Debswana to proceed with Jwaneng Tailings Project

Firestone Diamonds plc

Debswana to proceed with Jwaneng Tailings Project

LONDON: 30 June, 2010

Firestone Diamonds plc, ("Firestone" or "the Company"), the AIM-quoted diamond mining and exploration company (ticker: AIM:FDI), today announces that it has been informed by Debswana Diamond Company ("Debswana") that Debswana has decided to proceed with the Modular Tailings Treatment Project ("MTTP") at the Jwaneng Mine with Firestone, subject to contractual arrangements, which are currently at an advanced stage, being finalised, and suitable financing arrangements being made for the capital costs of the project. Construction is expected to commence in H1 2011 with full production scheduled for 2012. 

HIGHLIGHTS

Philip Kenny, CEO of Firestone Diamonds, commented: "We are very pleased that Debswana has decided to move forward with the Jwaneng Tailings Project, for which Firestone was selected due to its track record in financing, building and operating diamond processing and toll treatment plants. This project is a key component of our strategy of developing toll treatment opportunities to supplement our own mining operations at BK11 and the evaluation and development of our other kimberlites in the Orapa and Tsabong kimberlite fields."

Project Background

Following the submission of tenders by a number of suppliers in 2008, Firestone announced in Q1 2009 that it and ADP Projects ("ADP") had been selected by Debswana as the preferred bidders to supply, construct and operate a modular tailings treatment plant at the Jwaneng Mine in Botswana on a toll treatment basis. Debswana is a joint venture between the Government of the Republic of Botswana and De Beers and is the world's leading diamond producer by value. Jwaneng is the largest diamond mine in the world by value and in 2008 produced approximately 13 million carats, with an estimated value of $1.8 billion.

The Jwaneng plant is intended to serve as a pilot facility to demonstrate the economics and capability of the modular plant concept on the Jwaneng tailings resource, and could potentially lead to the deployment by Firestone and ADP of similar plants to exploit additional tailings resources at other Debswana mines. The Jwaneng tailings resource is estimated to be in excess of 30 million tonnes. The plant is being designed by ADP, with whom Firestone has a strategic alliance to jointly design, build and operate modular diamond tailings processing plants.

Current status

Negotiations with Debswana were originally expected to be concluded in 2009, but were delayed as a result of the decision by Debswana during the year to temporarily suspend some of its mining operations and significantly reduce production. With conditions in the diamond market having significantly improved Debswana has now decided to proceed with the MTTP at Jwaneng with Firestone, subject to contractual arrangements, which are currently at an advanced stage, being finalised, and suitable financing arrangements being made for the capital costs of the project. Based on contract rates from the Company's previous toll treatment operations in South Africa, the Directors anticipate that the Jwaneng tailings project has the potential to contribute up to $150 million in toll treatment revenue for the Company.

Project schedule

The MTTP will proceed into the execution phase as soon as the Firestone and Debswana project teams finalise the contractual arrangements and financing proposals for the project. Construction is expected to commence in H1 2011, with initial production scheduled for early 2012, and full production to be reached later in 2012. 

Project financing

The estimated capital cost for the project is $55 million. Firestone intends to finance the project through a special purpose vehicle that will arrange debt finance for the project against the contract with Debswana. Discussions have been held with a number of interested lenders and the Company is confident that suitable financing arrangements will be made available. 

For further information, visit the Company's web site or contact:

Background information on Firestone Diamonds:

Firestone Diamonds plc ("FDI.L") is an international diamond mining and exploration company with operations in Botswana and South Africa. Botswana is the world's largest and lowest cost producer of diamonds, with annual production worth over $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 square kilometres around the major Orapa and Jwaneng mines and the entire Tsabong kimberlite field. Firestone has 103 kimberlites in its portfolio, of which BK11 is about to commence production, and 29 others have been proven to be diamondiferous.