Sierra Leone – Stellar Diamonds, the AIM-listed diamond development company focused on West Africa, announces the results of the preliminary economic assessment (PEA) from its Tongo kimberlite diamond project.
Independent consulting company Paradigm Project Management (PPM) was retained by the company to conduct the PEA over the 1.45 million carat inferred resource of the Tongo Dyke-1 kimberlite, one of four kimberlite dykes at the Project.
The objective was to define updated project economics for both surface and underground mining of the diamond resource in support of the mining licence application.
Tongo Dyke-1 PEA highlights:
- 18 year life of mine from both surface and underground mining yielding 955 930 carats
- Surface mining in years 1 – 4 targeting a yield of 117 806 carats providing early cash flow
- Modelled diamond resource grade of 120 cpht and diamond value of US$270/ carat
- Low cost capex requirement of US$24.2 million to establish surface and underground mine
- Gross mine revenues of $386.7 million
- Pre-tax NPV10 of $53.2 million and IRR of 31%
- Significant potential to increase mine life and revenues with resource open at depth
- Mining licence application to be submitted
“The Tongo PEA has delivered robust economics which support the development of an open pit and subsequent underground mine. Early cash flow is expected to be generated from the initial surface mining but the mine also represents a long-term and sustainable operation which has the potential to generate solid cash flows from the sale of its very high quality, high grade diamonds over many years,” says Chief Executive Karl Smithson.
“Stellar considers that the Tongo mine can be further improved and extended with the development of additional diamond resources from nearby high-grade kimberlites that we have previously identified and tested.”
“Importantly for Sierra Leone, this mine will contribute significant employment and community development opportunities in an area that has been adversely affected by the Ebola crisis, which has now thankfully been eradicated from the area of operation for over six months. We expect to formally submit our application for the mining licence in the near future, once our environmental impact assessment study has been completed and our environmental licence granted.”
“I look forward to updating shareholders over the coming months as we continue towards the development of the Tongo mine to complement our Baoulé kimberlite pipe project in Guinea where trial mining has already generated revenues from diamond sales.”
Potential to further improve mine economics
The current life of mine plan is based solely on the Tongo Dyke-1 resource to a depth of between 300 m and 400 m. Opportunities exist to extend the life of mine and enhance revenues and project economics as follows:
- Deeper mining of Dyke-1 to levels similar to fissure mines in South Africa which have operated to (+700 m depth)
- Drilling and resource definition of other kimberlites dykes namely Dykes 2, 3 and 4 on the Tongo licence, all of which have indicated grades similar to (or higher than) Dyke-1
- Dyke-1 may have a higher actual recovered diamond grade to that used in the PEA
Any or all of the above scenarios would provide material opportunities to increase the resource base of the Tongo mine project.
Exploration licence renewal and mining licence application
Following completion of the Tongo PEA, the directors have decided to pursue the development of the Tongo project and continue with the mining licence application process. As part of this process an Environmental and Social Impact Study (ESIA) must be completed and submitted to the Environmental Protection Agency in order to be awarded an environmental licence.
This process is well advanced with independent group TerraNova-EcoSys Limited compiling the ESIA.
The mining licence application will then be submitted for consideration via the National Minerals Agency and Minerals Advisory Board, which will make the final recommendation to the Minister of Mines for its approval.
Subject to the mining licence being approved, which is allowed for in the Mines Act (2009), a negotiation process will follow between the company and its advisors and a specialised Governmental body whereby the fiscal terms of the future mine will be agreed.
Since the exploration licence was due to expire in August 2015, before the Mining Licence was likely to be granted, Stellar applied for a two year extension of the exploration licence so that there will be no gap in the licence tenure. This extension was granted on 22 July 2015.