Australian diamond miner DiamonEx Ltd. was on Thursday readying itself for first production at its 100% owned Lerala project in Botswana, as the diamond-rich southern African country moved towards releasing its gem-mining sector from the clutches of De Beers.

All major civil works at the processing plant at the Lerala diamond mine are complete, the AIM-, ASX- and BSE-listed company announced in London on Thursday. The commissioning phase of the plant began on April 23 and would end on June 26, after which it would produce some 10,000 carats for its first gem sale scheduled for July.

During the current commissioning period, around 30,000 tons of ore would be processed, said the company, with full ramp up of production and plant optimisation from July.

At present the Brisbane-based company has stockpiled some 200,000 tons of ore ready for hot commissioning and processing. Monthly throughput is around 100,000 tons of ore in full production, it said.

We are extremely pleased to announce that commissioning at Lerala is running smoothly with only a few delays arising from the late arrival of ancillary plant items to the site, said Managing Director of DiamonEx, Dan O'Neill. The Board together with the site staff, and the local and wider Botswana community, wait in eager anticipation for the commencement of full production.

DiamonEx acquired Lerala, which is located in southeastern Botswana, in a tender process in 2002. The property is a kimberlite deposit that was first discovered by De Beers, which defined a 3-million carat resource in the early 1990s but later abandoned the project saying it was not economically viable to mine.

A feasibility study, which was completed at the end of 2006, pointed to a mine with a 10-year life producing 330,000 carats a year and costing US$24-million. Subsequent testing by DiamonEx has since seen the grades revised upwards and the indicated resource increased to 3.7 million carats at an average grade of 27.41 carats per hundred tons.

The mine has a purpose built Dense Media Separation Plant (DMS), with a 200 ton per hour throughput capacity that utilises state-of-the-art HPGR crushing technology. DiamonEx recently installed 12 synchronised 400 kVa generators (4.8MW) to ensure that the Lerala mine will not be affected by electricity supply problems currently being experienced in southern Africa.

DiamonEx paid for the construction of Lerala with a mixture of equity and debt. A convertible loan of A$10-million was raised last year with interest payable of 13% per annum over its four-year life. 10% of the loan can be converted into shares. An eight-year €5-million debt facility was also taken out.

Sales will be conducted 10 times a year through WWW International Diamond Consultants Ltd, and the prospects for the mine are good given the constant increase in rough diamond prices.

WWW IDC forecasts long-term growth taking into account the downturn in the US economy. The average price received is expected to be US$58 per carat this year suggesting revenues of US$19-million in the first year increasing to US$30-million plus with the forecast growth in diamond prices, according to experts.

Botswana's diamonds already command an average of around US$100 per carat while the world's average is around US$70 per carat. The steady growing diamond demand curve matched by a sliding supply curve supports the view that DiamonEx's profit margin will grow considerably over the course of the next few years and beyond.

Another prospect DiamonEx is looking at is in the Martin's Drift area in eastern Botswana. The company says soil sampling for kimberlitic indicator minerals continues immediately south of the Kimberlite Pipe K002 along an East-North-East trending structure that intersects the overall Lerala kimberlitic pipes on a North-North-East trend. Results from further sampling are expected by June.

Meanwhile DiamonEx's Tuli Prospecting Licences, also in Botswana, have included significant datasets of previous sampling carried out by De Beers and Rio Tinto. The datasets have now been incorporated into the Tuli project database. Validation of positive kimberlitic minerals identified from this work is being carried out prior to follow-up sampling.

DiamonEx submitted new applications in Botswana during the first quarter for two additional prospecting licences for diamonds in the Orapa and Gope North areas. The company plans to submit additional applications during the year.