FDI.L Regulatory News (FDI)

15 Jul 2005 07:00

Firestone Diamonds PLC15 July 2005 Firestone Diamonds provides update on South Africa operations Joint venture with Trans Hex Group over Marine Concession 7a Acquisition of Hondeklip Bay Mine from Trans Hex Group South African mining and exploration progress report LONDON: 15 July 2005 HIGHLIGHTS Marine Concession 7a, South Africa • Joint venture signed with Trans Hex Group • Firestone to manage the concession on revenue share basis Hondeklip Bay Mine, South Africa • Agreed to acquire from Trans Hex Group • Will integrate with operations at Avontuur Mine Namaqualand Mining Operations • Production for FY 2005 in line with FY 2004 • Significant increase expected in FY2006 Namaqualand Exploration • Targeting new projects similar to Groen River Valley Firestone Diamonds plc ("Firestone" or the "Company") is pleased to announcethat it has entered into a joint venture agreement with Trans Hex Group Limited("Trans Hex") over Marine Concession 7a in South Africa and that it has enteredinto an agreement to acquire the Hondeklip Bay Mine in Namaqualand from TransHex. The Company also provides an update on its exploration and mining activities in South Africa. Marine Concession 7a Joint Venture Firestone has entered into a joint venture agreement over Marine Concession 7a("Concession 7a") with Trans Hex. Concession 7a is located on the west coast ofSouth Africa and is owned by Trans Hex, the second largest diamond producer inSouth Africa. The concession covers a 1 kilometre wide strip in the sea,adjacent to and parallel to the coast, and extends approximately 33 kilometresalong the coast. The concession lies adjacent to De Beers' mining operations atKoingnaas in the north and Langklip and Mitchell's Bay in the south. Thecoastal town of Hondeklip Bay, where Firestone's Avontuur Mine is located, isclose to the midpoint of Concession 7a. Mining operations in the shallow water "a" concessions in South Africa aretypically carried out by independent contractors using boat-mounted pumpingequipment to produce screened gravel, which is then processed onshore. Miningoperations on Concession 7a are very limited at present as there have been nofacilities available at Hondeklip Bay to handle or process gravel from theconcession since Trans Hex ceased mining operations at the Hondeklip Bay Mine in2003. Under the terms of the joint venture agreement, Firestone will be responsiblefor securing, supporting and managing contractors for Concession 7a. Firestonewill provide facilities to offload gravel from and provide logistical support toboats operating on the concession, and will use its gravel treatment plant atthe Company's Avontuur Mine to process the gravel. Revenue from miningoperations on the concession will be shared between Firestone and Trans Hex.Details of the revenue sharing arrangements, including provisions for thepayment of royalties and marketing fees for the sale of diamonds produced, arecurrently being finalised and will be announced in due course. Firestone will initially focus on recruiting contractors to work on Concession7a on a revenue sharing basis. This will ensure short term cash flow, withlimited capital cost and operating cost exposure for the Company. Firestonealso intends to undertake geophysical surveys on the concession to identifyareas where high grade deposits that have been mined by De Beers and othersonshore extend into the sea. These areas will be the primary targets forexploration and mining on the concession in the medium term. The processingplant at the Avontuur Mine will require a number of modifications in order to beable to process marine gravel from contractors and to comply with Trans Hex'ssecurity requirements. Planning for these modifications is now at an advancedstage. Hondeklip Bay Mine Acquisition Firestone has entered into an agreement with Trans Hex to acquire the HondeklipBay Mine for Rand 4 million (approximately £340,000). The Hondeklip Bay Minecovers an area of 2,200 hectares and is located close to the town of HondeklipBay. The Hondeklip Bay Mine adjoins Firestone's Avontuur Mine and De Beers'Koingnaas Mine. The Hondeklip Bay Mine hosts marine terraces andpalaeo-channels related to those mined at Koingnaas to the north, and whichextend into De Beers' Langklip and Mitchell's Bay operations to the south.Mining operations at the Hondeklip Bay Mine have produced more than one millioncarats over a twenty year period up to 2003. Firestone believes that there arestill substantial gravel resources at the mine that can be exploited using theCompany's plant and equipment at the Avontuur Mine. Firestone intends to combine data from exploration drilling carried out by TransHex on the property with geophysical data in order to generate a detailed 3Dmodel of the bedrock topography in the mine area. The model will be used toidentify new