Open pit mining at Williamson in Tanzania

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Finsch

Overview

Finsch is one of the world’s important diamond mines and South Africa’s second largest diamond operation by production. The mine benefits from state-of-the-art mining infrastructure, including a modern processing plant which was recently upgraded at a total cost of approximately US$100 million.

Finsch is a major producer, having supplied over 127 million carats in its 40 plus year life to date. Petra is currently implementing a development plan to lift production from ca. 1.89 million carats per annum to ca. 2 million carats per annum by FY 2017.

Finsch has produced large, special diamonds in its history and produces a number of +50 carat stones annually. In addition, the mine is known for highly commercial goods of +5 carats and is rich in gem quality smaller diamonds.

Key Facts
Location Northern Cape Province, South Africa
Size of kimberlite pipe at surface 18ha
Mine start date 1967
Acquisition by Petra Diamonds September 2011
Ownership Petra Diamonds Limited: 74%1
Senakha Diamonds Investments (Pty) Ltd: 21%
Petra Diamonds Employee Share Trust: 5%
Total Resources
(inclusive of Reserves)
51.31 Mcts
Current depth of Resources 1,000m
Mining Method Block cave and sub level cave
Depth of current mining 630m
Mine Plan 16 years
Potential Mine Life +25 years

1 Other than the percentage interest above, Petra has an interest in Sedibeng Mining, one of its BEE partners – refer document ‘Effective Interest in Mines’ here

History

The Finsch kimberlite was discovered in 1960 and the mine was officially opened in 1967. Ore extraction was initially from the open pit. Sinking of the main shaft to access the mine from underground started in 1978. Two vertical shaft complexes, tunnels and ground handling infrastructure were prepared for the continuing exploitation of the pipe with the use of highly mechanised mining methods. In 2008 the treatment plant was upgraded at a cost of approximately US$100 million.

On 14 September 2011, Petra purchased Finsch as a fully-staffed, operating mine from De Beers.

Reserves & Resources
Category Gross
Tonnes (millions) Grade (cpht) Contained Diamonds (Mcts)
Reserves
Proved
Probable 49.7 56.5 28.04
Sub-total 49.7 56.5 28.04
Resources
Measured
Indicated 46.3 64.5 29.89
Inferred 38.9 55.1 21.42
Sub-total 85.2 60.2 51.31
  1. Resource bottom cut-off: 1.0mm.
  2. Reserve bottom cut-off: 1.0mm.
  3. Block 4 Resource tonnes and grade are based on block cave depletion modelling and include external waste.
  4. Block 5 Resource stated as in situ.
  5. Changes in Resource figures due to depletions and re-calibration of the Block 4 PCBC Model.
  6. The Block 4 PCBC model has been re-calibrated to correct for historical over-depletion and refined to better account for the South West Precursor ore that is now included in the Block 4 Block Cave material due to sidewall collapses in the open pit above Block 4.
  7. Block 5 Reserves are based on PCSLC and PCBC modelling of new Sub-Level Cave and Block Cave designs.
FY 2014 Results
  Unit FY 2014 FY 2013 Variance
Sales
Revenue US$m 183.7 160.6 +14%
Diamonds sold Carats 1,856,939 1,336,418 +39%
Average price per carat US$ 99 120 -18%
ROM Production
Tonnes treated Tonnes 2,910,195 2,609,935 +12%
Diamonds produced Carats 1,109,022 890,360 +25%
Grade1 Cpht 38.1 34.1 +12%
Tailings Production
Tonnes treated Tonnes 2,668,278 2,600,611 +3%
Diamonds produced Carats 776,138 522,106 +49%
Grade1 Cpht 29.1 20.1 +45%
Total Production
Tonnes treated Tonnes 5,578,473 5,210,546 +7%
Diamonds produced Carats 1,885,160 1,412,465 +33%
Costs
On-mine cash cost per tonne treated ZAR 146 139 +5%
Capex
Expansion Capex US$m 50.7 33.5 +51%
Sustaining Capex US$m 12.3 10.6 +16%
Borrowing Costs Capitalised US$m 4.8 4.5 +7%
Total Capex US$m 67.8 48.6 +40%

Note:

1. The Company is not able to precisely measure the ROM / tailings grade split because ore from both sources is processed through the same plant; the Company therefore back-calculates the grade with reference to resource grades.

