Tuesday September 12, 10:57 am Eastern Time
Press Release
SOURCE: Diamond Fields International Ltd.
Positive Sea Diamonds project feasibility study completed
VANCOUVER, Sept. 12 /PRNewswire/ -
HIGHLIGHTS
- Successful completion of the Sea Diamonds Project feasibility study
- 54% after-tax internal rate of return for base case
- 133% after-tax internal rate of return should carats from the suspected
sampling bias be included
- 16 month payback period for the base case
- Low capital cost (US$28.1 million) and low annual operating cost
(US$13.5 million) before royalties, marketing and taxes
- Financing negotiations already underway
Diamond Fields International Ltd., (DFI-TSE) is pleased to announce the results of a positive feasibility study completed in September 2000, for its Sea Diamonds Project near Luderitz, Namibia.
This report was prepared exclusively for Diamond Fields by AGRA Simons Limited, MRDI Canada, a division of AGRA, Seacore Limited, Dowding Reynard and Associates, Sue Lane and Associates, Diamond Tenders Belgium and other industry consultants were also retained to assist in the preparation of this detailed feasibility study. The Diamond Fields Sea Diamonds Project has been developed to explore and mine offshore diamond deposits near the coastal town of Luderitz, Namibia and will entail mining and processing of seabed sediments to extract high quality gem diamonds using a mining vessel and supporting infrastructure.
PROJECT ECONOMICS
The base case for the Sea Diamonds Project consists of mining the reserves and resources, as shown under ``Resources'' below, over a seven-year mine life. The base case provides an after-tax internal rate of return (IRR) of 54% and a net present value (NPV) at a discount rate of 10% of US$31.2 million. Payback of capital is estimated to be 16 months from the commencement of mining operations.
Should only the probable reserves be considered, the mine life would be shortened to 5.8 years, and the project would yield an IRR of 46% and a NPV at a discount rate of 10% of US$22.8 million. The payback period in this case would be 18 months from the commencement of mining operations. Should carats resulting from the suspected sampling bias be added to the base case, the project would yield an IRR of 133% and a NPV of US$111.6 million.
Capital costs include all expenditures for detailed design and procurement of equipment, vessel chartering and contracting of facilities required to bring the Sea Diamonds Project into operation, and are estimated to total US$28.1 million (including US$2.0 million cash in working capital) over a twelve-month period. Annual cash operating costs, based on mining an annual average of 873,000 m3, are projected to be US$13.5 million before royalties, marketing and taxes.
RESOURCES
The reserves/resources estimates for the Sea Diamonds Project base case
are shown below:
<<
------------------------------------------------------------------------
Indicated Resources
(Probable Reserves) Inferred Resources
------------------------------------------------------------------------
Grades per square metre of sediment
------------------------------------------------------------------------
Feature Area Grade Carats Area Grade Carats
(ha) (cts/m2) 1,000's (ha) (cts/m2) 1,000's
------------------------------------------------------------------------
Marshall Fork 86.50 0.50 436.6 49.12 0.27 132.2
------------------------------------------------------------------------
Diaz Reef 212.81 0.22 459.6 23.84 0.33 77.6
------------------------------------------------------------------------
TOTAL 299.31 0.30 896.2 72.96 0.29 209.8
------------------------------------------------------------------------
Grades per cubic metre of sediment including overburden
------------------------------------------------------------------------
Feature Volume Grade Carats Volume Grade Carats
1,000's (cts/m3) 1,000's 1,000's (cts/m3) 1,000's
------------------------------------------------------------------------
Marshall Fork 1,452 0.30 436.6 540 0.24 132.2
------------------------------------------------------------------------
Diaz Reef 3,578 0.13 459.6 545 0.14 77.6
------------------------------------------------------------------------
TOTAL 5,030 0.18 896.2 1,085 0.19 209.8
------------------------------------------------------------------------
Total Resources
--------------------------------------------------------
Grades per square metre of sediment
--------------------------------------------------------
Area Grade Carats
(ha) (cts/m2) 1,000's
--------------------------------------------------------------------------------
Marshall Fork 135.62 0.42 568.8
--------------------------------------------------------------------------------
Diaz Reef 236.65 0.23 537.3
--------------------------------------------------------------------------------
TOTAL 372.27 0.30 1,106.1
--------------------------------------------------------------------------------
Grades per cubic metre of sediment including overburden
--------------------------------------------------------------------------------
Volume Grade Carats
1,000's (cts/m3) 1,000's
--------------------------------------------------------------------------------
Marshall Fork 1,991 0.29 568.8
--------------------------------------------------------------------------------
Diaz Reef 4,123 0.13 537.3
--------------------------------------------------------------------------------
TOTAL 6,114 0.18 1,106.1
--------------------------------------------------------------------------------
>>
The resource estimate for the Marshall Fork feature was compiled by MRDI, (Senior Author and Qualified Person: M. Thurston, Ph.D.) based on geophysical and sampling data provided by the Company. The resource estimates for the Diaz Reef features were compiled by Diamond Fields (Senior Author and Qualified Person: R. Cullen, MSc., P. Geol.). Resource estimates used the resource classification in accordance with the Toronto Stock Exchange guidelines and the Australasian code for reporting Mineral Resources and Ore Reserves (JORC, 1999). The resources are based on data from sampling activities carried out by De Beers Marine and previously by BHP and are unadjusted for differences that might exist between the sampling and future mining processes. The reserve estimates are based on average estimated diamond prices of US$175 per carat, economic cutoff grades that approximate 0.15 carats per square metre, and the technical parameters established in the feasibility study. Diamond Tenders Belgium estimated the diamond prices based on the sale prices for over 11,000 carats recovered from sampling activities in 1999 adjusted upwards by approximately 9% to reflect current market conditions.