gravel resources for follow-up exploration and evaluation work.This work is already at an advanced stage and has identified a number of highinterest areas. The acquisition is subject to the approval of the Department ofMinerals and Energy. Namaqualand Mining Operations Mining operations at the Bonte Koe Mine since March 2005 have been focused onprocessing material from a number of locations on the property with theobjective of improving the geological interpretation of the deposits on the mineand allowing material from a number of areas to be blended. Grades from areasprocessed to date are below the expected average, but as mining has beenoperating at full scale for only a few months, it is expected that grades willimprove as mining progresses and new mining blocks are opened up. Following thecompletion of construction and commissioning activities at Bonte Koe, theCompany has now focused its efforts on the securing of a new mining contractorfor the Oena Mine, and progress is expected to be made in this regard in thecoming months. While some equipment from the Avontuur Mine has been temporarilytransferred to Bonte Koe, activities at Avontuur have been focused onpreparation and planning to support the expansion of the operation to exploitthe Company's new projects at the Hondeklip Bay Mine and Concession 7a. Overallproduction from the Company's mining operations for the 2005 financial year isexpected to be in line with 2004, with a significant improvement expected in2006. Namaqualand Exploration Firestone has continued to pursue new large scale exploration projects inNamaqualand. Following the recent signing of a joint venture with De Beers overthe Groen River Valley project, the Company has decided to increase its focus onthe identification of new projects similar to the Groen River Valley projectthat have the potential to host significant reserves of large, high qualitydiamonds. A number of suitable projects have already been identified, and theCompany expects to be able to announce developments in this regard in the comingmonths. Philip Kenny, CEO of Firestone Diamonds, commented today: "We have made verysubstantial progress in South Africa over the past six months, with the signingof joint ventures with De Beers and Trans Hex and an acquisition from Trans Hex.The Hondeklip Bay Mine and Marine Concession 7a are attractive projects, andwe are particularly excited about the prospects for our Groen River Valleyproject, which we believe has the potential to become a world class alluvialdiamond producing area." For further information: Philip Kenny, Firestone Diamonds: +44 20 7370 6452 / +44 7831 324 645Leesa Peters, Conduit PR: +44 20 7618 8707/ +44 7812 159 885Jamie Cumming, Bell Lawrie White: +44 141 314 8103 / +44 776 8044 620 Website: www.firestonediamonds.com BACKGROUND INFORMATION Firestone Diamonds plc is an international diamond mining and explorationcompany with operations in South Africa, Botswana and the United States.Firestone is quoted on the London Stock Exchange's Alternative Investment Market(AIM), and trades under the symbol FDI.L. Firestone has extensive diamond exploration interests in Botswana, which is theworld's largest producer of diamonds, with annual production of approximately 30million carats, worth over $2.5 billion. Firestone's interests in Botswana are as follows: • The Orapa and Mopipi Projects, which cover an area of approximately 4,900 square kilometers, are located close to the Orapa and Letlhakane diamond mines and are being explored by De Beers in joint venture with the Company. • The Jwaneng Project, which covers an area of approximately 3,700 square kilometers, is located close to the Jwaneng Mine and is being explored by De Beers in joint venture with the Company. • The Daly City joint venture project covers an area of approximately 380 square kilometers and is located close to the Orapa and Letlhakane diamond mines. The Company is in the process of earning an 81% interest in this project. Firestone also has extensive diamond mining and exploration interests inNamaqualand, which is located on the west coast of South Africa and has been oneof the world's largest alluvial diamond producing regions for the past seventyyears, 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. In June 2005, theCompany entered into a joint venture with De Beers over the Company's GroenRiver Valley exploration project, under the terms of which De Beers can earn a61% interest in the project by financing all work up to completion of bankablefeasibility studies on the project. Firestone also has a large scale kimberlite exploration project in the UnitedStates. In 2004 the Company entered into a joint venture with AmericanDiamonds, which is in the process of earning a 60% interest in the project. This information is provided by RNS The company news service from the London Stock Exchange