9th Aug 2006 07:01
Firestone Diamonds PLC09 August 2006 Firestone Diamonds plc Operations update LONDON: 9 August 2006 SUMMARY Groen River Valley • Joint venture exploration project with De Beers; previous exploration recovered high value diamonds and identified13 deposits in project area • Large diameter auger sampling completed in HL deposit; 133 square metres sampled, no diamonds recovered to date • Bulk sampling pits being excavated in southern portion of HL deposit, close to previous diamond recoveries • First pit completed, 1,300 square metres sampled; gravel to be processed by September • Work programme for HL deposit and other 12 deposits in the project area to be revised once sample pits completed Buffels River Mine • Joint mine development with De Beers • Agreement signed with De Beers to accelerate production from Buffels River project • Production commenced in July; ramp up to full production in Q1 2007 • Operation expected to produce over 600,000 carats over 6 years • Target annual revenue for Firestone at full production of £5 million and operating profit of £3.2 million Botswana • Exploration by Firestone and De Beers around the Orapa and Jwaneng mines, which are the two largest diamond mines in the world • Firestone's position as the largest holder of diamond exploration rights around the Orapa and Jwaneng mines further improved with awarding of nine new prospecting licences • Ground held by Firestone increased from 8,000 to 17,000 square kilometres • New kimberlite discovered in Orapa area • Extensive exploration planned in Orapa and Jwaneng areas in H2 2006 • De Beers to complete Zeppelin surveys over Firestone ground and drill initial targets in Jwaneng area in H2 2006 General • Strong financial position, with liquid assets of approximately £15 million • Investigating additional resources to exploit with De Beers in Namaqualand • Project portfolio continues to expand Firestone Diamonds plc ("Firestone" or "the Company"), the AIM-quoted diamondmining and exploration company, provides an update on the Groen River Valleyjoint venture exploration project with De Beers in South Africa, the BuffelsRiver mining project which is being developed in partnership with De Beers inSouth Africa and its kimberlite exploration activities in the Orapa and Jwanengregions in Botswana. Results have been received from large diameter auger ("LDA") sampling in thecentral part of the HL deposit at the Groen River Valley. A total area of 133square metres has been sampled, with no diamonds recovered from processing ofmaterial recovered. These results are disappointing, given that the presence ofdiamonds of high quality and large size has been proven in numerous locations inthe project area, and that diamonds have previously been recovered on thesouthern portion of the HL deposit. A series of bulk sampling pits are beingexcavated in the southern portion of HL deposit, close to the location ofprevious diamond recoveries. These pits will sample a much larger area than theLDA sampling, with the first pit, which has been completed, sampling an area of1,300 square metres. Gravel from this pit will be processed in September. An agreement has been signed with De Beers to accelerate production from the newBuffels River mining project that is being developed by Firestone and De Beersin South Africa. Production commenced in July and is expected to ramp up tofull production in Q1 2007, with target annual revenue for Firestone at fullproduction of £5 million and operating profit of £3.2 million. Significant progress has also been made at the Company's exploration projects inBotswana. A new kimberlite has been discovered close to the Orapa Mine and iscurrently being evaluated. The Company has also has been awarded nine newprospecting licences covering a substantial area in the Orapa and Jwanengregions, almost doubling the ground held by the Company to 17,000 squarekilometres. Extensive exploration is planned in the Orapa and Jwaneng areas inH2 2006, with De Beers expected to complete Zeppelin Airborne GravityGradiometer surveys over Firestone's ground and to drill initial targets in theJwaneng area by the end of the year. Philip Kenny, CEO of Firestone Diamonds, commented: "While the results ofinitial sampling at the Groen River Valley project are disappointing, thesampling covers only a small portion of one deposit, which still needssignificant work, and there are 12 other deposits in the project area to beevaluated. We still believe that the area has the potential to become a majornew producing area of high quality diamonds. The commencement of productionfrom the Buffels River project marks a major milestone for Firestone. We nowlook forward to significant assured revenues and cash flows from this projectfor at least the next six years and are also actively investigating other knownresources in the Namaqualand region that we can jointly exploit with De Beers.We are encouraged by the latest kimberlite discovery in the Orapa area and thefurther extension of Firestone's position as