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Botswana-AK6 Diamond Project
The Boteti AK6 kimberlite is an advanced, high value diamond development project located in the Orapa/Letlhakane kimberlite district of Botswana. Lucara holds a 100% interest in the AK6 project.
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.
In June 2010 an updated feasibility study updating previous work to a confidence level to support project approval was completed. The study detailed 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 4.0 mtpa after 4 years. This phased production approach, combined with contract mining reduces up-front capital required to bring this project on stream.
A formal decision was made in 2010 to proceed with the construction of the AK6 diamond mine which is estimated to require a capital investment of approximately US$120 - US$130 million ( based on ZAR:US$ exchange rate of 7.00 to 7.50), which includes the process plant and all mine site and off-site infrastructure.
Project development activities commenced upon completion of the feasibility study with the selection of Dowding Reynard and Associates ("DRA") as the engineering, procurement and construction management contractor. The project development focus areas in 2010 were the critical path activities to ensure that ramp up to full production in the first quarter of 2012 is achieved. The earthworks contract for the site civil works and the access road upgrade was awarded and the contractor mobilized to site in September 2010.
During 2010, parties affected by the mine development were relocated in accordance with the Botswana Land Board assessment report as a minimum. Relocation and resettlement claims were finalized to all parties' satisfaction.
Agreements were reached with Botswana Power Corporation for the supply of power to project and Debswana Diamond Company (PTY) Ltd, to use their existing construction camp. The bulk power line contract was put out to tender and the contract was awarded in March 2011.
Amendments to certain provisions of the mining license with the Government of the Republic of the Botswana ("GRB") were 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, the removal of the commercial production start date and the mine lease area expanded.
Construction has advanced from 55% complete at the end of Q2, 2011 to 84% complete at the end of Q3, 2011. This is as per the August re-baselined schedule, which reflects the impact of the steel industry strike in July. During the quarter, engineering, procurement and fabrication were essentially completed in support of construction activities and the focus of the EPCM contractors and Boteti is fully on the AK6 project site activities. The project is still trending within the initial capital budget, and expenditure to end Q3, 2011 is 46% of budget with a total of 83% of the approved capital budget being committed.
In addition to the civils, structural and mechanical activities, in Q3, 2011 building works, piping and electrical installation contractors commenced work on site. By the end of Q3, 2011 over 3km of piping around the open pit and to the process plant raw water dam had been installed. Equipping of the required eight dewatering wells is on schedule for delivery of water to the process facility for commissioning. The medium voltage (MV) and low voltage (LV), communications and instrumentation contracts have been awarded. The MV contractor has mobilized to site and work is progressing well. The LV, communications and instrumentation contractor will be mobilizing to site in October.
The AK6 sub-station is currently being commissioned and the overhead power-line from the Orapa sub-station to site has been completed. The permanent tie in at the Orapa substation will be completed before the end of October. Initial grid power for commissioning activities will come from a temporary tie in to the Letlhakane line by end of October.
The owner's team has made excellent progress with recruitment of key operations personnel for site. The mining contractor has mobilized to site and the sinking cut for the first production bench has commenced - the first blast in the pit took place on October 8. Extraction and stockpiling of ore will start in October in preparation for commissioning activities early in Q1, 2012. The plant operations and maintenance contractors are busy mobilizing to site and have commenced local recruiting. The contracts management team is working with the Boteti metallurgical team on finalizing operational and critical stores holdings and operational procedures.
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