TSX-listed Diamcor Mining, which recently completed expansion upgrades at its Krone-Endora project in South Africa as part of final preparations to commence 24/7 operations, is certain that the future is bright.
Company president and chief executive Dean Taylor told Rough & Polished’s African Bureau Editor In Chief, Mathew Nyaungwa that the project was “very unique” due to the nature of the deposit and the low capital expenditure to production.
He said Diamcor was currently targeting to reach an output of about 10,000 carats per month within 12 months.
Output, Taylor said, was also expected to reach 250,000 carats per annum within a period of three years.
The diamond project, which was previously owned by De Beers, would produce a high percentage of gem and near-gem quality diamonds, he said.
Diamcor had already clinched a deal to supply diamonds from the project to Tiffany’s facilities in South Africa for polishing.
Below are the excerpts.
Diamcor reported last March the completion of expansion upgrades at Krone-Endora. What is the latest development at this project?
The latest development on-site has been the ongoing testing and trial-mining of material in preparation for our targeted move to 24-7 operations in the near future. As was widely reported over the past few months, the area of Venetia received record rains in the first quarter of this year (levels above anything recorded in past 200 years according to DeBeers records / release), so that limited our advancement to the level we expected for the short-term. That being said, things are drying out, and we are now getting back on track with advancing the project goals and targets.
The initial NI43-101 estimates on the included areas of Krone-Endora were reported at 54 million tonnes of diamondiferous gravels and 1.3 million carats. Given these estimates, what is your projected life span of the mine and your plans beyond that?
Our current NI43-101 report was completed as part of the initial acquisition process and was based only on the work completed to date at that time. We would note that of the 1.3M carats, approximately 1.1M is allocated to the K1 area of the project, and based on our initial target of 10,000 carats per month, we believed that an initial life of mine potential in that area alone to be 7-10 years. The additional drilling we completed in 2011 identified yet additional basal gravels which we believe will also prove to be higher grade, and once we are able to confirm the actual grades through proper bulk sampling, a new current and updated NI43-101 would be expected. Overall, we believe that the area of K1, K3, and the confluence areas, along with the extended drilling now completed throughout an area of just over 400 hectares has excellent potential for significant growth from the current NI43-101. The project is very unique due to the nature of the deposit and the low cap-ex to production, so we were able to first advance to production on the key area of K1, and then in conjunction with that, do additional work on the surrounding areas to better establish the full potential of the project. Overall, we believe the project has great potential above what is currently known, and we are targeting a mine-life of ~15 years.
What is your targeted output at the mine when full operations commence?
Our current target is to reach +/-10,000 carats per month within 12 months, and our 24-36 month target is to reach 20,000 carats per month or 250,000 carats per year.
Diamcor had plans to conduct a drilling programme on additional areas of interest at Krone-Endora at Venetia. What is the main objective of this endeavour?
The initial work completed (approx. 500 holes) was aimed at providing much more accurate information on the initial areas through in-fill drilling at much tighter spacing. This information allowed us to plan the initial areas to be targeted in K1 for trial-mining and our planned move to 24-7 in those areas. Additional drilling was aimed at determining areas for future bulk sampling in the K3, Confluence, and surrounding areas. Additional drilling is planned for other areas in the future to further expand and gain information on yet additional potential growth.
You were also involved in discussions aimed at the potential acquisition of other production based diamond projects. What is the latest on this move?
We are always reviewing opportunities which fit within our production based strategy, but are very comfortable with focusing on the task at hand for the short-term. We believe that the Krone-Endora at Venetia project is very attractive and rare, in that it basically provides us with a near-term production scenario, and as well with an ongoing exploration and expansion/growth opportunity.
Tell us about Diamcor’s relationship with Tiffany & Co, which recently provided your company with a substantial financing to advance the Krone-Endora project.
Diamcor feels very fortunate to have established a strategic alliance with an industry leader such Tiffany & Co., and their continued investment and support of our efforts has helped us to expedite the project’s advancement. As we all know in the industry, the known diamond mines are becoming older, and with no new finds of any significance expect to come on in the near future, the supply-demand scenario is compelling. Given Krone-Endora’s direct relationship with Venetia, we expect the project will produce a high percentage of gem and near-gem quality diamonds, and our ability to supply diamonds from Krone-Endora at Venetia to Tiffany’s facilities in South Africa for polishing serves the collective needs of all involved, and supports the desired growth and beneficiation of goods within South Africa.
What is your assessment of the current diamond market having previously conducted a sale of 3,579.58 carats of rough diamonds from trial mining?
We were very happy with the price achieved on our initial sale of goods considering these diamonds were recovered from areas we expected to be weaker in terms of $/carat, and primarily from the processing of only material in the +1mm to -10mm size fraction. We understood that the estimates from our current NI43-101 represented estimates based on rough pricing from 2005, and thus an increase of approximately 80-100 percent could be expected. Overall, many industry experts believe rough prices will increase at somewhere around 5 percent year-over-year going forward, and we would agree with that assumption.
What is your projection of the rough diamond market during the second half of the year?
The beginning of 2013 has seen rough prices increase over and above the +5 percent we would have expected to see for the year, and we will just have to wait to see how the remaining portion of the year plays out. The dynamics of the supply-demand scenario are always at play, and with the growth or decline of various key areas of the world always in question, the potential for further increases is certainly there.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
