Kono

Kono is a fissure kimberlite exploration project at an advanced stage of development.

Kono vital statistics

Size of concession:

127.57 km²

Date acquired by
Petra Diamonds:

May 2005 (further to the merger with Crown Diamonds NL)

Ownership:

Petra Diamonds 51%, Stellar Diamonds 49%

Operator:

Stellar Diamonds

Status:

Advanced exploration

Location:

Kono district, in the Eastern Province of Sierra Leone

Geology

Diamonds were first discovered in the Kono district in 1930. Subsequent exploration defined extensive alluvial diamond fields, with an exceptionally rich group of deposits in the Koidu area. The kimberlites found in Sierra Leone are generally fissure style deposits, the narrow and vertical root zones of kimberlite pipes where the top area has been eroded away. More than one type of kimberlite can be present within fissure systems (multiple intrusive phases in both space and time) and the continuity and complexity of the kimberlite lenses is dependent primarily on the characteristics of the host rock.

Review of progress

In May 2009, Petra made a decision with its joint venture partner Stellar to place the Kono kimberlite fissure project on temporary care and maintenance. This decision will be reviewed by both parties when the rough diamond market improves sufficiently to achieve a more reasonable sales value for the Kono trial mining production.

The Kono project is currently sole-funded by Stellar and is at an advanced stage of exploration, with underground trial mining having been undertaken at the Pol-K and Bardu kimberlites. Despite the encouraging grades and diamond quality encountered at Kono, it was not considered sustainable to maintain the development and trial mining until diamond prices return to a more appropriate level.

A total of 4,213 carats of diamonds have been produced from trial mining at Kono to date. Of these, the Pol-K shaft has yielded 3,209 carats and the Bardu shaft 867 carats. The balance came from other kimberlites that were tested, but have not yet been developed further.

In September 2008 the first, small parcels of 810 carats from Pol-K and 253 carats from Bardu were sold at average prices of US$152 and US$52 per carat respectively, or a combined average of US$128 per carat. In May 2009, a sale of 2,694 carats was completed, represented by Pol-K (2,163 carats) and Bardu (531 carats). This parcel realised an average of only US$46 per carat, a significant discount to the September 2008 sale and symptomatic of the weakness of the diamond market. In June 2009 a smaller parcel of 271 carats was sold for an average of US$85 per carat, indicating slightly improved market conditions.

Outlook

Petra and Stellar may elect to re-start operations at Kono when the rough diamond market improves sufficiently to achieve a more reasonable sales value for the Kono trial mining production. Petra has until 31 December 2009 to elect to refund Stellar for the 51% of the continued exploration and development costs incurred since 1 January 2009, or alternatively to dilute its interest in Kono.

The project has no carrying value in Petra's balance sheet and therefore there are no impairments to be recognised by Petra with regards to the care and maintenance decision.