Firestone to start BK11 diamond production ahead of schedule. Resource and grades rise

With an increase in grade and total resource behind it, Firestone Diamonds is set for production at its BK11 diamond pipe ahead of its previously planned schedule.

LONDON - 

South Africa and Botswana operating diamond miner Firestone Diamonds (AIM: FDI) said production from the BK11 kimberlite in Botswana was now expected ahead of schedule after the company announced increases in both the resource and grade of the deposit.

As a result of the final phase of bulk sampling, the overall diamond value increase to US$137/carat, while the value in the KW area rose to US$157/carat, representing a 9% increase from June. At the same time, the resource increased following delineation work to 12 million tonnes containing 800,000 carats to a depth of 120m, including six million tonnes in the KW area with an average grade of 10 cpht (carats per hundred tonnes) and another six million tonnes containing 200,000 carats between 120m and 250m. Firestone noted that the BK11 diamond values are considered to be high for kimberlite production.

Additional work is now planned to convert the entire KW resource to the indicated category as development of the mine progresses. Firestone said that actual mining grades have the potential to increase significantly due to the use of selective mining and the presence of higher grade zones which are expected at depth.

Mining in the KW area of BK11 is expected to produce annual revenues of US$24 million, or US$16 per tonne and operating costs of US$6.50 per tonne, with operating margins expected at 60%. The profitability of the mine could increase as Firestone foresees higher diamond prices in view of imminent shortfalls in supply, which give the project a "substantial upside."

The Environmental Impact Assessment for the project has already been approved by the Department of Environmental Affairs, and the mining lease application expected to be ready for submission to the Department of Minerals, Energy and Water Resources shortly with production now expected to commence ahead of schedule in Q2 2010, turning the company into one of a small number of listed kimberlite producers worldwide.

"This is a significant achievement in its own right, but even more so as we will have done so in less than two years from the results of our initial evaluation work on the project. The BK11 mine will give us a very solid foundation from which to further develop our exciting portfolio of projects and opportunities in Botswana. With the projected shortfall in rough diamond supply expected to drive diamond prices higher in coming years, we believe that the prospects for Firestone are extremely good," said Chief Executive of Firestone Diamonds Philip Kenny.

The work on modifying the production plant at the company's Bonte Koe mine in South Africa, which will be used by BK11, is also progressing ahead of schedule. The plant will be relocated and commissioned in two phases, with production to commence ahead of schedule in Q2 2010 with a plant capacity of approximately 650,000 tpa, increasing to the targeted 1.5 million tpa in Q3 2010.

Firestone is currently in negotiations with the Botswana Power Corporation for the construction of a 14 km long power line from Orapa to BK11, but the company has planned sufficient generating capacity available to operate the plant. This will add approximately US$1/tonne to operating costs until grid power is available.

The development costs for the project will be fully funded from Firestone's existing cash reserves.

Botswana is the world's largest and lowest cost producer of diamonds, with annual production worth over US$2.5 billion, and is considered to be one of the most prospective countries in the world to explore for diamonds.

Firestone is the largest holder of mineral rights in Botswana's diamondiferous kimberlite fields, controlling over 25,000 sq km (square kilometres) around the major Orapa and Jwaneng mines and the entire Tsabong kimberlite field. Firestone has 95 kimberlites in its portfolio, of which 24 have been proven to be diamondiferous. Fifteen of Firestone's kimberlites are at the bulk sampling stage.

Published courtesy of Proactive Investors - www.proactiveinvestors.co.uk

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