Gope project springs back to life

MBONGENI MGUNI
Staff Writer | Monday July 5, 2010 00:00

UK mining house Gem Diamonds acquired the Gope project from De Beers in 2007 and, under a new retention licence, spent most of 2008 updating various technical and geological studies, as well as successfully conducting a Social Environmental Impact Assessment.

Plans for Gope were frozen last year when the global recession sank diamond demand by up to 60 percent while eroding project funding. Gem Diamonds - prioritising its operating mines - placed the Gope project on 'care and maintenance' last June, pending a change in diamond sector fundamentals.

Last week, Gope Project Operations Manager, Howard Marsden, said activities were reaching fever pitch at the planned diamond mind. Under the terms of the retention licence expiring in December, Marsden and his team are required to provide an updated feasibility study by August.

The Operations Manager revealed that the study will show a radical shift in Gope's modelling, with the changes driven by the need to cut project capital expenditure. 'From last June, we conducted an internal study to identify means of reducing capital and operating costs while improving revenue,' he explained.

'The original plan from 2008 was for a large open pit mine with capital expenditure of more than US$500 million (P3.5 billion) due to the lack of infrastructure and heavy, sandy overburden of about 80 metres.

'However, we have had to re-look at the diamond situation; such a mine would be too large at this time. We have a licence issue and we have to get into something quickly, with low capital expenditure.'

Thus, Gem Diamonds' plans for Gope now involve an underground mine - at least for the first 10 years - with installed plant capacity of 150 tonnes per hour. Open pit operations will then be developed after 10 years with plant capacity of 900 tonnes per hour.

'This is more affordable and it pushes the large capital expenditure commitment to after 2020,' said Marsden.'The underground mine is a good approach.'  Gope's strategists believe once underground mining has taken place for three years, they will have produced about 600 000 carats and have a better understanding of diamond price trends and the resource. Revenues from this period will also enable Gem Diamonds to make appropriate capital decisions with regards to the open pit operations.

Prevailing patterns indicate that Gem Diamonds will reap high value from Gope's gemstones. In May, the UK miner commissioned an evaluation of a Gope diamond parcel, the results of which revealed values equal to pre-recession periods.

'The results showed that there was an increase in the value to about US$162 per carat, which is pre-global financial crisis value,' Marsden said. 'This is quite positive.'