Lucapa Diamond and its Angolan partners are making great strides to improve the Lulo kimberlite exploration programme.
Company chief executive and managing director Stephen Wetherall told Rough & Polished’s Mathew Nyaungwa on the sidelines of the Mining Indaba held recently in Cape Town, South Africa that they established a standalone kimberlite bulk sampling plant.
This, he said, allows bulk sampling to take place uninterrupted.
He said Kimberlite L164 is their most diamondiferous kimberlite.
The early bulk sample results of kimberlite L164 showed a grade of about 3 carats per 100 cubic metres and a large average stone size of 1.61 carats per stone.
Wetherall said kimberlite L164 is the 10th diamondiferous kimberlite they have discovered on the Lulo concession.
Lucapa is also conducting primary source exploration programmes on Brooking in Western Australia and Merlin in the Northern Territory.
The company has a drilling plan to put four holes into two targets on its Botswana tenement, but the programme was delayed due to licence renewals and the COVID-19 pandemic.
Wetherall said they intend to resume drilling this year after their exploration licence for the Orapa Area F project was renewed for a further two years.
Below are excerpts from the interview.
You recently recovered 41 diamonds from the Lulo kimberlite exploration project. How pleased are you with your exploration activities?
Very pleased and excited about the diamond recoveries from Lulo kimberlite 164. We recovered 41 diamonds, just over 66 carats, and an average stone size of 1.61 carats, which is a very coarse size fraction. And then within that sample, we recovered two Special size diamonds. So, two diamonds greater than 10.8 carats, which, obviously is very exciting for us, because it's the first physical confirmation that the kimberlites on the Lulo concession host diamonds of large size. So we're very excited. In terms of results, naturally, we always want activities to happen faster, but in terms of the methodical programme that we initiated, we are very happy.
We are excited about 2023, particularly where the kimberlite exploration programme is and the speed at which it's currently running. We have established a standalone kimberlite bulk sampling plant, so bulk sampling can happen on a 24/7 basis, and we are looking forward to regular results and to updating the market more frequently. This is a big step change for the exploration project.
How much did it cost you to set up the standalone kimberlite bulk sample plant at Lulo?
The bulk sample plant itself was about R50 million or US$3 million. Over the years, we have invested nearly US$30m in kimberlite exploration.
What are the preliminary indications of the kimberlite deposits at Lulo?
Kimberlite L164 is our most diamondiferous kimberlite. It is the 10th diamondiferous kimberlite that we have identified or discovered on the Lulo concession. So as a small-cap exploration and mining company, I think we are the biggest discoverer of diamondiferous kimberlites globally at the moment. From a process perspective, we believe we have multiple primary influences or contributors to the secondary alluvial deposits, so we want to complete the remaining bulk samples for the other 15 kimberlites that are on our priority list. We want to identify which kimberlites are the best ones and do larger bulk samples to get more meaningful diamond and grade data. But this is by far the best kimberlite result we've had to date in terms of the number of diamonds, in terms of size of diamonds and grade.
How many exploration targets do you have at Lulo?
From over 500 geophysical anomalies or targets, we drilled over 140 targets and discovered over 120 kimberlites. A significant target to kimberlite conversion rate. From our subsequent testing and analysis, we highlighted 20 kimberlites for priority sampling.
How are you funding your exploration activities in Angola?
We use funding from our shareholders as well as internally generated funds or returns from our mines.
How optimistic are you about finding diamondiferous kimberlite deposits in Angola?
Very optimistic as we have already identified 10 diamondiferous kimberlites to date. In terms of conversion to an economic or viable diamondiferous kimberlite, we too are full of optimism. The early bulk sample results of kimberlite L164 have given us much to be excited about. The grade of approximately 3 carats per 100 cubic metres and the large average stone size of 1.61 carats per stone is very encouraging indeed. We look forward to treating a larger bulk sample from this kimberlite and if we recover a diamond of the same size and quality as the diamonds that we are recovering in our secondary or alluvial mining campaign, then we may well have the making of an economic kimberlite. There's a lot more good work to be done.
How far have you gone with your exploration programme in Australia?
We have two projects in Australia that we are conducting primary source exploration programmes on – Brooking in Western Australia and Merlin in the Northern Territory.
At Brooking, we have already identified a diamondiferous primary source and we are scheduling a new drill programme for this year on several other anomalies identified.
At Merlin, whilst we have conducted cursory hyperspectral programmes to identify other potential primary source targets, we have spent most of our effort on conducting two scoping studies and a feasibility study for a mine development to mine the existing 4 million carats inferred and indicated JORC compliant diamond resource. We believe the Merlin development will be transformational for Lucapa as a diamond producer. At present, we have ownership in two very special niche mines – whilst they produce some of the best quality carats in the world, they are relatively small from a scale perspective. The Merlin development would take our production from approximately 65,000 carats per annum from our two existing mines to around about 200,000 carats per annum on average from three mines – a significant step change in both production and we believe cash flow generation. As a result, we are looking forward to completing and bringing the feasibility study results to the market in the next 4 to 6 weeks.
Do you have any plans to expand beyond your current operations in Angola, Lesotho, Australia and Botswana?
