DiamondCorp again mulls options as downpour halts production

JOHANNESBURG (miningweekly.com) – Aim- and AltX-listed DiamondCorp is consulting a business rescue practitioner regarding its Lace Diamond Mine operating subsidiary, as part of options it is considering in light of having to suspend production at its Free State-based Lace mine, which was flooded in heavy downpours on Friday.

The company on Monday said almost 90 mm of rain had fallen at the mine within an hour, which equated to nearly one-third of the rain the mine usually experiences in a year.

The rainfall overwhelmed the mine's pumping systems, flooding the 310 m production level to the hanging wall.

In total, more than 10 000 m³ of water is estimated to have entered the mine through the openpit and access ramps.

DiamondCorp stated that while all personnel were successfully evacuated from the mine without injury, it would take at least a week to pump the mine dry to production level, assuming no further material rainfall.

However, once the level is dry, no production will be possible in the short term as the longhole drill rig, which was operating at the time of the flood will have to be recovered and the electrics rebuilt. This could take up to 12 weeks from the time of recovery.

“Management is investigating all options as a consequence of the above and its impact on the group’s financial position,” it stated.

The company further requested a suspension of its shares from trading on both the JSE and the LSE.

Analysts at SP Angel have called on fellow mining companies that may have a spare longhole drill available to lend it to DiamondCorp.

"The company is acutely short of cash but we reckon the loan of a rig is worth more than a few shares not to mention the satisfaction and goodwill associated with saving the jobs of quite a number of mineworkers.

"It is at times such as these that our brother miners should dust off their boots and get stuck in. There are good people at the Lace mine and they really deserve the help," the analysts commented.

This was the latest in a series of events to negatively impact the Lace mine and DiamondCorp.

The company’s shares fell significantly last month when it announced that the ramp-up to full commercial production of 30 000 t/m would be delayed to February 2017 as a result of continued operational setbacks. Its shares took another beating a day later when it reported a Section 54 shutdown of the mine following a fire incident on a dump truck.

These events led to a third party, with which DiamondCorp was in discussions with regarding a £500 000 convertible debt facility to remain a going concern, terminating discussions.

However, after DiamondCorp announced that it would consider selling its Lace mine, it secured a £700 000 Shariah-compliant convertible financing facility with investment management firm Rasmala.

The company announced just last week that it would no longer sell the Lace mine, in light of having secured the funding from Rasmala, and as the offers it had received “undervalued” the company.