28th Jul 2006 10:02
Dwyka Diamonds Limited28 July 2006 DWYKA DIAMONDS LIMITED (ASX:DWY.AX; AIM:DWY.L) HIGHLIGHTS •Diamond processing commences and first diamonds recovered at De Beers Tailings JV, South Africa. •Rough diamond stock on hand at quarter end - 2,125.11 carats. -------------------------------------------------------------------------------- AFRICAN OPERATIONS Exploration and development De Beers Diamond Tailings Retreatment Project - RSA With the first ore processed on 21 April 2006, commercial recovery of diamondsbegan on 14 June 2006. Throughput increased progressively throughout the period,and it is anticipated that design capacity will be achieved during the Septemberquarter. Once this occurs, the performance of major plant components will beassessed, with a view to extending plant performance beyond the design capacityof 50,000 tonnes per month and optimising operating costs. Under the terms of Dwyka's agreement with De Beers, Dwyka is paid a fixed amountto treat the material on a contract basis. Thus, Dwyka's exposure to operatingcosts at designed throughput is minimal. Dwyka shares the diamond revenue - lessoperating costs - with De Beers. The project is a joint venture between Dwyka's wholly owned subsidiary SupermixMining (Pty) Ltd ('Supermix'), and Black Economic Empowerment ('BEE') entityKolong Investment Holdings (Pty) Ltd ('Kolong'). Dwyka has an effective 40 percent interest in the joint venture vehicle, Superkolong (Pty) Limited. Theproject will be supplied with tailings from De Beers Consolidated MinesLimited's Kimberley mines. Mahene and Itanana Kimberlites - Tanzania (JV with De Beers) Dwyka's second joint venture with De Beers involves assessment of the diamondiferous Mahene and Itanana kimberlite pipes in the Nzega District of Tanzania. Under the terms of its agreement with De Beers, Dwyka will bulk-sample thepipes, at a cost of about US$1.5 million. Dwyka's Tanzanian partner, ThorntreeMinerals Limited ('Thorntree'), is assisting with logistical, managerial andgovernment liaison support within Tanzania. Thorntree has the right toparticipate in 20 per cent of Dwyka's equity interest in these projects once thedecision to progress to feasibility study is made, but will have to fund itsshare of costs to maintain its equity position. De Beers has the option to acquire a 51 per cent shareholding in Dwyka TanzaniaLimited, the Dwyka subsidiary holding the project, by reimbursing Dwyka threetimes the costs incurred by Dwyka to evaluate the projects. Alternatively, DeBeers can elect to remain a 5 per cent shareholder in Dwyka Tanzania Limited orconvert its shareholding into a 1.5 per cent gross royalty payable on diamondrevenues. As part of this agreement, Dwyka Tanzania will sell all diamondsrecovered in the licence areas to De Beers. Bosele Exploration - RSA On 29 June 2006, Dwyka announced that it will fast-track its prospective Boseleexploration project. Assessment will commence with geophysical surveys,scheduled for August 2006. The geophysical programme, if successful, will befollowed by drilling to locate the source of diamonds previously recovered frombulk sampling of the crater-fill sediments; it is believed that the latter arederived from an extrusive kimberlite eruption. Previous drilling by Dwyka revealed that the volcanoclastic sediments fillingthe crater exceed a vertical thickness of 200 metres; however, none of the holesdrilled penetrated the base of the sedimentary sequence. It was bulk sampling ofthe sandy sediments in the upper part of the sequence that showed them to bediamondiferous. New Elands Kimberlite Mine - RSA Dwyka has engaged contractors to process tailings from historic operation of theNew Elands mine. Dewatering of the old workings will begin in the Septemberquarter, with the water utilised for contract processing. Revenue from thecontract operations should cover the cost of the dewatering, which will enableaccess to the underground workings. Production assets Nooitgedacht Alluvial Diamond Mine - RSA During the quarter, 31,291.98 tonnes of gravel were treated to recover 187.28carats at an average grade of 0.60 carats per hundred tonnes ('cpht'). It is anticipated that diamonds recovered during the quarter will be sold inJuly 2006. Diamonds on hand from Nooitgedacht at period end totalled 153.36carats. Newlands Kimberlite Mine - RSA During the quarter, 12,195.00 tonnes of kimberlite were treated to recover1,518.69 carats at an average grade of 12.45 cpht. A number of large stones wererecovered, among them stones of the following sizes: 7.02; 6.30; 3.53; 4.12;3.27; 4.76; 4.63; 3.21; 5.96; 3.14; 3.44; 3.58; 3.97 carats It is anticipated that diamonds recovered during the quarter will be sold inJuly 2006. Diamonds on hand from Newlands at period end totalled 1,334.86carats. Blaauwbosch Kimberlite Mine - RSA During the quarter, 20,194.27 tonnes of tailings were treated to recover 905.93carats at an average grade of 4.48 cpht. A number