Diamond Fields International has received results of a positive feasibility study completed in September, 2000, for its
Sea Diamonds project near Luderitz, Namibia.
This report was prepared exclusively for Diamond Fields by AGRA Simons
Limited, MRDI Canada, a division of AGRA, Seacore Limited, Dowding Reynard and
Associates, Sue Lane and Associates, Diamond Tenders Belgium and other
industry consultants were also retained to assist in the preparation of this
detailed feasibility study. The Diamond Fields Sea Diamonds project has been
developed to explore and mine offshore diamond deposits near the coastal town
of Luderitz, Namibia and will entail mining and processing of seabed sediments
to extract high-quality gem diamonds using a mining vessel and supporting
infrastructure.
Project economics
The base case for the Sea Diamonds project consists of mining the
reserves and resources, as shown under resources below, over a seven-year
mine life. The base case provides an after-tax internal rate of return (IRR)
of 54 per cent and a net present value (NPV) at a discount rate of 10 per cent of $31.2-million (U.S.). Payback of capital is estimated to be 16 months from the commencement
of mining operations.
Should only the probable reserves be considered, the mine life would be
shortened to 5.8 years, and the project would yield an IRR of 46 per cent and a NPV at
a discount rate of 10 per cent of $22.8-million (U.S.). The payback period in this case
would be 18 months from the commencement of mining operations. Should carats
resulting from the suspected sampling bias be added to the base case, the
project would yield an IRR of 133 per cent and a NPV of $111.6-million (U.S.).
Capital costs include all expenditures for detailed design and
procurement of equipment, vessel chartering and contracting of facilities
required to bring the Sea Diamonds project into operation, and are estimated
to total $28.1-million (U.S.) (including $2-million (U.S.) cash in working capital)
over a 12-month period. Annual cash operating costs, based on mining an
annual average of 873,000 cubic metres, are projected to be $13.5-million (U.S.) before
royalties, marketing and taxes.
Resources
The reserves/resources estimates for the Sea Diamonds project base case
are shown below:
INDICATED RESOURCES
(PROBABLE RESERVES)
Grades per square metre of sediment
Feature Area Grade Carats
(ha) (cts/m2) 1,000s
Marshall Fork 86.50 0.50 436.6
Diaz Reef 212.81 0.22 459.6
—— —- —–
Total 299.31 0.30 896.2
INFERRED RESOURCES
Grades per square metre of sediment
Feature Area Grade Carats
(ha) (cts/m2) 1,000s
Marshall Fork 49.12 0.27 132.2
Diaz Reef 23.84 0.33 77.6
—– —- —–
TOTAL 72.96 0.29 209.8
INDICATED RESOURCES
(PROBABLE RESERVES)
Grades per cubic metre of sediment
including overburden
Feature Volume Grade Carats
1,000’s (cts/m3) 1,000s
Marshall Fork 1,452 0.30 436.6
Diaz Reef 3,578 0.13 459.6
—– —- —–
Total 5,030 0.18 896.2
INFERRED RESOURCES
Grades per cubic metre of sediment
including overburden
Feature Volume Grade Carats
1,000’s (cts/m3) 1,000s
Marshall Fork 540 0.24 132.2
Diaz Reef 545 0.14 77.6
—– —- —–
Total 1,085 0.19 209.8
TOTAL RESOURCES
Grades per square metre of sediment
Area Grade Carats
(ha) (cts/m2) 1,000s
Marshall Fork 135.62 0.42 568.8
Diaz Reef 236.65 0.23 537.3
—— —- ——-
Total 372.27 0.30 1,106.1
Grades per cubic metre of sediment
including overburden
Volume Grade Carats
1,000’s (cts/m3) 1,000s
Marshall Fork 1,991 0.29 568.8
Diaz Reef 4,123 0.13 537.3
TOTAL 6,114 0.18 1,106.1
The resource estimate for the Marshall Fork feature was compiled by MRDI
(senior author and qualified person, M. Thurston, PhD), based on geophysical
and sampling data provided by the company. The resource estimates for the Diaz
Reef features were compiled by Diamond Fields (senior author and qualified
person, R. Cullen, MSc, PGeol). Resource estimates used the resource
classification in accordance with the Toronto Stock Exchange guidelines and
the Australasian code for reporting mineral resources and ore reserves (JORC,
1999). The resources are based on data from sampling activities carried out by
De Beers Marine and previously by BHP and are unadjusted for differences that
might exist between the sampling and future mining processes. The reserve
estimates are based on average estimated diamond prices of $175 (U.S.) per carat,
economic cutoff grades that approximate 0.15 of a carat per square metre, and the
technical parameters established in the feasibility study. Diamond Tenders
Belgium estimated the diamond prices based on the sale prices for over 11,000
carats recovered from sampling activities in 1999 adjusted upwards by
approximately 9 per cent to reflect current market conditions.
