BDI Mining reports Q2 Indonesian mining activities
Saturday, September 23 2006 - 02:39 AM WIB
The first half of 2006 witnessed the continued development of the Cempaka Diamond Mine in Indonesia. The mining of the Danau Seran channel (the smaller northern tributary to the Cempaka main channel) achieved steady state production during the period.
With average monthly recoveries of between 3,500 - 4,000 carats, and the company recently announcing the production milestone of 50,000 carats recovered since commercial-scale mining began in 2005, these figures prove that the operational systems adopted at Cempaka are extremely effective in the difficult mining conditions encountered locally and provide us with the confidence to move forward as we seek to develop the mine. In addition, the recovery of 499 ounces of gold and platinum concentrate generated strong by-product credits which helped off-set the operating cost base, facilitating further improvement in Cempaka's performance.
Looking forward, the strategy will be to apply the successful methods utilized at Danau Seran at an increased production rate in the 1.6km wide, 10km long Cempaka main channel. The main channel hosts a resource of over 1.3 million carats (NI43-101 compliant) of gem quality diamonds, and the initial stages of this expansion will see processing plant throughput increased to 50,000 bcm (bench cubic metres) of diamond bearing gravels per month from the current level of 30,000 bcm per month.
The expanded production rate is being implemented to derive operating efficiencies through improved economies of scale. With an eventual production target of 100,000 carats per year, the mine is estimated to have a life well in excess of 10 years. The processing plant modifications required for the expansion are currently in progress, while the pre-stripping of overburden ahead of first diamondiferous gravel removal in the fourth quarter of 2006 has also begun. Drilling of the Cempaka Channel continues with the aim of defining the channel boundaries ahead of Phase II mining.
During the period, the company made tenement applications covering over 29,000 ha of potential diamond bearing palaeochannel gravels 3km to the north of current Cempaka operations. The application covers what the Directors believe to be an interpreted diamondiferous palaeochannel which is similar in both geological setting and dimensions to the Cempaka channel, and is believed to consist of alluvium from the same hard rock source as that which contributed to the Cempaka deposit.
During the period under review, the company reported a loss of US$2,217,000 (2005: Loss of US$3,381,000).
A total of 20,812.53 carats of gem diamonds were sold in the period, generating revenue of US$4,619,511. Sales volumes were in line with the initial forecast production rate of 40,000 carats per annum stated for Cempaka. Despite the sales volumes achieved, escalating fuel and power prices in Indonesia, extended wet-season conditions and the mining of lower-grade blocks during the earlier part of the year negatively impacted Cempaka's operating unit costs.
Furthermore, soft market conditions for rough diamonds reduced the sales revenue received over the corresponding period. Despite these factors, management is confident of its ability to overcome these operational hurdles, and believes the current market conditions for rough diamonds to be short term. It is the Directors view that there exists a shortfall between global supply and demand of diamonds in the next decade, which indicates that over the medium to long term, conditions will improve. (end of excerpt)