Sampling activities, which provide the basis for the Sea Diamonds Project mineral resources estimates, were conducted using sampling tools not specifically designed for the geologic environment found in Marshall Fork and Diaz Reef. The inferred resource refers to those parts that are less well sampled than the indicated resource and for which the estimates of grade and thickness are considered less well known. Given the design and operating characteristics of the sampling tool and the irregular surface of the footwall in the Marshall Fork feature, MRDI believes it is likely that the sample grade and therefore total number of carats have been underestimated and estimates this suspected bias to be 740,000 carats. The estimate was made by comparing limited available sampling and production data in a similar geological environment. Diamond Fields' geologists believe a similar sampling bias factor may be applied to the Diaz Reef areas. Inclusive of the suspected sampling bias, diamond production could increase to 2.5 million carats in a similar volume of material. The actual difference in carats between sampling and mining can only be accurately assessed once mining has begun.
MINING
Mining will involve the systematic exploitation of the Marshall Fork feature, followed by the Diaz Reef resources. Ore value, tailings disposal and numerous other geological and mining considerations influence the mining sequences. The mine plan incorporates a time provision for annual sampling in support of detailed mine planning, upgrade and correction of resource estimates (in light of the suspected sampling bias), and potential expansion of the resource base beyond the current estimate level.
Mining rates for each resource zone are determined by sediment thickness, water depth, material types and processing characteristics. The mining rate is projected to average 873,000 m3 per year. A total of 6.1 million cubic metres of ore and overburden containing 1.1 million carats (including 81% defined as probable reserves) are scheduled to be mined over the 7-year mine life.
The sediments will be dredged and pumped from the seabed by a mining tool developed by Seacore Ltd. (U.K.). The tool will be remotely controlled from the vessel. It employs proven components and has been designed for the conditions expected to be encountered. Dredged material will be pumped to the mining vessel through a rigid riser pipe. The diamond bearing sediments will be processed on the vessel in a conventional diamond processing plant. Processing involves screening and dewatering, shell removal, dense media separation, x-ray sorting and hand sorting. Final cleaning and sorting of the diamonds for valuation and sale will be done at Diamond Fields' planned facility in Windhoek, Namibia, and through sales outlets in Antwerp, Belgium.
MARKETING
The objectives of Diamond Fields' marketing plan are to maximize net revenues, provide a means of measuring results for shareholders and the Company and gain experience in valuing, sorting and sales functions so that performance can be continuously monitored and improved.
There are several potential marketing options available to Diamond Fields including selling through De Beers' Diamond Trading Company (DTC), sales at tender, joint venture or agency agreement with one or more established dealers or direct sales through a company marketing organization. A formal decision on the marketing channel(s) will likely be made shortly before the commencement of production. The diamonds found on the Sea Diamonds Project consist of over 95% gem quality stones, which currently yield an average market price of US$150-200 per carat.
The recent publicity on conflict diamonds does not affect the Namibian diamond industry or Diamond Fields' planned operations. Diamond Fields does not, has not, and will not deal in conflict diamonds and fully supports the diamond industry's proposals to isolate diamond trade from conflict areas.
FINANCING
Management of Diamond Fields has been in discussions with several international banks regarding financing for the Sea Diamonds Project. We believe that, based on the high profit potential of the project combined with low initial capital costs, financing of the project could be completed later this year. A formal decision to proceed with the project is dependent upon financing terms that are satisfactory to the Company.
Diamond Fields is an international diamond exploration and mining company and continues to pursue diamond business opportunities worldwide. The Company is currently focusing on the development of its Sea Diamonds Project in Namibia.
Daniel D. Johnson
President and Director
FORWARD-LOOKING STATEMENTS: This news release contains certain forward- looking statements. All statements, other than statements of historical fact, included herein, including, without limitation, statements regarding future production and expansion plans of Diamond Fields International Ltd. (DFI), are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from DFI's expectations are disclosed under the heading ``Risk Factors'', and elsewhere, in DFI's documents filed from time to time with the Toronto Stock Exchange and other regulatory authorities. Forward-looking statements are based on the estimates and opinions of management on the date the statements are made, and DFI does not undertake any obligation to update forward-looking statements should conditions, or management's estimates or opinions, change.
SOURCE: Diamond Fields International Ltd.
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