Sampling activities, which provide the basis for the Sea Diamonds project
mineral resources estimates, were conducted using sampling tools not
specifically designed for the geologic environment found in Marshall Fork and
Diaz Reef. The inferred resource refers to those parts that are less well
sampled than the indicated resource and for which the estimates of grade and
thickness are considered less well known. Given the design and operating
characteristics of the sampling tool and the irregular surface of the footwall
in the Marshall Fork feature, MRDI believes it is likely that the sample grade
and therefore total number of carats have been underestimated and estimates
this suspected bias to be 740,000 carats. The estimate was made by comparing
limited available sampling and production data in a similar geological
environment. Diamond Fields’ geologists believe a similar sampling bias factor
may be applied to the Diaz Reef areas. Inclusive of the suspected sampling
bias, diamond production could increase to 2.5 million carats in a similar
volume of material. The actual difference in carats between sampling and
mining can only be accurately assessed once mining has begun.
Mining
Mining will involve the systematic exploitation of the Marshall Fork
feature, followed by the Diaz Reef resources. Ore value, tailings disposal, and
numerous other geological and mining considerations influence the mining
sequences. The mine plan incorporates a time provision for annual sampling in
support of detailed mine planning, upgrade and correction of resource
estimates (in light of the suspected sampling bias), and potential expansion
of the resource base beyond the current estimate level.
Mining rates for each resource zone are determined by sediment thickness,
water depth, material types and processing characteristics. The mining rate is
projected to average 873,000 cubic metres per year. A total of 6.1 million cubic metres
of ore and overburden containing 1.1 million carats (including 81 per cent defined as
probable reserves) are scheduled to be mined over the seven-year mine life.
The sediments will be dredged and pumped from the seabed by a mining tool
developed by Seacore Ltd. (United Kingdom). The tool will be remotely controlled from
the vessel. It employs proven components and has been designed for the
conditions expected to be encountered. Dredged material will be pumped to the
mining vessel through a rigid riser pipe. The diamond-bearing sediments will
be processed on the vessel in a conventional diamond processing plant.
Processing involves screening and dewatering, shell removal, dense media
separation, X-ray sorting, and hand sorting. Final cleaning and sorting of the
diamonds for valuation and sale will be done at Diamond Fields’ planned
facility in Windhoek, Namibia, and through sales outlets in Antwerp, Belgium.
Marketing
The objectives of Diamond Fields’ marketing plan are to maximize net
revenues, provide a means of measuring results for shareholders and the
company and gain experience in valuing, sorting and sales functions so that
performance can be continuously monitored and improved.
There are several potential marketing options available to Diamond Fields
including selling through De Beers’ Diamond Trading Company (DTC), sales at
tender, joint venture or agency agreement with one or more established dealers
or direct sales through a company marketing organization. A formal decision on
the marketing channel(s) will likely be made shortly before the commencement
of production. The diamonds found on the Sea Diamonds project consist of over
95-per-cent gem-quality stones, which currently yield an average market price of
$150 (U.S.) to $200 (U.S.) per carat.
The recent publicity on conflict diamonds does not affect the Namibian
diamond industry or Diamond Fields’ planned operations. Diamond Fields does
not, has not, and will not deal in conflict diamonds and fully supports the
diamond industry’s proposals to isolate diamond trade from conflict areas.
Financing
Management of Diamond Fields has been in discussions with several
international banks regarding financing for the Sea Diamonds project. The company
believes that, based on the high-profit potential of the project combined with
low initial capital costs, financing of the project could be completed later
this year. A formal decision to proceed with the project is dependent upon
financing terms that are satisfactory to the company.
WARNING: The company relies upon litigation protection for “forward-looking” statements.
