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From: Nigel
ArtDate: 15th September 2006
Section: (FILLYABOOTS NEWS RELEASES)
Remote Name: 87.74.94.108
Date: 20/09/06
Time: 09:04
15th September 2006
Xceldiam Interim Results
News Item - Conduit PR
Xceldiam, the AIM quoted diamond exploration company, announces its consolidated interim results (unaudited) for the 6 month period to June 30, 2006.
Interim Highlights
Kimberlite core drilling commences with very favourable shallow intersections achieved; To date 7 of the 20 high priority kimberlite targets have been drilled Petra Diamonds Technical Co-operation Agreement expedites exploration at reduced cost to the Company Bulk sampling of alluvial deposits underway with production decision to be made in Q1 2007 Overview
Xceldiam’s operations are focussed on the 3000km2 Luangue Concession in north east Angola where the Company has a 39% interest in a kimberlite exploration license and a 40% interest in an alluvial exploration license. Xceldiam has partnered on these operations with Endiama, the state appointed diamond concessionaire and Bapsil Lda, an Angolan mining investment company. Angola is recognised as one of the key territories in the search for new diamond production to meet the growing global deficit.
Kimberlite exploration
Over 70 kimberlitic type anomalies were identified following completion in May 2005 of the 22,000 line kilometre total magnetic radiometric and topographic aerial survey over the entire concession. Of these, 20 targets have been prioritised for immediate drilling and the remaining 50 will follow pending the results of this programme.
The Sullivan diamond core drilling rig, which was mobilised at the Luangue Concession during the period, is set up to recover two and half inch diameter core up to depths of 400 metres and is operated by Gem Drill CC; sub-contractors with several years of kimberlite drilling experience in Angola.
Core drilling undertaken to date has intersected sedimentary facies kimberlite at extremely shallow depths of 23 metres. Of the 20 high priority targets; seven have been drilled to date. The intersection on the HS-1 anomaly is consistent with the Company’s consulting geophysicists' interpretation and geologists’ expectations as significant overlying crater facies is generally found above the Angolan kimberlite pipes.
The target (HS-1), was selected on the basis of its size (indicated by the aeromagnetic survey to be in excess of 12 hectares), anticipated proximity to surface and the occurrence of indicator minerals in the alluvial diamond workings in the surrounding area, all of which showed potential for a nearby kimberlite source. Mineralogical analysis of indicator minerals currently being undertaken from the recovered core will confirm whether the kimberlite is potentially diamondiferous and hence whether further delineation and large diameter drilling should be undertaken. Assay results from the holes drilled to date are expected to be announced to the market in the coming quarter.
With further consideration still to be given to the first pass drill holes on the remaining 50 significant anomalies identified on the Luangue Concession, the Board is confident the significant potential of the Luangue Concession will continue to emerge over the coming period.
Alluvial exploration
Two areas of focus for the alluvial exploration have been identified, both of which exhibit positive indicator mineralogy, indicating a nearby primary diamond source. Initial exploration has been performed to delineate the extent of the deposits and bulk sampling is underway to establish the grades and value of diamonds present. Processing of these larger samples will be done through the 70tph scrubbing and 20tph DMS plant. The smaller mobile 6tph plant is being used to do scouting and preliminary mini point sampling of other areas within the concession. The aim is to evaluate the alluvial potential by Q1 2007 and decide whether production of alluvial diamonds is economically beneficial.
Preparation and clearance of over 45 kilometres of access roads has been cut for further reconnaissance activities, as well as general access for drilling and ground-truthing magnetometery surveys. In addition, regional scale topographic surveys were conducted to establish sand cover over the concession area along with mapping of the previous artisanal mining activities. The Company is now well positioned to progress the Luangue Concession into an advanced alluvial exploration phase.
Corporate developments
Xceldiam concluded a strategic co-operation agreement with Petra Diamonds Limited (“Petra Diamonds”) in May which provides for the sharing of information and co-operation on technical, operational and other related matters regarding the development of the Company’s Luangue Concession and Petra Diamonds’ neighbouring Alto Cuilo Concession. Bearing in mind the contiguous underlying geology of these concessions and consequent kimberlite mineralogical similarities, the comparison and profiling of the mineralogy of kimberlitic occurrences in Luangue against the Alto Cuilo’s kimberlitic occurrences will enable Xceldiam to accelerate the assessment and development of its Luangue’s targets at a lower cost. As detailed information on diamond content emerges in the year ahead on the Alto Cuilo kimberlitic occurrences from large diameter drilling (“LDD”) and bulk sampling, this will significantly enhance the selection and prioritisation of LDD targets on Luangue following the less expensive small diameter drilling programme which is now underway.
