Koffiefontein

Koffiefontein is one of the world's top kimberlite mines by average value per carat. The mine produces high-value diamonds, a regular proportion of which are beautiful white diamonds between 5 and 30 carats in size. The average value per carat achieved in the financial year to June 2010 was US$402, which is high compared to the world's kimberlite mines. In 1994, a 232.34 carat diamond was recovered at Koffiefontein, being the largest rough diamond ever produced by the mine.

Petra acquired Koffiefontein in July 2007 from De Beers for R81.9 million and, having conducted care and maintenance activities at the mine in the 12 months prior to completion, was able to bring the mine on stream immediately. This acquisition marked the initial implementation of Petra's strategy to become a significant diamond producer as historically, production had been solely from the Group's fissure mines. The acquisition has proved to be exceptional for Petra as Koffiefontein is now a significant contributor to Group revenue, and its high-value production is highly sought after in the international diamond market.

Koffiefontein vital statistics

Size of kimberlite pipe

11.1 hectares at surface

Commencement of mining

1870 (mining started in the form of small claims which were then amalgamated into the Koffiefontein mine)

Acquisition by Petra Diamonds

July 2007

Ownership

Petra Diamonds: 70%

Re-Teng Diamonds (Pty) Limited: 30%

Operator

Petra Diamonds

Total resources

6.0 million carats

Type of mining

Underground front cave

Depth of mining
(metres underground)

490

Status

Full production

Location

The mine is located at Koffiefontein, in the Free State Province of South Africa, 110 kilometres southeast of Kimberley.

Geology

The local geology consists of Karoo age shale and carbonaceous shale with intercalated dolerite overlying granite gneiss basement. The main deposit is a kimberlite ore body known as the Koffiefontein pipe which forms part of a cluster of kimberlite pipes and dykes that intrude Dwyka shales and Karoo dolerites. Adjacent to the Koffiefontein pipe is a second kimberlite ore body known as the Ebenhaezer pipe, which is approximately half the size, with a surface area of approximately six hectares.

Mining methods

The Koffiefontein pipe was originally mined as an open pit operation until 1981. On completion of the open pit operations, the pit had a surface area of 44 hectares and a diameter of 750 metres, plus a depth in excess of 270 metres. Thereafter underground development began and the ore is now mined from the underground workings using the front cave mining method to extract a 100 metre high block of ore between 37 level and 48 level/49 level. Petra is currently mining Block 1 at a depth of 490 metres. Block 2 extends down from 490 metres to 590 metres. In addition, the kimberlite pipe has been investigated by a drilling programme to a depth of 720 metres. Petra expects there to be significant additional resources below the 690 metre level (current resource statement depth) which should extend the existing mine life considerably.

Access to the underground operations is via the roadway decline down to 52 level (520 metres below surface) and via No.2 Main Rock Shaft. Hoisting is via a vertical shaft that extends to a depth of 620 metres. Preparation and execution for the next mining block at 58 level (590 metres below surface) is well advanced with the decline development already underway. This new mining area is scheduled to begin production by 2012. Sufficient development has been completed through the year to secure ongoing production until the new mining block comes online.

Operating review

	Unit	Year ended 30 June 2010	Year ended 30 June 2009	Change
Production
Diamonds produced	Carats	60,260	52,089	+16%
Grade	Cpht	6.0	6.6	-9%
Sales
Revenue	US$M	22.8	18.3	+25%
Diamonds sold	Carats	56,707	72,809	-22%
Average price per carat	US$	402	252	+60%

In the 2010 financial year, prices for Koffiefontein’s high value output recovered strongly in the 2010 financial year, with the average value per carat now back around the US$400 mark.

A lower average grade of 6 cpht in FY 2010 is the result of significant amounts of diluted front cave material being drawn from the main cave on the 480 level, whilst allowing the East cave, the West cave and the recovery level cave to reach maturity by pulling lower tonnages from these areas. Over the coming year it is anticipated that there will be a systematic decrease in reliance on the main cave material and underground ROM grade will improve.

Excess capacity created in the plant is being utilised by feeding material from the Eskom dump tailings, which is now fully operational and supplying significant ore to the main plant.

Outlook

Current production levels of 948,000 tpa will be maintained from the east and west extensions and the 52 level recovery section of the main pipe. Grades are expected to remain at current levels with a gradual increase to 8.7 cpht by the time the 58 level block comes into production. The programme to access the 58 level production area is well advanced. It is anticipated that annual tonnage production will exceed one million tonnes within three years and reach 1.2 Mtpa within five years. By continuing the deepening process to the 68 level, production at 1.2 Mtpa will sustain a life of mine in excess of 20 years, delivering 104,000 ROM carats per annum.

The 65 million tonnes (estimated 1.42 million carats) of tailings resource will be treated to fill the plant capacity to a total throughput of 1.6 Mtpa, yielding in excess of 10,000 carats per annum over the life of mine. Further investigation will be conducted to establish the feasibility of a dedicated tailings treatment facility.

There is a resource of 30 million tonnes (1 million carats) available at Ebenhaezer, a large undeveloped opencast resource adjacent to the main kimberlite pipe. The limited tonnes treated confirm a grade in excess of 3 cpht with the occurrence of good quality pink diamonds. Some 240,000 tonnes have been included in the 2010 and 2011 mining plans. The results of the treatment will assist in determining the optimal extraction rate, delivering diamonds in addition to the 114,000 carat production level stated above.

Reserves and resources (as at September 2009 Resource statement)

Category	Gross			Net attributable
	Tonnes (millions)	Grade (cpht)	Contained Diamonds (millions)	Tonnes (millions)	Grade (cpht)	Contained Diamonds (Mcts)
Diamond reserves per assets
Proven	17.660	3.50	0.619	12.362	3.50	0.433
Probable	18.482	8.76	1.618	12.938	8.76	1.133
Sub-total	36.143	6.19	2.237	25.300	6.19	1.566
Diamond resources per asset
Measured	–	–	–	–	–	–
Indicated	12.440	7.84	0.976	8.708	7.84	0.683
Inferred	90.417	3.04	2.751	63.292	3.04	1.926
Sub-total	102.857	3.62	3.727	72.000	3.62	2.609
Total			5.964			4.175

Notes:

1. Resource bottom cut-off (Koffiefontein underground and Ebenheazer): 0.5mm
2. Resource bottom cut-off (Eskom tailings):1mm
3. Reserve bottom cut-off: 1.2mm