Finsch performed strongly for the Year, contributing 1,885,160 carats (FY 2013: 1,412,465 carats) and revenue of US$183.7 million (FY 2013: US$160.6 million).

The 33% increase in production for the Year is attributable to a 12% increase in ROM tonnes treated coupled with changes to the plant. As previously reported, Petra lowered the plant bottom cut-off at Finsch in Q4 FY 2013 in order to capture the high quality smaller stones present within the orebody. This resulted in a higher estimated ROM grade of 38.1 cpht in FY 2014 (FY 2013: 34.1 cpht) (which is expected to stay effectively flat for FY 2015) and a higher estimated tailings grade of 29.1 cpht (FY 2013: 20.1 cpht).

Costs:
The on-mine cash cost of ZAR146/t (FY 2013: ZAR139/t) at Finsch was in line with management’s expectations. Above-inflationary cost pressures associated with labour and electricity were partially offset by increased levels of throughput resulting in a 5% unit cash cost increase compared to South African CPI of 6.0%.

Capex:
Capex of US$67.8 million for the Year (FY 2013: US$48.6 million) reflects the progression of the expansion project and associated underground development in FY 2014, as mentioned above. The majority of sustaining Capex was spent on the replacement of equipment reaching the end of its useful life.

Mine Plan

Petra’s development plan at Finsch is due to increase production from 1.89 Mct in FY 2014 to ca. 2 Mctpa by FY 2017. Petra’s initial mine plan has a life of 16 years, but resources in  Block 6 and the adjacent Precursor kimberlite, which sits next to the main body of the Finsch kimberlite pipe, are expected to prolong the actual life of mine (“LOM”) for considerably longer. The mine has a significant gross resource of 51.3 Mcts.

Production is currently entirely from Block 4 on the 630 metre level (“mL”), which is a mature block that has been largely mined out, resulting in the ore being heavily diluted with waste rock. In order to provide earlier access to undiluted ore before the main Block 5 Cave is put in place, Petra will use the sub level cave (“SLC”) mining method over four levels in Block 5 from 700 mL to 780 mL. The new Block 5 Cave will then be installed at 900 mL. A schematic of the Finsch mine and orebody is available on Petra’s website at: http://www.petradiamonds.com/investors/analysts/analyst-guidance.

On 18 August 2014, Petra announced a value accretive scope change at Finsch which will provide for the enlargement of the mining area of the Block 5 SLC and the acceleration of the ramp-up to its steady state production level of 3.5 Mtpa by FY 2018 as opposed to by FY 2021. This has been made possible by enlarging the footprint of the SLC, as well as by opening up access from the 630 mL to the 780 mL to mine the South West Precursor.

The scope change has added ca. ZAR160 million to the mine’s FY 2015 Capex, however Petra’s internal company models show that it enhances overall project NPV (10% discount rate) by ca. US$100 million on a 100% attributable basis. It has also served to defer the capital required for the main Block 5 Block Cave, reducing overall expansion capital by ca. ZAR350 million for the period FY 2017 to FY 2019 compared to previous guidance.

During FY 2014, the development of the declines at Finsch continued apace, with a total of 4,055 development metres delivered during the Year (FY 2013: 2,311 metres). Raiseboring activities continued throughout FY 2014 and yielded 302 metres (FY 2013: 165 metres).

As the mine’s production profile gradually changes from diluted to undiluted ore, the ROM grade is expected to increase to ca. 46 cpht by FY 2016 and to ca. 58 cpht from FY 2017 onwards (up from previous guidance of 56 cpht, more accurately reflecting the impact of the plant changes).

The Block 5 Block Cave expansion capital (post FY 2019) is guided at ca. ZAR260 million per annum (FY 2015 money terms) to be incurred over the five year period FY 2020 to FY 2024, with this new block cave contributing 3.5 Mtpa from FY 2023 / FY 2024 up to FY 2030 at an average recovered grade of ca. 60 cpht.

Treatment of the ‘Pre 79 Tailings’ is planned at 2.6 Mt for FY 2015 and is expected to be mined for a further three years (including FY 2015) at a grade of 27.3 cpht (also increased from prior year guidance as a result of the aforementioned plant changes). The Pre 79 Tailings grade is guided at ca. 25 cpht for FY 2016 and ca. 22 cpht for FY 2017.  The treatment of the ‘Post 79 tailings’ material has been removed from the mine plan.

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