Capital expenditure
Capital expenditure on the alluvial bulk sampling plant and earthmoving equipment is complete and expenditure focussing on operational activities going forward is some US$0.5million per month. The Company has also exceeded the US$3million minimum expenditure required under the alluvial licence contract terms.
The focus of capital spend in the year ahead will revolve around the kimberlite exploration programme. This will start with the small diameter core drilling of kimberlites by Gem Drill and be augmented by sampling of positive targets by large diameter drilling with an associated drill chip dense media treatment plant. Expenditure on these activities is expected to total some US$2.9 million.
Results for the period
The Group loss for the period 1 January to 30 June 2006 was US$1.5 million. The loss for the period includes US$ 1.98 million of expenditure related to the exploration and development of operations on the Luangue concession and a profit on foreign exchange translation of US$0.8 million.
Exploration Activities
Significant capital spend for this interim period 1 January to 30 June 2006 relative to the budget for the full 2006 financial year and 2005 has been as follows:
Description Actual spend six months to 30 June 2006 Budgeted spend Financial year 2006 Actual spend to 31 December 2005
Earthmoving Equipment US$ 1 008 327 US$ 1,689,658 US$ 1,483 932 Alluvial Sampling Plant US$ 1 379 537 US$ 1,592,728 US$ 247, 954 Mobile Prospecting Plant US$ 144 270 US$ 159,520 Site Equipment US$ 83 692 US$ 300,000 US$ 356, 050 Aerial Surveying - * US$ 125,000 US$ 307,546 Support Vehicles US$ 134 000 US$ 134,000 US$ 125,000 Kimberlite Drilling US$ 37 500 US$ 2,026,300 ** US$ 37,500 Kimberlite Sampling Plant - *** US$ 930,000 Total US$ 2 787 326 US$ 6,957,206 US$ 2,557,982
* Positive ground magnetometer surveying results has allowed for the postponement of further aerial surveying this year. ** Based on positive mineralogy from the small diameter drilling warranting large diameter drilling *** The Kimberlite sampling plant has been ordered. An initial deposit of US$ 225 676 was made in August 2006
Background
Exploration licenses
Both the Luangue kimberlite and alluvial licenses provide for an initial three year term, renewable to five years upon surrender of 50% of the exploration area that is determined to not be prospective. It is important, therefore, not only to concentrate initially on the attractive areas of the concession, but to ascertain which areas are of no further interest. Although alluvial evaluation is reasonably rapid, the nature of kimberlite exploration is more prolonged, requiring both small diameter drilling to identify diamondiferous targets followed by large diameter drilling on selected positive targets allowing greater volumes of kimberlite to be collected from depth and tested for diamond content. Following bulk sampling and confirmation of an economic kimberlite or alluvial deposit, conversion to a dedicated mining licence occurs with the interest of the Group being preserved at least at the percentage granted in exploration phase in a special purpose company formed for the mining operations.
Diamond market
The outlook for the diamond market continues to be positive with a shortage of rough diamonds. This is likely to intensify over the next five to ten years as growth in demand continues to outstrip supply. Rough diamond prices, which rose by about 50% between 2003 and 2005, are set to rise further over the next decade and De Beers over the 18 months to June 2006 sold an unusual amount of rough into the market. This expanded trade stocks too much and the companies average 2% rough diamond price increase in February had to be replaced by price adjustments across the different categories. Fine, large gems were increased in price and smaller, medium goods were adjusted downwards. The net effect is estimated at a 5-7% reduction in De Beers overall prices. However Aber, which holds 40% of Rio Tinto's big Diavik mine, also adjusted its prices which had the effect of an overall average increase. The medium to long term picture remains for significant average price rises as the supply squeeze intensifies and the already existing shortage of fine gem of 4-5 carats plus widens out through the broader supply spectrum.
For further information, please contact:
Xceldiam Limited +44 7910 855 640 Tim George +27 (82) 573 4199
WH Ireland Limited David Youngman +44 161 832 2174
Conduit PR Leesa Peters +44 20 7429 6666
Edward Portman Conduit PR Ltd 76 Cannon St EC4N 6AE Office: +44 (0) 20 7429 6666 Direct: +44 (0) 20 7429 6607 Fax: +44 (0) 20 7429 6699 Mob: +44 (0) 773 3363 501
www.conduitpr.com
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