FDI.L Regulatory News (FDI)

28 Jun 2005 07:00

Firestone Diamonds PLC28 June 2005 Firestone Diamonds plc Joint venture with De Beers Consolidated Mines Limited on Groen River Valley project LONDON: 28th June 2005 HIGHLIGHTS • Establishes joint venture with De Beers Consolidated Mines Limited (" DBCM") on Groen River Valley exploration project in South Africa • DBCM to earn 61% interest for financing project to completion of bankable feasibility study • Firestone has option to have DBCM fund mine construction for additional 9% interest • DBCM to contribute minerals rights in the Groen River area to the joint venture • Two new exploration targets identified • Bulk sampling of HL deposit to be accelerated Firestone Diamonds plc ("Firestone" or the "Company") today announces that ithas entered into a joint venture with DBCM over the Company's Groen River Valleyexploration project in South Africa. The Groen River Valley project is Firestone's most important exploration projectin South Africa. This is due to the fact that the Groen River is the lastmajor unexplored ancient river system on the west coast of South Africa and thatmining by DBCM and others has proven the presence of diamonds of large size andexceptional quality in the area. Diamonds from the Groen River Valley areconsidered to be similar to or better in quality than those recovered from theOrange River. Diamonds recovered downstream from the joint venture area at themouth of the Groen River have recorded values up to and exceeding $1,000 percarat. Firestone controls all of the most prospective ground in the lowerreaches of the Groen River, covering an area of approximately 500 squarekilometres. Joint Venture Terms Under the terms of the joint venture agreement, DBCM can earn a 61% interest inthe project by financing and carrying out all exploration and evaluation work,up to completion of bankable feasibility studies on any deposits identified byexploration in the project area. Following completion of a bankable feasibility study on any deposit, Firestoneand DBCM will each bear their pro-rata share of mine construction costs,although Firestone will have the option to call on DBCM to provide loan financefor Firestone's share of these costs. If Firestone elects to exercise thisoption, DBCM will earn an additional 9% interest in the joint venture. DBCMwill also contribute mineral rights that it holds in the Groen River Valleyregion to the joint venture, covering an area of approximately 90 squarekilometres. DBCM will retain the right to market any diamonds recovered throughthe activities of the joint venture. Exploration Results Firestone has carried out a substantial amount of exploration in the Groen RiverValley area over the past ten years, including aerial photography and satelliteimagery interpretation, ground geological mapping, extensive drilling andsampling of diamondiferous gravels. This work has resulted in theidentification of the palaeo river systems that were responsible fortransporting the diamonds that have been mined near the mouth of the Groen Riverby DBCM and others. DBCM has conducted a comprehensive geological due diligence review on theresults of Firestone's exploration, including the following: • review and interpretation of material recovered from drilling in the area • geological interpretation of drilling logs and profiles • review of the location and value of diamonds recovered by exploration in the area, and the grade of the deposits from which the diamonds were recovered • review of Firestone's palaeo-drainage interpretation for the area DBCM has also carried out a significant amount of exploration in the Groen RiverValley in recent years, including a Spectrem high resolution airborneelectromagnetic (EM) survey that has been used to generate a detailed 3D modelof the bedrock topography in the area. Based on this model, DBCM hasindependently developed its own palaeo-drainage interpretation. Thisinterpretation is consistent with Firestone's interpretation and confirms thatthe area contains a very large resource of potentially diamondiferous alluvialdeposits that may have significant economic potential. Exploration Plans DBCM has assumed responsibility for managing exploration and evaluation work andintends to significantly increase the pace of work on the project. Since theend of 2004, Firestone has been carrying out exploration drilling on targetsidentified by previous exploration and this work will be continued by DBCM.Data from exploration carried out by Firestone will be combined with DBCM's EMand other data to produce an integrated geological model of the project area.DBCM's 3D bedrock topography model will allow the most attractive explorationtargets to be rapidly identified. This work is at an advanced stage and hasalready identified two new targets for further exploration drilling. Evaluation of HL Deposit The DBCM due diligence review also focused on the very large HL gravel deposit,which was discovered by Firestone in 2003. The HL deposit is 7 kilometres longand up to 700 metres wide. Analysis of EM data for the area where the HLdeposit is located and of material recovered from drilling indicates that thedeposit is similar in age and geological setting to the "Megalodon" depositrecently discovered by DBCM, which is the largest alluvial diamond depositdiscovered to date in Namaqualand. As evaluation of the HL deposit will be a high priority for the joint venture,plans for bulk sampling during the second half of the year are beingaccelerated. Results of this work will provide an indication of the grade ofthe HL deposit and the value of the diamonds it contains and will allow aninitial evaluation of the economic potential of the deposit to be made. Bulksampling will be carried out by using a Bauer specialised large diameter augerdrill, extensively used by DBCM's Namaqualand Mines for sampling of alluvialdeposits. It is expected that by the time the HL bulk sampling programme iscompleted, exploration drilling will have identified other deposits for bulksampling. Philip Kenny, CEO of Firestone Diamonds, commented: "We have believed for manyyears that the Groen River has the potential to become a major new alluvialdiamond producing region, and DBCM's interest in the project indicates that theyalso recognize the potential for a new, large-scale source of high qualitydiamonds. The introduction of DBCM's capability and expertise, and its morethan seventy years' experience in diamond exploration and mining in Namaqualand,will allow us to accelerate the exploitation of that potential. We are verypleased to have signed our fourth joint venture with DBCM in the past twelvemonths, and we look forward to continuing to develop the growing relationshipbetween our companies." Kerwin Rana, Head of New Business for DBCM , also commented: "We are pleased tohave concluded yet another value creating partnership with Firestone Diamonds, acompany whose skills and ability we have grown to respect. We look forward tocollaborating on our expertise and technologies to realize the economicpotential of this project." The Company expects to be able to update shareholders on progress at its otherprojects in Botswana and South Africa and other developments shortly. For further information: Philip Kenny, Firestone Diamonds +44 20 7370 6452 / +44 7831 324 645Leesa Peters, Conduit PR +44 20 7618 8760 / +44 7812 159 885Jamie Cumming, Bell Lawrie White +44 141 314 8103 / +44 7768 044 620Website: www.firestonediamonds.com Background information: 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 DBCM in joint venture withFirestone. 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 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