Our ambitions are to keep growing as a diamond company – we have built two mines with exciting high-end productions and are running several prospective primary source exploration programmes, but we do believe growth, both organic and acquisitive, is important. We believe that scale in our industry particularly is necessary to return lost sentiment to the space and unlock what we see as unrecognised value. So, the answer is a big yes.
Any country that you're keeping an eye on?
Outside of where we are, no other specific countries. There are a lot of opportunities in the diamond space globally, particularly in Africa as it holds the largest known diamond resources globally. Currently, Angola seems to be the country of choice in the diamond space and is a hotbed for new entrants and majors. Naturally, we have and do assess projects there as well as further afield.
How many targets are you planning to drill in Botswana?
We have a drilling plan to put four holes into two targets on our tenement there. Our programme in Botswana has been delayed due to licence renewals and COVID, but we will be back on the ground there this year to begin the drilling.
How long is the exploration licence in Botswana?
We have received a new two-year licence in June 2022.
Are you funding the Botswana exploration alone or do you have a partner?
We're a 100% shareholder in our Botswana venture, and we are funding it ourselves.
So should you find a diamondiferous kimberlite deposit in Botswana, will you exploit it alone or engage a partner?
It's all about the size of the prize that we are exploring. If development is within our funding capacity, naturally, we will want to go it alone. However, if it is larger than we can reasonably chew and swallow, one does have to look to funding partners. We have great technical expertise in our company, so we would only need to look for funding avenues as opposed to technical ones.
How long have you extracted diamonds from your alluvial deposits?
We commenced commercial mining operations in Angola in 2015, so we are in our ninth year now. Lulo has, over the years, become known for its very large and high-quality production.
How many more years do you think you will continue extracting the alluvial diamonds?
That's unfortunately not an easy answer and is tantamount to “how long is a piece of string?”. Certainly, we have been operating for nine years, have a decent inferred JORC-compliant resource in the Cacuilo valley and therefore will be there for many years yet, but we haven't assessed all of the Cacuilo valley as yet and have not as yet even assessed the Lulo River potential. We will be assessing the Lulo River deposits this year for the first time to assess what we can add to our resource and future mine life.
When exactly do you think you will start work on the Lulo River?
It will be during this year. Lucapa and our Lulo partners recently met and approved the development and exploration plans and budgets for 2023, which included accessing the Lulo River this year.
How much are you planning to spend on this exercise?
We haven't released that information to the market as yet, but it is part and parcel of the whole capital programme for Lulo.
From the river, do you have any plans of going underground at Lulo?
No. Alluvial deposits, thankfully, are secondary deposits that have been eroded from their primary source and deposited fairly close to the surface. As such, they are accessible through conventional surface mining/ excavation methods.
You recently conducted your diamond auction under SODIAM. How pleased were you with the prices achieved?
Very pleased. The overall diamond market was trending down towards the end of the year and so our expectations were tempered. However, the strong bidding and prices achieved showed the continued interest and demand for high-quality large diamonds, such as those produced by Lulo.
When next will you conduct a diamond auction and how many times are you planning to put under the hammer?
For our Lulo production in Angola, we will work with Sodiam to schedule tenders regularly during the year. We would hope for at least one per quarter, but there are no fixed dates as yet.
For Mothae, our goods are sold in a cutting and polishing partnership. Those goods that are not selected for polishing are sold into the market, mostly by tender. We could run up to 8 tenders annually for these goods sold as rough.
How many stones did you supply in 2022 under your diamond cutting and polishing agreement?
In Angola, we sell approximately 60% of the value from the Lulo production to the mines’ preferred buyer under a cutting and polishing agreement.
In Lesotho, we sell 100% of the production into a cutting and polishing partnership.
Please note, that while the most valuable and special coloured stones are selected to be cut and sold as polished, not all diamonds sold into these partnerships are selected for cutting and polishing. Most of the weight (represented by smaller lower value diamonds) is usually sold under a tender mechanism as mentioned earlier.
How much did you sell your pink diamond last year?
We don't generally announce individual stones, as it's commercially sensitive to the buyers. As such, we usually release results on a total basis.
Do you think you'll most likely get more coloured stones?
Definitely. We recover fancy-coloured stones quite often from both Lulo and Mothae. The 170-carat pink diamond was the largest pink-coloured stone that we have recovered to date at Lulo, but Lulo recovers many pink and yellow coloured diamonds. The largest fancy-coloured diamond from Mothae was a 90-carat fancy yellow diamond and equally, Mothae recovers them periodically.
It used to be a problem to repatriate funds from Angola back in the day. Have you been able to do so of late?
It used to be very slow in the past, but ultimately it happened. We have now completed all the required processes, including the National Bank of Angola approvals, which will now ensure the repatriation of our loans and dividends in the future is fairly swift.
In 2022, Lucapa repatriated a record A$20 million from our operations in Angola. The process has been streamlined and Angola has just announced new regulations to further improve the repatriation of investments to foreign direct investors.
What is your safety record at both mines?
Safety is our number one priority, and we are proud of our safety records. Both mines have achieved good milestones in terms of lost time and injury-free manhours. In any environment which involves heavy machinery, safety is paramount which is why we pay a lot of attention to safe practices at our mines. No one wants to have any incidents.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
