The Kono project has produced its first 1,000 carats to be bought at a commercial tender placed through Petra's normal channels, these early offerings are hoped to be the prelude to even more diamonds from this developing mine in Sierra Leone.
With the Pol-K shaft in-situ kimberlite grade increased to 66 carats per hundred tonnes, and the Bardu shaft in-situ grade measured at 75cpht, the companies involved in the JV - Petra and Mano River (which owns a 63.2% stake in Stellar) are optimistic that the Kono project will provide a healthy profit margin. Up until now results from the developing mine have supported their confidence.
As Petra has already completed a 3,167 line km electromagnetic survey over the Sierra Leone-based project, we can expect a more detailed view in the future from the partners drilling of their designated target areas. They hope that the follow-up, due to begin shortly, will uncover even more resources. Based on preliminary results and Sierra Leone's other diamond mines this would appear to be likely unless the mines promised potential turns out to be unsupportive.
Still, an average recovered diamond grade of around 0.65 carats per tonne makes the Kono project a venture to watch and the first commercial tender of roughly 800 carats, planned for this August, along with stope trial mining at the Pol-K shaft, will give an early indication of the likely minimum value of the Pol-K stones. This will allow the JV to produce a far more accurate forecast off the project's potential revenue. A second, larger, tender dealing diamonds from the Pol-K stope is being scheduled for October, showing signs that the Kono project is well on its way to becoming a formal mine.
Karl Smithson, CEO of Stellar Diamonds, has expectations that Kono's product might sell for US$200 per carat which could be thought slightly conservative, considering that the Koidu mine, which is on the same dyke system as Kono, is currently running at US$230 per carat and if the operating costs work out as expected at US$50 per tonne, then Kono could become a valuable asset. However the usual problems in mining a kimberlite dyke could come into play to increase the JV's overheads and lower its margins against the strong diamond market.
This could prove to be a bigger problem for Kono than other mines. Petra will be hoping that the trial will soon be paying for itself as the JV's diamond production continues to ramp up towards its full potential. But a sudden change in the diamond market, or unforeseen difficulties at the trial mine itself, could quickly overtake the JV if its owners have not prepared their budget on the side of paranoia.
Petra and Mano River will also need a stable environment for their enterprise - Sierra Leone has had a long history of conflict, much like many of the African countries around it, including a five year long civil war from 1997 that forced most legal mining to a grinding halt. The JV partners will not feel too threatened by the situation however; U.N. peacekeepers felt safe enough to leave in 2005 and only last year the country underwent democratic elections.
The Kono project will not make or break either of the companies - both have enough producing mines, developing projects and, perhaps most importantly, working capital to be able to see this venture through.