Gem Diamonds' Ghaghoo Mine powers forward

MBONGENI MGUNI
Staff Writer | Friday September 9, 2011 00:00

This week, company officials revealed that construction was well underway with 200 workers on site undertaking earthworks for the decline, plant and tailings dam. Of these components, the decline is the most significant, being the access corridor into the planned underground mine.

Officials said approximately P228 million in contracts had been awarded in pursuit of the mine's development, with activities proceeding within time and cost.

Gem Diamonds' CEO and founder, Clifford Elphick, said development of the 20.5 million carat mine was proceeding seamlessly. Once complete, Ghaghoo will become Gem Diamonds' twin star alongside its Letseng Mine in Lesotho.

'Some 200 people are on site and the shaft is being sunk as we speak,' Elphick said during a live webcast. 'So far, we have not hit any unexpected issue. Infact, the ground conditions are better than expected. The development is proceeding on a phased basis, but there are opportunities for us to increase the pace.'

Under current plans, Gem Diamonds is building an underground mine that will pump out approximately 100,000 carats per annum, stepping this up over time and possibly a different mining model to 780,000 carats per annum.

Chief Operating Officer, Alan Ashworth, expressed optimism of rising returns from Ghaghoo once mining commenced. At present, the project boasts an in situ or sitting value of US$4.6 billion (P31 billion), based on prevailing diamond prices.

'I believe very strongly that we are going to see an improvement in grade as we start mining, as well a higher price,' said Ashworth. 'There's an opportunity for a higher diamond price based on the fancy coloured diamonds, and we have had two blue diamonds in a sample collection of just over 3,000 carats.

'Once we start mining and have a larger parcel, we will have a better picture. Blue diamonds fetch quite high prices as we have seen at Letseng. It's impossible to obtain an accurate figure of the number of blue diamonds as proportion of total world carats, but that figure should have quite a lot of zeroes after the decimal point.'

Ashworth said as underground operations progressed, Gem Diamonds would continue studying 'the optimal way forward' in terms of recovering the precious stones. 'Are we going to leave the mine as it is or double production using the infrastructure we have? If there are very good results from Phase One, we may re-look the open pit model, which could have been US$500 to US$600 million (as previously estimated),' he said.In previous geotechnical studies, Gem Diamonds had mooted an open pit mine costing about P3.4 billion.

However, the plans were put on ice in April 2009 as the global financial crisis forced the UK-based miner to cut costs and focus on keeping existing operations afloat.

Provisionally, Gem Diamonds plans to run an underground operation at Ghaghoo for at least three years while understanding diamond price trends and building revenues for appropriate capital decisions on future recoveries at the mine.