The geological setting in which the Kimberlite pipe and main fissures are situated is favourable for the formation of diamonds.
An independent petrologist for concluded that the Kimberlite pipe is a hypayssal facies type and that 12 x G10 garnets, that were analysed suggests that the pipe is of “high interest with respect to diamond potential”.
An independent research firm extracted 6 diamonds from a small sample of 43,99kg. This indicates a very high diamond content if it is taken in account that diamond ore grade is measured in carats per 100 tons.
The diamond potential in the area in and around the pipe and the known fissures is therefore beyond doubt.
The size and grade of the resource is determined as is described below.
Pipe dimensions have been accurately determined by detailed magnetic survey and covers one hectare with a tonnage of approximately 8 million tons to a depth of 300m. He further observed 2 fissures and estimates that the area for each fissure is about 1.85 hectares. The tonnage to a depth of 300m will then be 9.3 million tons for each fissure, a total of 18.6 million tons for the 2 fissures. This gives a tonnage of 26.6 million tons in situ for the pipe and fissures
6 diamonds in a sample of 43.99kg. This indicates a remarkable high grade of 23 diamonds per ton or 2300 diamonds per 100 tons. The grade is 0.848 mg/43.99kg or 19.27 mg/ton or 1927 mg per 100 tons. One carat equals 200mg. Therefore the grade is 9.63 carats per 100 tons. This figure can obviously not be projected over the total resource, but it does indicate that the average grade over the resource will be high.
Estimated a grade of 20 carats per ton over 40 million tons.
This valuation is based on a discounted grade of 3 carats per 100 tons. Given the “geological address” and the limited but meaningful work that have been professionally carried out on the properties, it will be difficult to dispute this conservative estimate.
The cash value of the mineral rights on the properties is determined from royalties that the owners could have negotiated at the time of the exploration. Such royalties are calculated on the basis of 15% of the sales price of diamonds sold annually. The annual royalties are discounted at a rate of 15% pa to arrive at the net present value (NPV) at the expropriation date.
The resource can support a mine producing 2 million tons of Kimberlite ore per year for 13 years. The grade is assumed to be 3 carats per 100 tons. The diamond production will then be 60000 carats per year. The value is estimate at R3000 per carat. That gives a sales value of R180 000 000 per year. The royalty will then be R18 000 000 per annum at a rate of 10%, continuing for 13 years.
The NPV is then R100 496 645.
