AFD African Diamond

 

TIDMAFD 
 
RNS Number : 5113H 
African Diamonds PLC 
23 February 2010 
 

African Diamonds 
AK6 Diamond Discovery Update 
·      Latest diamond valuation of US$162 a carat is US$23 a carat higher than 
that used in our current studies.  The valuation indicates the possibility of a 
US$200 a carat value at production. 
·      Project is on target for a late 2011 start-up. 
·      Major upside potential in high purity stones: No attempt was made to 
value the impact of the large Type IIA diamonds which were recovered in a broken 
state in the exploration drill diamond samples. 
·      Changes are being made to the processing plant to minimise diamond 
breakage and allowing the recovery of diamonds up to 350 carats in size. 
·      The plant is being refigured to increase start-up capacity from 2 million 
tons to 2.5 - 3.0 million tons of ore a year. 
·      Bottom size cut-off size being evaluated to optimize plant throughput and 
maximize revenue. 
 
The Directors of African Diamonds plc (AIM: AFD), the Botswana diamond company, 
are pleased to give an update on the progress of the AK6 diamond discovery in 
Botswana.  The timeline remains first production in late 2011. 
A valuation of 1,760 carats of diamonds from AK6 was undertaken in Geneva by 
Shlomo Tidhar of Mercury Diamonds.  The diamond parcel included 1,175.7 carats 
of diamond recovered from large diameter drill samples that were processed to 
recover diamonds greater than 1 mm, and 584.5 carats of diamond recovered from 
trench samples that were processed to recover diamonds both at a 1mm and 2mm 
bottom cut off.  Mercury noted that "Overall the diamonds from AK6 are deemed to 
be of very good quality and very attractive to diamond buyers.  Colours are 
generally very white and the samples showed numerous examples of 'blocky' 
makeable and strong crystal forms that tend to lead to strong polished yields 
and demand a premium.  There was a significant presence of Type IIA stones 
including 12+ carat stones that had been broken into 8 or more fragments". 
The modelled valuation of the sample was US$162 a carat.  It was noted by 
Mercury that diamond breakage was a significant problem in the samples, chiefly 
caused by the drilling and diamond recovery process.  They noted that "there is 
much upside valuation potential if breakage were to be reduced and/or 
eliminated". 
Mercury noted that 34% of the value of the sample was made-up of nine large 
stones greater than 5 carats and that "this figure (the valuation) understates 
the true value proportion of the largest stones". 
Accordingly, the plant is being adapted to minimise breakage and to allow 
diamonds up to 350 carats to be recovered.   We expect this to dramatically 
improve project economics. 
In considering the extent of diamond breakage, presence of Type IIA stones and 
comparatively coarse size distribution, Mercury summarized that: "In Mercury's 
opinion, it is reasonable to expect that full scale production could produce a 
value in the US$200 per carat range". 
A review of detailed valuation information is underway to determine the optimum 
bottom size cut-off screen in order to increase plant throughput by feeding less 
material to final diamond recovery, and maximize revenue by deferring recovery 
of lower value small diamonds. 
This release has been approved by Alex van Zyl, Technical Director African 
Diamonds.   Alex van Zyl (B.Sc. Stellenbosch, B.Sc. Hons. Pretoria) spent a long 
career in Anglo American in the diamond division, ending up 1990 to 1997 with 
worldwide responsibility for diamond exploration and evaluation. He was a 
consultant to De Beers from 1997 to 2002. 
John Teeling, Chairman, commented: 
"The US$162 a carat value on AK6 diamonds is excellent and substantially higher 
than previous valuations.  The following factors are important in valuing AK-6 
bulk sample diamonds: 
-          Drilling and recovery during exploration broke most of the large Type 
II diamonds.  The valuers could only value what was in front of them, but noted 
the potential price increases of 12 to 15% if breakage is reduced or eliminated. 
-          The current market for rough diamonds is at a volatile state, with 
prices having increased substantially over the past year.  It is not certain if 
this trend will continue or if the current pricing levels can be sustained. 
The plant has been redesigned to minimise breakage and, far more importantly, to 
allow diamonds up to 350 carats to pass through.  Typically diamond values rise 
exponentially with diamond size: in our sample, a 10 ct stone is worth four 
times, not just twice a 5 ct diamond.  We therefore anticipate that the diamond 
value could be over US$200 a carat. 
Our decision to commence production at 2.5 - 3.0 million tons a year with a 
larger screen size will have a very significant impact on Revenue, Cash Flow and 
Present Value." 
 
                                                               23 February 2010 
Further information: 
+---------------------------------+-------------------------+ 
| African Diamonds Plc            |                         | 
+---------------------------------+-------------------------+ 
| John Teeling                    | Tel: +353 1 8332833     | 
+---------------------------------+-------------------------+ 
| James AH Campbell               | Tel: +27 83 457 3724    | 
+---------------------------------+-------------------------+ 
|                                 |                         | 
+---------------------------------+-------------------------+ 
| Finn Cap                        |                         | 
+---------------------------------+-------------------------+ 
| Matthew Robinson, Corporate     | Tel: +44 (0) 20 7600    | 
| Finance                         | 1658                    | 
+---------------------------------+-------------------------+ 
|                                 |                         | 
+---------------------------------+-------------------------+ 
| College Hill                    |                         | 
+---------------------------------+-------------------------+ 
| Nick Elwes                      | Tel: +44 (0) 20 7457    | 
|                                 | 2020                    | 
+---------------------------------+-------------------------+ 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
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