Jamie Ashcroft
The Liqhobong mine in Lesotho will soon become a large scale and profitable operation, giant diamond producer Firestone Diamonds said this week.
The AIM-listed diamond producer was giving investors an update on the mine expansion programme at Liqhobong.
Firestone noted that the next batch of diamond sales are due later this month, at a tender auction in Gabon. Sales are expected to be significantly larger than the last tender in April.
At the moment Plant One is operating at 400 000 tonnes per annum rated capacity and this is set to expand to 600 000 tonnes by the end of the second quarter through the phase one expansion.
Beyond that it will expand further, through phase two, up to 1.3 million tonnes per annum by the end of 2011.
Currently plant one is achieving a mining grade of 32 carats per hundred tonnes (cpht), which is 15 percent higher than the 28 cpht resource grade.
“We are very excited with the progress that we have made at Liqhobong in the three months since production commenced,” chief executive Tim Wilkes said.
“We believe that Liqhobong will soon become a large scale profitable mining operation, particularly once we commence mining the high grade K5 and K6 units in the second half of this year. We also expect to reach full production levels at BK11 shortly.”
Firestone also highlighted that open pit reserves have increased by 15 percent to 70 million tonnes, which contains 23 million carats.
Separately Firestone also provided an update on the BK11 mine in Botswana, where a secondary crushing circuit is currently being commissioned to improve diamond liberation.
At BK11 mining is now ahead of schedule.
Two million tonnes have been mined between January and April 2011.
Firestone noted that the next batch of diamond sales are due later this month, at a tender auction in Gabon. Sales are expected to be significantly larger than the last tender in April 2011, the company said.
Northland Capital analyst Andrew McGeary emphasised the project’s potential while acknowledging that there is still plenty to do.
“With resources established the company faces the not inconsiderable execution risk and in Lesotho operates at high altitude in one of the world’s poorest countries which provides significant challenges,” McGeary said in a note to clients.
“However, progress towards key milestones could make the current £90 million (101 billion) market valuation look undemanding.”
The analyst also highlighted that Firestone is set for a number of catalysts.
“The next key newsflow relates to an upcoming valuation of a diamond parcel,” he added.
“Given significant inflation this year, the valuation could provide a useful near term catalyst. Longer term indications of progress towards successful delivery of the 1.3 million tonne per annum run rate could see more significant share price performance.”