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Namakwa Diamonds Ltd (NAD)

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Wednesday 16 May, 2012

Namakwa Diamonds Ltd

Trading Statement

RNS Number : 4215D
Namakwa Diamonds Limited
16 May 2012
 



16 May 2012

 

Namakwa Diamonds Limited (LSE: NAD)

("Namakwa Diamonds" or the "Company")

 

Trading Update

 

The Company announces a trading update in respect of mining operations in Lesotho and South Africa.

 

Lesotho, Kao Mine - Kimberlite Operations

 

First Sale of Kao Diamonds in Antwerp - Achieved Prices 17% Higher than Expectation

The Group is pleased to announce that it has closed its first sale of Kao diamonds in Antwerp, through Fusion Alternatives, the dedicated tender partner of I Hennig & Co. 

 

16,388 carats were sold at an average selling price of US$395/ct, with an average diamond size of 0.36cts.  The largest diamond sold was 38cts at US$6,668/ct, with an 11ct diamond selling for US$15,020/ct and four diamonds with sizes varying between 6 and 14 carats selling for an average of US$7,100/ct.  The sale realised revenues of c.US$6.47 million, with achieved prices c.17% higher than initial estimates. The diamonds sold were sourced predominately from hardrock kimberlite ores.

 

Sales will continue through Fusion Alternatives for at least the next six months.

 

Commenting, Richard Collocott, Chief Executive Officer of Namakwa Diamonds, said: "We are delighted with the outcome of our first tender sale in Antwerp of Storm Mountain Diamonds' production from the Kao Mine.  Achieved prices were 17% higher than anticipated resulting in an additional US$1m in sales income. The significant improvement in achieved price reflects both the increased parcel size on comparative diamond sales in Johannesburg, as production ramps-up at the Kao Mine, and the international exposure provided by our tender partner, Fusion Alternatives.  We look forward to regular monthly sales in Antwerp for the foreseeable future."

 

Since January 2012, the Group has now sold 49,771 carats from the Kao Mine, realising c.US$13.76m in revenue.

 

Tender

Tender Location

No. Carats

Average US/ct

Average Diamond Size (cts)

No.1 - January 2012

Johannesburg

3,918

246

0.21

No.2 - February 2012

Johannesburg

7,326

233

0.29

No.3 - February 2012

Johannesburg

7,242

168

0.21

No.4 - March 2012

Johannesburg

8,419

224

0.22

No.5 - April 2012

Johannesburg

6,478

234

0.29

No.6 - May 2012

Antwerp

16,388

395

0.36

 

Current Operations

As at 13 May 2012, production for FY2012 was at 61,997 carats, from 600,110 tonnes processed, with an average grade of 10.33cpht.  Costs remain in-line with budgets and the 500tph processing plant is currently running at c.250tph and producing in the region of 635 carats per day.

 

Following the removal of the 300tph scrubber from the plant configuration in March 2012, for repair, the plant has been processing predominately hardrock kimberlite ores through the secondary crushing circuit with its one new cone crusher.  Operating in this way, the plant is using c.40% less process water than it would do if weathered kimberlite ores were being processed.  The second new cone-crusher is scheduled for delivery and installation into the tertiary crushing circuit in late May 2012, aiding the further recovery of diamonds from hardrock kimberlite ores.

 

Capacity levels in the mine's dedicated 400,000 cubic metre freshwater dam are currently significantly lower than anticipated for the time of year, despite the dam holding a substantial amount of water during the construction phase.  This is predominately a result of water being released during the delayed completion of the dam's construction and drought like conditions in the region during the typically wet months of October to April.  Flow levels in the rivers adjacent to the mine are lower than medium and long-term averages for the region.  However, there is still flow in the Kao and Mabonyane rivers, and it is expected that this will be sufficient to allow the mine to operate in its current configuration until early July 2012. Thereafter, without an alternative source of process water, it is likely that there would be insufficient flow to allow the mine to operate at a rate in excess of 100tph (if at all).

 

Operating the 500tph processing plant at full capacity, process water requirements equate to approximately 120,000 cubic metres per month (based on a rate of 400 litres per tonne). At design capacity, the dam provides sufficient water to cover process water requirements for just over three months, whereas the dry season can be five to six months long based on recent weather patterns. As such, the dam at its current capacity, even when full, may not provide sufficient water to allow for continuous processing throughout the year. This means that an alternative source of water is required in order to prevent disruption to mining operations in the event of unusual weather patterns.

 

To address such alternative source requirements, the Company has initiated the installation of a pipeline from the confluence of the Kao and the Malibamotso rivers (the latter being the most significant water-course in Lesotho) that feeds the Katse dam, at a capital cost of c.US$1.75m.  Subject to the receipt of all necessary water permits, which Management expect to receive imminently, construction is scheduled to be completed by July 2012. In the event that the pipeline is not completed on time then there is a risk that operations may need to be reduced significantly until such time as the winter snows melt and summer rains begin, allowing water levels to return to a satisfactory level in order to facilitate nameplate production.  When in operation, pumping water through the pipeline will result in additional diesel and staff costs but this will only be at limited times of the year when additional water is required to supplement water from the freshwater dam. 

 

The capital costs of this project will be funded by Namakwa Diamonds.

 

As a result of the potential water shortage, the Company has taken the strategic decision not to reinstall the 300tph scrubber into the plant configuration.  Once repairs have been completed on the scrubber during May 2012, it will be maintained off-site until September 2012, when the plant will be taken offline for approximately 5 days to allow for re-installation.  In the meantime, the two 100tph scrubbers contained in the metallurgical test plant will be installed into the 500tph processing plant. This will provide the operational management team with the flexibility to process 300tph of hardrock kimberlite ores or 200tph of weathered kimberlite ores (assuming that there is sufficient water from July 2012). 

 

Subject to the proposed water pipeline being completed by July 2012 and providing sufficient process water, as designed, Storm Mountain Diamonds has maintained its FY2012 production target of 170Kcts.

 

South Africa, North West Province - Alluvial Operations

 

As at 13 May 2012, production for FY2012 was at 15,614 carats, from 2,194,820 tonnes processed, with an average grade of 0.71cpht.  Costs remain in-line with budgets and average sales prices during H2'2012 are commensurate with H1'2012 (US$632/ct).  Whilst discussions continue with the National Union of Miners in respect of wage demands, strikes are not having a material impact on production and guidance for FY2012 remains unchanged at 20Kcts.

 

For further information please visit www.namakwadiamonds.com or contact:

 

Namakwa Diamonds

Tavistock Communications

Richard Collocott

+27 11 334 8886

Simon Hudson

+44 20 7920 3150

Ryan Barrow

+44 7974 453 954

Simon Compton

+44 20 7920 3150

 

About Namakwa Diamonds Limited

Namakwa is a diamond resource group, which seeks to extract maximum value from the marketing and sale of Group mined and contracted production.

 

The Group's mining activities are focused on the Kao Mine in Lesotho.  Operated by Storm Mountain Diamonds and its leading hard-rock mining team, with a proven track record in the construction and development of Lesotho's leading kimberlite pipes, the Kao Mine presents a 189Mt kimberlite resource of c.12.8m carats (c.4m indicated and c.8.8m inferred), with an additional 1.7m carats at a deposit level of confidence, in which Namakwa holds a 62.5% interest. The other shareholders are the Government of Lesotho 25% and Kimberlite Investments Lesotho Limited 12.5%.

 

The Group also maintains alluvial mining operations in the North West Province of South Africa and resource-development properties in the Northern Cape Province of South Africa and the offshore marine environment of Namibia.

 

-ends-


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