of large stones wererecovered, among them stones of the following sizes: 5.73; 3.58; 4.61 carats It is anticipated that diamonds recovered during the quarter will be sold inJuly 2006. Diamonds on hand from Blaauwbosch at period end totalled 636.89carats. Industrial Division - RSA Dwyka's Industrial Division achieved combined concrete and brick sales ofR5,989,289.38.for the June quarter. Rising demand for bricks has resulted in theimplementation of two shift operations of the brick plant subsequent to the endof the quarter. INDIAN DIAMOND EXPLORATION PROGRAMME During the quarter, Dwyka announced further positive results from its recentregional stream sediment sampling programmes in Uttar Pradesh, India. Microprobe analysis of three samples from the Uttar Pradesh programme suggeststhat the indicator minerals were derived from a diamondiferous source rock. Among material derived from the first sample, a chrome spinel and a pyropegarnet exhibit compositions typical of the diamond inclusion field. In addition, the second and third positive reconnaissance samples contain chromespinels with kimberlitic geochemistry. The sample sites are adjacent to eachother but more than 30 kilometres from the location of positive results releasedby Dwyka in March 2006. Follow-up sampling has also been completed at the siteof one of those positive samples. The samples are being sent to Perth fortreatment, observation and micro probing on a high-priority basis. The future direction of exploration in India will be determined following theassessment of laboratory results from the last exploration programme. CORPORATE Issue of a series of unsecured convertible loan notes to the value of GB£1million At the end of the quarter, Dwyka announced its issue of a series of unsecuredconvertible loan notes to the value of GB£1 million. The aim is to fast-trackits prospective Bosele Exploration Project, rather than waiting to fund theprogramme from future operating cashflows. The funds may also used for moreunderground development at both the Newlands and Blaauwboch Diamond Mines and asgeneral working capital. The convertible loan notes, which are unsecured, attract a yield of 8 per cent,payable quarterly in arrears, from the deemed issue date of 22 June 2006 to thematurity date of 22 June 2010. Each of the convertible loan notes can be converted to fully paid ordinaryshares of Dwyka, at any time until 22 June 2010, at a conversion price ofGB£0.36. The number of shares issued upon conversion of the convertible loannotes is subject to proportionate adjustment for bonus issues, share splits,etc. Upon a change of control resulting from the acquisition of more than 50 percent of Dwyka's ordinary shares, the note holders can require Dwyka torepurchase the notes at a price equal to 101 per cent of the principal amountplus interest. From 12 months after the deemed issue date, Dwyka can call the loan notes forconversion if the 20-day average price of its ordinary shares is at leastGB£0.55. Restructure of Dwyka's South African investments Dwyka, through it's wholly owned South African subsidiary, Supermix Mining hasnegotiated a restructure of its black economic empowerment ("BEE") arrangementswith its principal BEE partner, Kolong Investments. The key terms of theagreement, are: • Kolong's existing 60% interest in the De Beers Tailings re-treatment project will be reduced to 30%; • the existing 30% BEE interest in each of the Bosele Exploration Project and the Kimberley-based bricks business operated by Dwyka's subsidiary Biz Afrika 546 (Pty) Ltd, will be unchanged; • Kolong will acquire a 30% interest in each of the Kimberley-based cement business operated by Dwyka's wholly-owned subsidiary Supermix Mining (Pty) Ltd, the Nooitgedacht Alluvial Mine and the Blaauwbosch, Newlands and New Elands underground diamond mines; and • Kolong will be paid a once-off cash payment of R2,000,000. The restructure will be effected through the creation of a South Africansubsidiary company which will be owned 70% by Dwyka and 30% by Kolong. Alloperations will then be owned 100% by this entity. ADRIAN GRIFFIN Chief Executive Officer For further information, please contact: In Australia: In the United Kingdom:-------------------------- --------------------Adrian Griffin/Melissa Sturgess Laurence Read/Leesa Peters-------------------------- --------------------Dwyka Diamonds Limited Conduit PR-------------------------- --------------------(+618) 9324 2955 (+44) 20 7429 6605/ (+44) 7979 955 923 The technical exploration and mining information contained in this report wascompiled by Adrian Griffin (CEO of Dwyka Diamonds), who is a member of theAustralasian Institute of Mining and Metallurgy and is considered to be aCompetent Person in his respective area of expertise pursuant to theAustralasian Code for Reporting of Mineral Resources and Ore Reserves. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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