DiamondCorp noted early March 2016 that a new study on its 74 percent-owned Lace mine, in South Africa had estimated the mine’s total resource at 38.48 million tonnes down to the 920 metre level.
This was 16 percent more than the 33.12 million tonnes estimated in March 2012, although that was down to 855 metres.
It said at the time that projected grades would be based on the production plant using a 1.25mm screen against the previous 1.00 mm screens.
The company also said that diamond grade would be reduced although the carat value would be higher.
The recoverable diamonds from this resource at the increased bottom screen size of 1.25 mm was estimated at 9.39 million carats, compared to 13.39 million carats, at 1.00 mm screen size.
DiamonCorp said within the overall resource, 2.21 million tonnes of the UK4 Block had been classified as a reserve between the 230 and 370m levels.
“The new resource and reserve statements provide a much higher level of confidence in the estimated grade and carat value of the Lace deposit,” said company chief executive Paul Loudon.
“This confirms the potential for high operating margins increasing with depth which was one of the factors which attracted us to the project from the outset.
“The forecast grade numbers are in line with what we are seeing from the UK4 mining ramp up and the actual carat value achieved will be known when we commence diamond sales in Antwerp in the last week of March.”
As shown in the quote above, the company appeared very confident of the future of Lace, until disaster struck, later that year.
In October, 2016, Lace Diamond Mines received a shutdown notice on underground operations by the South African Department of Mineral Resources (DMR), following a fire incident on a dump truck that was extinguished without injury.
When this incident happened, the company had previously said that it was looking for additional funding in the very near term of about £500,000 for immediate financial commitments to continue trading as a going concern.
It was also looking to raise additional equity and/or debt from one or more parties of between £2.5 million and £3.0 million in the near term to cover the anticipated cash required to fund operations through to commercial production and positive cashflow from operations.
Its woes started mounting as a third party it had been in advanced talks for the provision of a convertible debt facility withdrew from such discussions due to the adverse movement in the company's share price after the fire incident.
As if that was not enough, DiamondCorp placed its operating subsidiary, Lace Diamond Mines (LDM) into a business rescue towards the end of 2016 following the suspension of its shares from trading on both the AIM Market of the London Stock Exchange and on the Alternative Exchange of the JSE pending clarification of its financial position following a flooding incident at Lace mine.
The company said two extreme thunderstorms passed over the Lace mine in November, dropping almost 90mm of rain in just over an hour.
This, it said, overwhelmed the mine's pumping systems and flooded the 310m production level to the hanging wall.
DiamondCorp said more than 10,000 cubic meters of water was estimated to have entered the mine through the open pit and access ramps.
It also said a longhole drill rig which was operating at the time of the flood would have to be recovered and the electrics rebuilt.
No doubt as 2017 began, DiamondCorp wanted to put behind the ills of last year.
It reported third week of January that it had raised gross proceeds of about £1 million through the placing of 25,4 million new ordinary shares at 4 pence each.
The proceeds were meant to fund critical expenditure at its Lace mine in South Africa.
The troubled diamond junior also said that it was issuing, in aggregate, 3,15 million new ordinary shares with 3,15 million attached warrants on the basis of one warrant for every fee share issued as settlement for professional fees pursuant to the placing and in satisfaction of certain outstanding indebtedness.
The settlement for and admission of the placing shares as well as the fee shares were set to become effective on 27 January.
However, this date came and the placing of shares was extended out, “magnifying the bankruptcy spectre”, according to Mining Weekly.
DiamondCorp said in a note on 27 January that it was delaying its share placement until January 31 to give South Africa’s State-owned Industrial Development (IDC) time to meet conditions precedent, as well as provide a chance to the Association of Mining and Construction Union (AMCU) to document and finalise an in-principle agreement it had stuck with the union.
DiamondCorp said although agreement had been reached in principle with AMCU, Lace mine’s business rescue practitioner Deloitte & Touche had failed to reach agreement with the IDC, the secured lender, with respect to what the company described as “various issues related to the board’s obligations pursuant to this placing”.
It warned that if the parties fail to reach an agreement, then the company would likely face insolvency proceedings.
However, on 31 January, DiamondCorp announced that it had extended its placing deadline as conditions to the placing first announced on 13 January were yet to be met.
It said talks with IDC would continue, and the agreement in principle reached with the AMCU was “progressing”, although not yet concluded.
DiamondCorp and Panmure Gordon also entered into an amendment to the placing agreement and the fundraising would be conditional on admission of the new shares by 14 February, although a backstop date of 28 February had also been allowed for.
One hopes that DiamondCor would survive the tide.
The Lace asset, irrespective of startup delays, still contained an estimated 9.39 million carats of diamonds with an in-ground value in excess of $1.5 billion.
This, should, be reason enough for the company to ensure the mine remains open, much to the benefit of shareholders and South Africa.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
