Camafuca wins final approval

Angola’s Council of Ministers has approved the operating agreement for the Camafuca diamond project, 20 km southwest of Lucapa in Lunda Norte province. The council also OKed the creation of Sociedade Mineira do Angola, which will operate the project.

A feasibility study in late 2000 estimated total inferred mineral resources at 209.5 million cubic metres averaging 0.11 carat per cubic metre, equivalent to 23.2 million carats of diamonds valued at US$109 apiece. The resource runs to a depth of 145 metres.

The initial mining plan calls for the dredging of 6.1 million cubic metres running 0.18 carat per cubic metre over five years. The targeted area comprises the southeastern portion of the Camafuca kimberlite.

Mined material would be pumped in slurry form to a land-based dense-media-separation plant. The cost for the dredge and plant are pegged at US$16 million. Operating costs are estimated to be US$55 per carat, based on diamond evaluations of US$117 per carat. Annual recovery is pegged at 220,000 carats.

Construction of the dredge and processing plant would begin once mining licences are in hand; production would gear up in about one year.

With cash flow of US$40 million and an internal rate of return of 185%, payback is anticipated in a year.

SouthernEra Resources (SUF-T) holds a 32% carried interest in the project and has been relieved of two 7% net profit interests owing to third parties. Welox, a private Hong Kong-based company affiliated with the Leviev diamond-trading group, has a 33% stake. The remaining interest in the project is divided between Empresa Nacional de Diamantes de Angola (Endiama), with 20%, and Sociedade Mineira do Lucapa, with 15%.

Welox will fund all of the capital required for mine development.

SouthernEra recently closed a bought deal with a syndicate led by National Bank Financial and BMO Nesbitt Burns for gross proceeds of $48.6 million.

A portion of the proceeds will be used to extend the Voorspoed Main shaft bottom, at the Messina platinum group metals mine in South Africa, to 730 metres from its current depth of 432 metres. The US$22-million project is designed to boost phase-1 production by 50%, and calls for production to hit 80,000 tonnes per month by the end of the third quarter of 2003. The monthly rate is expected to hit 120,000 tonnes by end of the 2004 first quarter.

The company also plans to boost its 70.4% stake in the mine’s owner, Messina Ltd., via a rights offering.