ASX-listed Lucapa Diamond Company is well advanced with a strategic plan to unlock greater wealth from its asset portfolio.
It will achieve this by expanding production of large, premium-value diamonds and continuing exploration programmes to make new discoveries.
Its operations include an extensive exploration programme at its 40% owned Lulo alluvial mine to locate the hardrock source or sources of the exceptional alluvial diamonds and the development of a second high-value diamond mine at Mothae in Lesotho, writes Sascha Solomons.
This article first appeared in Mining Review Africa Issue 11 2018
On the back of very successful diamond mining at Lulo in Angola, which includes the recovery of a number of high value diamonds over the course of its three year operating history, Lucapa is more determined than ever to find the original source of these alluvial diamonds which could elevate the company’s high grade diamond production to substantially greater heights.
“We have had considerable exploration success over our history and see further potential and upside in most of the projects that we have through continuing to focus on exploration,” states MD and CEO Stephen Wetherall.
As such, the company is investing in a largescale exploration programme which entails systematic drilling of ~80 kimberlite targets selected from a geophysical survey flown over the entire 3 000 km2 Lulo concession.
The kimberlite drilling programme entails continuous drilling throughout the year, even through the Angolan wet season, and has three main objectives.
These include determining which of the identified targets are kimberlites; recovering core material from confirmed kimberlites for petrography, indicator mineral recoveries and mineral chemistry analysis; and finally using those laboratory results to prioritise a much-reduced number of potentially diamondiferous kimberlite pipes for further drilling and bulk sampling.
The kimberlite exploration programme is being funded from Lucapa’s share of distributions from the alluvial diamond mining operations.
Lucapa has operated the Lulo concession for more than a decade in partnership with Empresa Nacional de Diamantes E.P. (Endiama), Angola’s national diamond company.
A record setting operation
The Lulo partners have been conducting alluvial and kimberlite exploration activities at Lulo since 2008 which in fact enabled commercial alluvial diamond production to commence in January 2015, thereafter quickly establishing Lulo is the world’s highest US dollar per carat alluvial diamond mine.
In a world where large stones are few and far between, Wetherall highlights that this concession produces at a relative frequency that is unseen in the diamond space today – allowing Lucapa to boast the highest average carat ... and that’s not just from one or two stones.
The company has recovered ~60,000 carats thus far, since operation start-up. It now averages around US$2 000/carat – 14 times the world average of $140/carat.
The mine is situated in vastly spread alluvial fields in Angola’s Lunda Norte diamond heartland, approximately 630 km east of the Angolan capital of Luanda. These alluvial fields have hosted some of the largest diamonds in the world such as the 404 carat and the 227 carat which are Angola’s two largest diamonds ever recorded in over 100 years of diamond mining.
Lulo is also a source of high-value coloured diamonds, with production including a 46 carat pink and 43 carat yellow diamond.
On this very same concession Lucapa has discovered a 173 carat diamond, 129 carat diamond and a 133 carat diamond.
Those are just five of the 11 +100 carat diamonds that the company has recovered.
There are 800 other diamonds greater than 10.8 carats which have also been recovered, giving Lucapa further confidence that the sources of the diamonds could be close.
Following the election of a new government in Angola in 2017, a new diamond marketing policy was formally enacted, led by President Joao Lourenco, who is looking to ensure that the minerals sector contributes more to the Angolan fiscus.
In order to do that he is seeking to attract international investors to Angola’s diamond sector.
“Lucapa is working with its government partners in Angola to help draft the regulatory framework and implementation of the new diamond marketing policy, which has been welcomed as a significant and positive step forward for the diamond sector,” says Wetherall.
The new marketing policy revokes the previous presidential decree – promoting transparency, predictability and standardisation – and seeks to protect the interests of the producers by establishing additional sales channels that producers in Angola can use to attract high values to their product.
Of major importance and significance in line with initiatives that the president is running, Lucapa has been invited by Endiama to support the drafting of the new legislation.
“We are also in discussions with Endiama to increase our equity participation in both the Lulo and Mothae projects and we are in discussions to expand our operational footprint in Angola as well,” he notes.
Multi mine operator
Apart from the company’s already well established Lulo operation, Lucapa owns 70% of the Mothae kimberlite project in Lesotho in partnership with the government of Lesotho (30%). This project is a kimberlite mine development with a surface area of ~8.8 ha.
The company acquired the asset, formerly held by Lucara Diamond Corp, from the Government of Lesotho.
The frequency of large stones in this resource positions it as the second highest dollar per carat JORC resource in the world.
Lucapa will be investing some $30 million in delivering an operational Mothae project and when it reaches production later this year, will be Lucapa’s second producing asset. Mothae has a new 10 year mining licence, which has an automatic right of renewal for a further 10 years.
“We commenced with plant commissioning in the latter half of October 2018. We have de-risked the project and are also conducting a concurrent bulk sampling programme,” notes Wetherall.
Mothae will be ready for commercial production in November 2018 with construction of the new 1.1 Mtpa plant and infrastructure proceeding on schedule.
In terms of the mine plan there are also plans to double Mothae’s ROM production to 2.2 Mtpa in 2021 under the Phase 2 development. This will complement the high-value diamond production from Lulo.
The Phase 1 mine was financed primarily from a US$15 million project facility provided by Equigold, a company associated with prominent Australian resources investor Simon Lee AO.
During the trial mining phase at Mothae conducted by previous owner Lucara, more than 23 000 carats of diamonds were recovered from ~600 000 t of processed kimberlite material.
This included 96 diamonds larger than 10 carats and individual stones of up to 254 carats. These diamonds were sold for $17 million, with individual stones achieving sale prices of up to $41 500/carat.
Lucapa has recovered more large diamonds at Mothae from its bulk sampling programme, which is being run concurrently with the construction of the new 1.1 Mtpa commercial plant.
These bulk sampling recoveries include an 89 carat yellow diamond from the south-east zone of the kimberlite pipe, a 25 carat yellow diamond from the neck zone which was previously untested and a 28 carat white diamond from the north zone, which was also previously inadequately tested.
Lucapa was not so long ago just a single asset company but today has progressed substantially and is invested across multiple jurisdictions in Africa and Australia.
“When it comes to large, high value diamond production, Lucapa is at the top of the tree. If you look at the alluvial mines around the world and you look at the kimberlite mines around the world, as well as the highest dollar per carat projects, Lucapa is invested in two of the top three.
"Therefore we have access and we mean to continue being an exceptional diamond company,” Wetherall concludes.