7 million and operating profits of approximately £2 millionover the life of the project. With estimated maximum plant capacity of1,250,000 tonnes per annum, Firestone's annual revenues could increasesubstantially if De Beers' mining rate exceeds the current minimum plannedlevel. The agreement also has a profit sharing provision under which Firestone willhave the right to participate in profits generated by the project once De Beers'target return from the project has been reached. There is further potential forFirestone's revenues and profits from the project to increase significantly, asit is expected that resource evaluation work currently being carried out by DeBeers in the BIC area and continued increases in rough diamond prices willresult in substantial additional mineable resources being identified in the BICarea. Project Schedule Under the terms of the agreement, Firestone will be required to make a number ofmodifications to the Bonte Koe plant, including upgrading of the DMS capacityand the crushing circuit. Planning and design work for the modifications werecompleted in the first quarter of 2006. Site works commenced in March and arenow well under way. As these modifications will not require the existing plantto be shut down, Firestone and De Beers plan to process gravel from the BICthrough the existing plant as soon as possible, with the objective of commencingtreatment in June 2006. With the plant at Bonte Koe now being dedicated to processing the significantlylarger volume of BIC gravel resources for the expected six year life of theproject, Firestone plans to resume exploiting its own gravel resources at BonteKoe after processing of the BIC gravels has been completed. For further information: Philip Kenny, Firestone Diamonds +44 20 8834 1028 / +44 7831 324 645Leesa Peters, Conduit PR +44 20 7429 6600 / +44 7812 159 885Jamie Cumming, Bell Lawrie +44 141 314 8103 / +44 7768 044 620 www.firestonediamonds.com Background information on Firestone Diamonds plc: Firestone Diamonds plc is an international diamond mining and explorationcompany with operations in the Namaqualand region of South Africa, Botswana andthe United States. Firestone has extensive interests in Botswana, which is the world's largestproducer of diamonds, with annual production of approximately 30 million caratsworth over $2.5 billion. Botswana is considered to be one of the best countriesin the world to explore for kimberlite - the primary source rock for diamonds.Firestone's Mopipi, Orapa and Jwaneng projects are located close to the majorOrapa and Jwaneng mines and are all being explored by De Beers in joint venturewith Firestone. Firestone is also exploring for kimberlite in the US on theLaurentia craton, which extends into Canada, where it hosts a number ofdiamondiferous kimberlite deposits. Namaqualand, which is located on the west coast of South Africa, has been one ofthe world's largest alluvial diamond producing regions for the past 60 years,with total production to date estimated to be worth more than $3 billion.Firestone's mining operations in Namaqualand include the Bonte Koe, Avontuur andOena Mines, all of which produce high quality alluvial diamonds, and a growingportfolio of early stage and advanced exploration projects, of which the GroenRiver Valley project, which is being explored by De Beers in joint venture withFirestone, is the most important. Firestone has a highly qualified management team with extensive experience inthe exploration, evaluation and development of diamond projects. Firestone isquoted on the Alternative Investment Market (AIM) of the London Stock Exchangeand trades under the symbol FDI.L. This information is provided by RNS The company news service from the London Stock Exchange