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Botswana - Boteti Diamond Project
The Boteti AK6 kimberlite is an advanced diamond development project located in the Orapa/Letlhakane kimberlite district of Botswana. Lucara has a 60% interest in AK6 and is the project operator. The remaining 40% is held by African Diamonds.
The Boteti AK6 kimberlite consists of three lobes, South, Centre and North, of which the South Lobe makes up approximately 75% of the kimberlites' resource potential. The pipe has an area of 4.2 hectares at the surface which expands to 7 hectares at a depth of 120 meters.
An updated Feasibility Study details a cost effective technical solution with a process plant initially designed at a throughput rate of 2.5 million tonnes per annum ("mtpa") increasing to 4.0mtpa after 4 years. This phased production approach, combined with contract mining reduces up-front capital required to bring this project on stream.
From an Indicated Resource of 51 million tonnes ("mt") containing 8.2 million carats of diamond (Lucara News Release 24 March 2010), the mine design delineates Probable Reserve of 36.2 million tonnes of ore, containing 6.3 million carats of diamond in an open pit to a depth of 324 metres. The reserves are mined over an 11 year mine life.
The study indicates that the first phase will require a capital investment, including contingency, of US$120 million, which includes the process plant and all mine site and off-site infrastructure. Operating costs over the life of mine are estimated to be US$17.20 per tonne treated. The financial model, on an all equity basis using June 2010 costs, generates a free cash flow NPV (at 8%) of US$164 million and an IRR of 29%. Diamond revenue data used was from the recent March valuation (Lucara News release 24 March 2010). The execution schedule indicates that with work commencing in July 2010, diamond production is expected to ramp up to full design capacity during 2012.
Project engineering has been awarded to DRA Africa (PTY) Ltd ("DRA") and work has commenced. Work on weather sensitive tasks has commenced in the third quarter such as the upgrading of the mine access road and plant terracing.
Relocation of parties affected by the mine development has been completed in accordance with the Botswana Land Board assessment report as a minimum. Relocation and resettlement claims have been finalized to all parties' satisfaction.
Amendments to the diamond sales provisions of the mining license with the Government of the Republic of the Botswana ("GRB") have been concluded. The mining license was amended to allow the sale of the entire AK6 production of diamonds either through open tender sales or exclusive contract. A further amendment to the mining license pertaining to a revised start of commercial production has been submitted to the GRB. The Ministry of Mines has made their recommendation to the Minister and the formal approval of the amendment is expected by the end of the third quarter.
Plan Going Forward
Lucara intends to aggressively develop the AK-6 project in Botswana. The initiation of tasks defined in the project's Environmental Management Plan (EMP), which encompasses both environmental and socio-economic programs, will be an area of focus early in 2010 as we advance the AK-6 project and establish ourselves as a partner of choice in Botswana. Boteti will recruit key staff in Botswana to further foster relationships at all levels to ensure the successful integration of Boteti within the community and for the advancement of the EMP commitments.
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