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African Diamonds' A6 project on track for Q4 2010 commissioning

African Diamonds (LON:AFD) said its AK6 diamond project in Botswana is on track for commissioning in Q4 2010 after receiving an updated feasibility study, and added it is negotiating the marketing terms of the mining license with the government of Botswana.

The study proposes a process plant designed at an initial throughput rate of 2.5 Mtpa (million tonnes per annum), which would increase to 4 Mtpa in 4 years. The revised mining plan calls for a smaller number of carats being produced at a higher diamond value.

The indicated resource at a 1.5 mm bottom cut-off, an average grade of 16 cpht (carat per hundred tonnes) and assumes an average diamond price of US$243/carat. The bottom of the open cast pit is 324 metres and will be mined over an 11 year mine life.

Operating costs over the life of mine are estimated to be US$17.20 per tonne of ore treated. The first phase requires a capital investment of US$120 million, including the processing plant, all mine site and off site infrastructure along with a 13% contingency. This is a significant increase over the conceptual level Value Engineering Study, including a 25% increase in throughput representing US$14 million, foreign exchange movements accounting for 37% of the increase, or US$20 million, and scope changes representing US$20 million.

Work is planned to start in July 2010 and the first diamonds are expected to be recovered during the final quarter of 2011.

The company has also reached an agreement with the government of Botswana to allow its JV (joint venture) with the project’s operator Lucara Boteti Mining to sell its entire production of diamonds either through an open tender or negotiated exclusivity contracts.

African Diamonds has said that a number of proposals has already been received from diamantaires and are currently under evaluation.

“We are very pleased that the joint venture board has received the updated feasibility study and that approval has been given to proceed with implementation ensuring that the project remains on track for our Q4 2011 commissioning.  We are also delighted that the marketing terms in the Mining License have been satisfactorily addressed with the (Botswana government) and that sound progress has been made with raising project finance.  We are very pleased to have Ribson leading the Boteti management team,” said managing director of African Diamonds James Campbell.

African Diamonds holds a 40% stake in the project after exercising an option in April.

Whilst progressing AK6, African Diamonds said it also plans to ramp up exploration of its 100%-owned Botswana exploration licences. With the initial focus on AK8, AK9 and BK5, the company believes that they each have the potential to be stand-alone or feeder mines to the AK6.

According to African Diamonds, the drilling may reveal that grades could be higher in AK8 and AK9 and that the size of BK5 may triple, based on a thorough review of data from six years of drilling and prospecting. The extensive 800 hole RC drilling programme is expected to cost approximately $1m, and it will get underway the coming weeks.