the largest holder of diamondexploration rights around the Orapa and Jwaneng mines. With the substantialexploration planned by Firestone and De Beers in the Orapa and Jwaneng areas, inparticular the introduction of the Zeppelin system, we continue to believe thatthe prospects for new economic discoveries in these areas are very good. TheCompany's overall position continues to improve. Our cash and liquid assetsamount to approximately £15 million. With cash flow from the Buffels Riverstarting this month, and with our portfolio of assets continuing to expand, weremain very confident about the Company's prospects for continued growth." Detailed Project ReviewGroen River Valley Results have been received from the initial phase of bulk sampling on the HLdeposit. Twenty-seven LDA drill holes have been completed on a 700 metre longsection of the central portion of the HL deposit, producing approximately 620tons of gravel from a sampled area of approximately 130 square metres.Processing of this gravel has been completed, with no diamonds being recovered. De Beers' and Firestone's technical staff are currently reviewing data fromexploration completed to date, with the objective of gaining a betterunderstanding of the geology of the HL deposit. To assist in this process thebulk sampling programme has been moved to the southern portion of the HLchannel, close to the area of previous diamond recoveries and where shalloweroverburden will allow larger samples to be taken using bulk sample pits. Aseries of pits is planned, the first of which has been completed, with gravel inthe process of being transported to the sample treatment plant. The first pitwill sample an area of approximately 1,300 square metres, which is ten timeslarger than the area sampled by the entire LDA programme. Results from thefirst pit are due in September and are expected to improve the understanding ofthe geology of the HL deposit. Following completion of this work, a revisedwork programme for the HL deposit and the 12 other deposits in the Groen RiverValley project area will be developed. Buffels River Mine development In May 2006 Firestone announced that it had entered into an agreement with DeBeers to cooperate on the development of a joint mining operation based aroundthe Company's Bonte Koe Mine to exploit deposits on the Buffels River over whichDe Beers holds mining rights. The Buffels River mining operation is expected toproduce over 600,000 carats from approximately 5.5 million tonnes of gravel overa six year period. The Company is in the process of upgrading the DMS capacity and crushing circuitat the Bonte Koe processing plant in order to meet the requirements of theagreement. This work is at an advanced stage, and is expected to be completedby the end of 2006. As these modifications do not require the existing plant tobe shut down, Firestone and De Beers have agreed to accelerate production fromthe Buffels River area by using the plant at Bonte Koe in its currentconfiguration to process additional gravel resources located in the BuffelsRiver area. Firestone started processing De Beers gravel through the Bonte Koeplant in July 2006. Monthly tonnages processed are expected to rise fromapproximately 45,000 tonnes per month initially to a target rate of 80,000 permonth by the time that the plant modifications have been completed. Based on an agreed minimum gravel delivery rate of 950,000 tonnes per annum,Firestone's annual revenues are expected to be a minimum of £3.7 million, withoperating profits of approximately £2 million. With an estimated maximum plantcapacity of 1,250,000 tonnes per annum, Firestone's target annual revenues couldincrease to £5 million, with operating profits of £3.2 million. The BuffelsRiver agreement also has a profit sharing provision under which Firestone willhave the right to participate in profits generated by the project once De Beers'target return from the project has been reached. Botswana Exploration Orapa Region De Beers Joint Venture Area Twenty eight new geophysical targets have been drilled in the De Beers jointventure area around Orapa since the beginning of 2006, resulting in thediscovery of one kimberlite. The new kimberlite, known as BK56, is locatedapproximately 8 kilometres north west of the Letlhakane Mine. The discoveryhole encountered kimberlite at a depth of 3 metres. Basalt was encountered from23 metres to 130 metres, when kimberlite was intersected again. The hole wasterminated in kimberlite at a depth of 200 metres. Kimberlite samples have been collected and are currently being processed torecover material for microdiamond and mineral chemistry analysis andpetrographic studies, in order to allow a preliminary evaluation of the economicpotential of the kimberlite to be made. An inclined core hole is also beingdrilled approximately 100 metres south of the discovery hole to provide furthermaterial for analysis and a better indication of the size of the kimberlite,which is estimated to be up to 3 hectares. Additional exploration work is planned in