MINING IN AFRICA SPECIAL — Diamond Fields boosting S.

With the acquisition of a 100% interest in two producing kimberlite diamond mines in the Republic of South Africa, Vancouver-based Diamond Fields Resources (TSE) became Canada’s only high-quality gem diamond producer.

The removal of economic sanctions from South Africa led Diamond Fields to acquire its full interest in April, 1994, for a total payment of US$2.4 million plus 1.1 million shares.

The mines, Loxton Dal and Frank Smith, are in the heart of South Africa’s historic diamond field, the Kimberley district, known for such famous diamond mines as the Finsch, Wesselton, Bultfontein, De Beers, Dutoitspan and Koffiefontein.

Loxton Dal lies 25 km northeast of the city of Kimberley and consists of three kimberlite pipes — East, Central and West — trending in a northeast-southwest direction.

Discovered in 1961, the mine was worked intermittently until 1978 and then re-opened in 1989. The mine’s East pipe is the smallest; it produces the highest-quality gems but at 10 carats per 100 tonnes, it has the lowest yield. The central pipe produces a grade of 35 carats per 100 tonnes while the West pipe produces in excess of 100 carats per 100 tonnes. In addition, tailings on the property have yielded a grade as high as 20 carats per 100 tonnes.

Overall, Loxton Dal provides high yields of mostly white, medium-quality diamonds that have commanded an average price of US$80 to US$100 per carat. The mine currently produces 18,000 carats per year.

Frank Smith sits 80 km northwest of Kimberley and hosts one dumbbell-shaped pipe, discovered in the late 1890s. It is the largest diamondiferous pipe in South Africa that is not controlled by De Beers. The pipe produces a recovered grade of 4 to 6 carats per 100 tonnes. However, the diamonds are large, high-grade gems commanding a premium price of US$150-200 per carat. Diamond production is about 10,000 carats per year.

The kimberlites at both mines were initially mined through open pits, which eventually led to the current underground method of inclined chambering and caving to depths of 150 metres. At each mine, ore is hoisted to surface via a vertical shaft and treated in a diamond recovery plant through the use of pans and grease tables. Diamond recovery is estimated at 65%. In a bid to increase cash flow as well as profitability, Diamond Fields initiated a program of modernization and capacity expansion for both mines. (The work has been under way since September, 1994.) One objective is to improve Loxton Dal’s and Frank Smith’s plant recovery for diamonds to 80%. The company is also streamlining operations by consolidating the mines under one management team.

By increasing production at Loxton Dal to more than 144,000 tonnes of ore per year from its current capacity of 60,000 tonnes, the company is targeting a yield of 64,800 carats per year. Capital costs for such an expansion require an investment of US$2.9 million during a 2-year period. Revenue is projected to increase in excess of US$60 per tonne from its current US$47, accompanied by a decrease in operating costs to under US$12 per tonne from US$14. The upgrading of the Loxton mine is considered a higher priority than Frank Smith because of its potential for substantial financial returns. Frank Smith has been operating at around the break-even level. During the next four years, an investment of US$3.4 million will expand production capacity to 545,000 tonnes of ore per year from an existing 156,000 tonnes, for a targeted yield of 25,200 carats. Revenues are anticipated after the expansion phase to be US$12 per tonne, while cost per tonne will be an estimated US$8. A technical report by the consulting firm Watts, Griffis and McOuat states that profit for Frank Smith hinges on the recovery of the occasional large valuable stone.

In order to achieve the capacity expansion of both mines, increased production will require shaft sinkings for Loxton Dal and Frank Smith and upgrading of the underground mining systems, as well as purchasing new equipment, ore handling improvements and recovery plant expenditures. Watts, Griffis and McOuat concludes that excellent potential exists for upgrading the reserves and gives a proven and probable reserve of 1.3 million tonnes at 45 carats per 100 tonnes for Loxton Dal and 5.7 million tonnes of proven and probable at 5.43 carats per 100 tonnes for Frank Smith. The estimated reserves are sufficient to provide ore at the planned expansions for a minimum mine life of 10 years.

A well defined infrastructure exists for the mines. They are accessible by road, water is supplied from the nearby Vaal and Harts rivers, and high voltage power is supplied by the Kimberley substation.