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Liqhobong development history

1950’s
Liqhobong discovered

1990’s
First large scale evaluation programme undertaken

2005-2010
Production commenced at Satellite Pipe in 2005

Definitive Feasibility Study for development of Main Pipe commenced in 2007

Production suspecnded at Satelite Pipe in 2008

Acquired by Firestone Diamonds in 2010

2011
Production restarted by Firestone Diamonds

2012+
Definitive Feasibility Study on Main Pipe completed in August 2012

Target production of 1 million carats per annum by 2015

Liqhobong

Liqhobong

Key Facts

Location: The Kingdom of Lesotho

Acquired: September 2010

Ownership: Firestone Diamonds 75 per cent interest, 25 per cent interest held by the Government of the Kingdom of Lesotho

Status: Construction over the next two years, with expected full nameplate production in early 2016.

  • Liqhobong is a robust project with over 11 million carats in reserve. The total open pit resource contains over 17 million carats;
  • Focus on achieving successful project delivery and nameplate production in early 2016;
  • New plant designed at 500 tonnes per hour (twin stream 250 tonne) to yield 1.1 million carats per annum over 15 years life of mine; and
  • Project fully funded subject to remaining conditions precedent.

Project description

The Liqhobong Diamond Mine (‘Liqhobong’ or the ‘Project’) in Lesotho is Firestone’s principal asset, and was acquired as a result of the acquisition of Kopane Diamond Developments plc in September 2010. Liqhobong is located at the head of the Liqhobong Valley in the Maluti Mountains of northern Lesotho and is operated by Liqhobong Mining Development Company (Proprietary) Limited (‘LMDC’), which is 75% owned by Firestone Diamonds and 25% owned by the government of Lesotho.

Trial production commenced at Liqhobong following the commissioning of the pilot plant, from July 2011 until October 2013, which produced in excess of 325,000 carats. Through the operation of the pilot plant, the Company was able to confirm the quality, grade and size of stones present at Liqhobong, as well as understand the characteristics of the ore body.

The Company completed the definitive feasibility study (“DFS”) for Liqhobong in October 2012 which set out the basis for an open pit mine with a 15 year life and a Main Treatment Plant (‘MTP’) capable of an annual production of 3.6 million tonnes yielding in excess of 1 million carats.

On 5 November 2013, the Company announced an update to the DFS which included a revalidated initial capital expenditure for the Project of South African Rand 1,854 million (US$185.4 million), which included the full cost of grid power infrastructure required for the Project.  In addition, the updated DFS confirmed the strong base case economics for Liqhobong and demonstrated significant upside potential if anticipated revenues from large stones (plus 100 carats) are included.

The updated DFS, which assumed a 3 per cent growth in the diamond price with all costs being kept flat from the DFS, set out a base case post tax NPV for Liqhobong (using US$107 per carat and applying an 8 per cent discount rate) of approximately US$379 million and post tax IRR of 30 per cent and an upside post tax NPV, taking account of the potential revenues from larger stones (100 carats plus) (using US$156 per carat and applying an 8 per cent discount rate) of approximately US$728 million and post tax IRR of 45 per cent.

The key operating and financial parameters modelled in the DFS are summarised as follows:

 Unit  November 2013 DFS
 Ore Mined  Mt  53.7
 Average strip ratio  Waste/ ore  2.28
 Plant Capacity  Mtpa  3.6
 In situ grade  Cpht  32.07
 Average annual production  Mcts pa  1.15
 Mining cost  ZAR/ t mined  21.5
 Processing cost  ZAR/ t processed  57.8
 Site SG&A  ZAR/ t processed  12.5
 Steady state site operating expenses  US$/ ct  43.93
 Royalty  %  8%
 Initial capital expenditure  ZAR million  1,854
 Initial capital expenditure  US$ million  185

Updated DFS average ZAR:US$ exchange rate is a flat ZAR10:US$1 over the life of the Project compared to an average of ZAR9.76:US$1 in the October 2012 DFS, where, for the first two years the ZAR:US$ was ZAR8.42 and ZAR8.92, and then ZAR9.94 thereafter.
The updated DFS confirms strong base case project economics with significant upside potential if anticipated revenues from large stones (plus 100 carats) are included as follows:

US$ per carat Project
Post-tax NPV8%
(US$M)
Project
Post-tax IRR
(%)
 Updated DFS
 Base Case  107  379  30
 Upside Case  156  728  45
 Previous DFS (October 2012)  100  335  40

Note: at 3% diamond price growth, all costs are flat real in the model only diamond revenue has been escalated.

Planned development

The pilot plant has been closed and planning and logistical contracts are currently being completed for early stage preparation of the required infrastructure to begin construction in 2014. In addition to this, the Company is in the process of recruiting the project team to work alongside the Chief Project Officer, Glenn Black, and advancing the project engineering and planning phases. It is currently anticipated that all major construction related contracts will be finalised in Q1 2014 and that first construction and official project start will be in Q2 2014.