the area around BK56 during the secondhalf of 2006. Indicator mineral sampling will be carried out to identifykimberlite targets whose geophysical signature is masked by the noise of thebasalt country rock, as was the case with BK56. A ground gravity survey will beundertaken in the areas around the AK6 and AK10 kimberlites. Results areawaited from follow-up core drilling carried out earlier this year on BK53,which was discovered in 2005. Daly City Ventures Area Parts of the Daly City licence area close to the Letlhakane Mine and other knownkimberlites have never had detailed aeromagnetic surveys conducted over them.These areas are likely to contain high interest geophysical targets. A highresolution helicopter-borne magnetic and radiometric survey has recently beencompleted over an area of 140 square kilometres. The data is currently beingprocessed, and it is expected that drilling will be undertaken on kimberlitetargets identified by this work in the second half of 2006. New licences Firestone has been awarded nine new prospecting licences in the Orapa region.Eight of the licences are located to the north and west of the Orapa area andcover an area of approximately 7,300 square kilometres. Field work on thisarea, known as Orapa North, commenced in July 2006. The ninth licence islocated to the east of Letlhakane and covers an area of approximately 1,000square kilometres. The Company is currently drawing up plans for thecommencement of field work in this area, known as Letlhakane East. Jwaneng Region De Beers Joint Venture Area Planning has been completed for the commencement of geophysical surveys over thejoint venture area using De Beers' new Zeppelin Airborne Gravity Gradiometersystem. The Zeppelin system is the most advanced airborne gravity system in theworld. Results from surveys conducted by De Beers in the first half of 2006over the area immediately surrounding the Jwaneng Mine have been exceptionallygood, showing a five to ten-fold improvement in data quality compared to otherairborne gravity systems. It is expected that most of the joint venture areawill be surveyed in the second half of 2006, following which drilling will becarried out on any kimberlite targets that are identified. New licences Firestone has been awarded eight new prospecting licences in the Jwaneng region.These licences are located to the south and east of the Jwaneng Mine and coveran area of approximately 1,000 square kilometres. The Company is currentlydrawing up plans for the commencement of field work in this area. Note: The information in this statement has been reviewed by Mr. Tim Wilkes,BSc, MSAIMM, who is a qualified person for the purposes of the AIM Guidance Notefor Mining, Oil and Gas Companies. Mr. Wilkes is Chief Operating Officer ofFirestone Diamonds plc and has over 25 years experience in diamond mining andexploration. Mr. Wilkes is a member of the sub-committee for diamonds of theSouth African Mineral Resource Committee (SAMREC). For further information: Philip Kenny, Firestone Diamonds +44 20 8834 1028 / +44 7831 324 645Leesa Peters/Angus Prentice, Conduit PR +44 20 7429 6600 / +44 7812 159 885Jamie Cumming, Bell Lawrie +44 141 314 8103 / +44 7768 044 620 www.firestonediamonds.com Background information on Firestone Diamonds plc: Firestone Diamonds plc is an international diamond mining and explorationcompany with operations in the Namaqualand region of South Africa, Botswana andthe United States. Firestone has extensive interests in Botswana, which is the world's largestproducer of diamonds, with annual production of approximately 30 million caratsworth over $2.5 billion. Botswana is considered to be one of the best countriesin the world to explore for kimberlite - the primary source rock for diamonds.Firestone's Mopipi, Orapa and Jwaneng projects are located close to the majorOrapa and Jwaneng mines and are all being explored by De Beers in joint venturewith Firestone. Firestone is also exploring for kimberlite in the US on theLaurentia craton, which extends into Canada, where it hosts a number ofdiamondiferous kimberlite deposits. Namaqualand, which is located on the west coast of South Africa, has been one ofthe world's largest alluvial diamond producing regions for the past 60 years,with total production to date estimated to be worth more than $3 billion.Firestone's mining operations in Namaqualand include the Bonte Koe, Avontuur andOena Mines, all of which produce high quality alluvial diamonds, and a growingportfolio of early stage and advanced exploration projects, of which the GroenRiver Valley project, which is being explored by De Beers in joint venture withFirestone, is the most important. Firestone has a highly qualified management team with extensive experience inthe exploration, evaluation and development of diamond projects. Firestone isquoted on the Alternative Investment Market (AIM) of the London Stock Exchangeand trades under the symbol FDI.L. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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