Kimberley Diamonds Ltd, the Australian company that owns Lerala mine in the Central District of Botswana has affirmed its status as a going concern, but stated it was committed to commissioning the project.
The ASX listed junior miner said the mine will come into production in the middle of 2015 and is forecast to produce an average of AUD$44.4 million (about P355 million) of revenue per annum to the company.
Its annual report confirmed the company ‘is a going concern’, however, revealed it has realistic plans supported by financial modelling for continuance of its operations adding that neither the company nor any of its subsidiaries are insolvent.
“The company will need to raise capital to fund its future plans, including the re-commissioning of the Lerala Diamond Mine in Botswana. Management noted in the Annual Report that there is a degree of uncertainty in relation to the company as a going concern in the future given that such funding has not yet been raised,” KDL said in a note to the market.
“It is standard practice in the market to make such disclosure. However, that does not mean that the company is insolvent or that the company is not a going concern. The Board and Management team believe that the company will raise the necessary funds as and when required and will continue its operations,” it added.
The company’s share price has tumbled since the release of its Annual Report on 30 September 2014, which affirmed KDL as a going concern.
The Aussie company was last month forced to deny rumours it was planning to sell Lerala mine. “Such rumours are not true. KDL has no intention of selling Lerala. Such transaction has not been considered by the Board or the management of KDL at any point and has never been discussed with any external parties.”
The Lerala Diamond Project will produce an average of 357,000 carats per annum and result in AUD$7.6 million cash generated in the first year of production and AUD$16.5 million in the second year of production.
The project will have a mine life of 7 years and KDL said it will be undertaking an exploration program and believes it is possible that the life of the Lerala Diamond Mine may be extended beyond the estimated 7 year mine life.
The mine will be contract mined and consultants have been engaged to provide Lump Sum Turn Key pricing for the recommissioning of the operation and environmental consultants to analyse and advice on Health, Safety and Environmental aspects of Lerala.
KDL Managing Director Noel Halgreen told a Botswana Resources Conference in June that they will be successful with Lerala because the second group that ran the mine ‘has done a good review’, which allows operational readiness. He said the two groups had clean starts without operational readiness.
“We have the reasons of the previous failures and we can solve the problems easily. We have done alternative reviews and done extensive changes on what needs to be done,” Halgreen told the conference.
The company recently published the 2014 Ore Resource and Mineral Reserve Statement which showed that Lerala mine contains 3.253 million carats valued at an average price of $74 per carat.