DIAMOND PAGE — Messina Diamond grapples for survival

Faced with financial difficulties and a depressed diamond market, Messina Diamond (MSC.U-T) is selling its Star operation in an effort to maintain production at its namesake mine.

Both operations are in South Africa and have been unprofitable of late, having lost a total of US$3.8 million in the first nine months of this year. Cash flow, however, turned positive during the 6-month period ended Oct. 31 owing to an expansion program completed in 1997.

Sale of the Star mine, which has yet to be concluded, is expected to generate US$2.5 million in proceeds, which will be used to pay down debt and reduce operating and administrative costs at Messina.

The company notes that unless additional funds are raised, the Messina mine, too, will be sold and all activities in southern Africa will cease.

Among Messina Diamond’s non-producing assets is the advanced Liqhobong project in Lesotho. An independent prefeasibility study, completed earlier this year, concluded that an open-pit mine could be built for US$52 million over an 18-month period.

Initial feed would come from the Main and Satellite pipes, both of which were sampled extensively in the summer of 1997. The proposed mine would operate at 7,200 tonnes per day, which could increase in six years to 12,000 tonnes at an estimated capital cost of US$20 million.

Production is projected at 700,000 carats annually over a project life of 11.5 years. Gross annual revenues are projected to average US$40 million. Project operating costs are estimated at US$4.43 per tonne, which would place Liqhobong among the lowest-cost diamond producers in southern Africa.