Diamond Fields seeks damage control

Hoping to win over skittish investors, Diamond Fields International (DFI-T) has released new results from its marine diamond project off the coast of Namibia that suggest things are not as bad as its former partner’s recent departure implies.

A few weeks back, Trans Hex Group of South Africa suddenly pulled the plug on the year-old partnership after failing to win concessions on specified mining recovery rates. The pair had agreed to work together for seven years.

Partly justifying its decision, Trans Hex referred to unexpectedly difficult geological and mining conditions in the Marshall Fork deposit. The veteran alluvial diamond miner noted it had recovered 27,000 carats in the first 11 months of operations, which began in May 2001, for an average monthly rate of 2,454 carats.

Diamond Fields chalked up the dispute to money and has since announced that recoveries in the final three months of the partnership improved by 23% over the previous three, when mining had been switched to the western limb. The 6-month average was 3,833 carats, which puts the western section’s recovered grade at 1.14 carats per sq. metre — 13% higher than feasibility predictions.

The discrepency with Trans Hex reflects the company’s omission of the final three months and its inclusion of the first seven months of operations, when 16,578 carats were sucked up from the eastern limb. But in late March, Trans Hex still downgraded its production forecast for the next year to 45,000 carats, indicating its firm grasp of the situation.

Diamond Fields also remains confident of the western limb’s geological model and further notes that recoveries jumped by as much as 200% when high-pressure water jets were employed. The jets were available for only 70% of the final six months, having been installed by Trans Hex after the year began.

That being said, Diamond Fields plans to equip both its own planned vessels with the jets and revisit those areas not picked clean by Trans Hex. If all goes as planned, the first vessel will be launched early in the new year and sport dual 24-inch airlifts, versus Trans Hex’s 20-inch pipes.

The Overseas Private Investment Corporation, a U.S. governmental agency, has agreed to finance the foray to the tune of US$15 million. The closing date is set for mid-August.

In 2000, engineering firm MRDI, a division of AMEC E&C Services, pegged Marshall Fork’s indicated resource at 1.4 million cubic metres grading 0.3 carat per cubic metre. The resource is spread over 865,000 sq. metres and excludes inferred material of 540,000 cubic metres at 0.27 carat.

Indicated resources at the Diaz Reef feature, to the south, stand at 3.6 million cubic metres averaging 0.13 carat, spread over 2.13 million sq. metres. An inferred resource adds 776,000 carats to the overall deposit.

The resource calculations are based on sampling programs carried out by BHP and De Beers Marine. Each estimate assumes a cutoff grade of 0.15 carat per sq. metre, a diamond price of US$175 per carat, and overburden.

At presstime, Diamond Fields shares were trading at a new 52-week closing low of 45, having rebounded from an intra-day low of 40. The junior has lost 40% of its total market value since Trans Hex announced its departure.