THE DIAMOND PAGE — Kensington reaches deal to buy South African diamond mines

A wholly owned subsidiary of Diamond Fields Resources (TSE) will sell its Loxton Dal and Frank Smith diamond mines in South Africa to

Saskatchewan-oriented diamond and nickel explorer Kensington Resources (VSE).

Kensington has agreed to pay the international subsidiary of Diamond Fields US$2 million and issue 200,000 special warrants at a deemed value of $3.50 per warrant. Each special warrant will be exchangeable, at no additional consideration, into one common share of Kensington.

Diamond Fields acquired the producing Loxton Dal and Frank Smith mines in 1994. The mines are a respective 25 km to the northeast, and 80 km to the northwest of Kimberley in the district of Barkly West. Both mines started out as open-pit operations before evolving into underground operations using inclined chambering and caving methods.

The Loxton Dal mine was estimated in January 1994 to contain a proven and probable reserve of 1.3 million tonnes grading 0.45 carat per tonne.

Intermittent production since then has yielded an average run-of-mine grade of about 0.17 carat per tonne. The mine is known for its high yields of gem-quality diamonds, the average value being US$80-100 per carat.

Diamond Fields suspended operations at Loxton Dal from September 1994 to April 1995 so that equipment could be upgraded and new underground workings developed. Capital expenditures up to the fiscal year ended June 30, 1995, amounted to $3.2 million. A total of 3,426 carats were recovered from 35,400 tonnes of material during the same period.

Mining operations were again suspended in September 1995 following a rock fall at the 183-metre level of the mine. A block caving mining method was implemented, which necessitated construction of a ramp between the 183- and 204-metre level.

Loxton Dal is ready to resume production, with an increased capacity of about 25,000 carats per year.

The Frank Smith mine has comparatively lower yields than Loxton Dal but produces larger, higher-grade stones with a value averaging US$150-200 per carat.

In January 1994, proven and probable reserves were estimated at 5.7 million tonnes grading 0.0543 carat per tonne. Diamond Fields suspended operations at Frank Smith in April 1995 pending the resumption of full production at Loxton Dal.

For the year ended June 30, 1995, Frank Smith recovered 2,441 carats from 65,994 tonnes of material. Diamond sales from production at both mines yielded Diamond Fields $831,883. For the nine months ended March 31, no diamond sales were reported.

Diamond Fields International intends to focus on its offshore diamond concessions in Namibia and South Africa. The company regards its Luderitz sea concession, a 660-sq.-km area covering 55 km of the Namibian coast, as its most important diamond asset.

BHP Minerals and partner Benguela Concessions can earn a 50.1% interest in the concession by completing a bankable feasibility study by August.

Kensington intends to use the proceeds of a proposed private placement of up to 2.2 million special warrants at a price of $3.50 each for the acquisition and development of the diamond mines.