DiamondCorp’s troubles continue

JSE- and Aim-listed DiamondCorp was issued a shutdown notice for its Lace project in South Africa's Free State province.

According to a press release, the mine could be closed for at least a week after the Department of Mineral Resources presented the company with a Mine Health and Safety Act Section 54 notice, which requires mining firms to shut their operations for alleged safety transgressions.

The notice is related to a fire incident on a dump truck just inside the portal to the decline. DiamondCorp says the blaze was extinguished without injury.

Directives issued by the DMR include a request for an "external ventilation audit team to inspect the mine for smoke and other gasses". However, the company says that management “is struggling to find logic in the instruction and is considering its options including legal means of redress.”

DiamondCorp’s possible legal actions would be inspired by a strategy undertook by Sibanye Platinum earlier this year, aimed at parrying the closure of its Kroondal project. The Sibanye Gold subsidiary compiled a founding affidavit intended for the Labour Court and, in the end, Mineral Resources downgraded the Section 54 notice to a Section 55, which requires mines to shut down only sections pertinent to the alleged transgression.

A 19.83ct clear white gem recovered from underground development Q1 2015 (Photo: DiamondCorp).

But DiamondCorp’s problems go beyond this recent incident. On October 12, the diamond developer announced that the 30 000 t/m production target at Lace is expected to be delayed until February 2017 due to operational setbacks.

Previously, the firm reported drilling difficulties from fallen pieces of kimberlite blocking the main site and an interruption in production from its first mining block on the 310 m level, because a geological contact with significant water inflow was intersected and it flooded the production level until pumps were able to clear the level.

On top of this, the company requires  £500,000 in additional funding “for immediate financial commitments.” Management says that there are ongoing negotiations with a third party for the provision of a convertible debt facility to satisfy this requirement, but the executive team is quick to clarify that there’s no guarantee they’ll receive such finance. “In the absence of such a facility, it is likely that the Group will be unable to continue trading as a going concern,” they say.

As a result of the ongoing woes, DiamondCorp's share price fell 46.17% to 1.55p at 1410 BST on Thursday.