2010
Tania R Marshall Explorations Unlimited
Glenn A Norton Rockwell Diamonds Inc
REVISED TECHNICAL REPORT
ON THE KLIPDAM/HOLPAN ALLUVIAL DIAMOND MINE
(INCORPORATING THE KLIPDAM, HOLPAN MINES AND THE ERF 1 AND ERF 2004
PROSPECTING PROPERTIES), BARKLY WEST DISTRICT, NORTHERN CAPE
PROVINCE,
REPUBLIC OF SOUTH AFRICA FOR
ROCKWELL DIAMONDS INC
Effective Date: 30 November 2010
Signature Date: 30 May 2011
Revision Date: 30 June 2011
ROCKWELL DIAMONDS INC, KLIPDAM/HOLPAN MINE November 30, 2010
Table of Contents Page
1 INTRODUCTION ...... 14
1.1 TERMS OF REFERENCE AND SCOPE OF WORK ...... 14 1.2 SOURCES OF INFORMATION ...... 17 1.3 UNITS AND CURRENCY ...... 17 1.4 FIELD INVOLVEMENT OF QUALIFIED PERSONS ...... 17 1.5 USE OF DATA ...... 18 2 RELIANCE ON OTHER EXPERTS ...... 19
2.1 LEGAL OPINION ...... 19 2.2 DIAMOND VALUATION ...... 19 3 PROPERTY DESCRIPTION AND LOCATION ...... 20
3.1 PROPERTY DESCRIPTION AND LOCATION ...... 20 3.2 PERMITS, CONTRACTS AND AGREEMENTS ...... 23 3.2.1 Royalty Payments ...... 23 3.2.2 Surface ownership / land use rights ...... 23 3.2.3 Mineral rights ...... 23 3.2.3.1 Mining Right ...... 24 3.2.3.2 Prospecting Rights...... 24 3.3 BEE COMPLIANCE ...... 25 3.4 ENVIRONMENTAL ...... 25 3.4.1 Environmental Rehabilitation ...... 25 3.4.2 Water permits ...... 27 3.5 SOCIAL RESPONSIBILITY ...... 27 3.5.1 Social and Labour Plans ...... 27 4 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ...... 29
4.1 TOPOGRAPHY, ELEVATION AND VEGETATION ...... 29 4.2 ACCESS AND INFRASTRUCTURE ...... 30 4.3 CLIMATE ...... 31 5 HISTORY ...... 32
5.1 PREVIOUS OWNERSHIP ...... 32 5.2 PREVIOUS EXPLORATION/DEVELOPMENT ...... 33 5.2.1 Historical ...... 33 6 GEOLOGICAL SETTING ...... 34
6.1 GENERAL GEOLOGY AND MINERAL DEPOSITS OF SOUTH AFRICA ...... 34 6.2 THE ALLUVIAL DIAMOND FIELDS OF THE MIDDLE VAAL RIVER ...... 35 6.2.1 Geochronology ...... 38 6.3 PROPERTY GEOLOGY (KLIPDAM/HOLPAN) ...... 38 6.3.1 Fluvial-alluvial Deposits ...... 39 6.3.2 Derived (Rooikoppie) Deposits ...... 40 6.4 PROPERTY GEOLOGY (ERFS 1 AND 2004) ...... 43 7 DEPOSIT TYPES ...... 44
7.1 FLUVIAL-ALLUVIAL DEPOSITS ...... 44 7.1.1 Older gravels ...... 44 7.1.2 Younger gravels ...... 45 7.2 DERIVED (ROOIKOPPIE GRAVELS) ...... 46 7.2.1 Eluvial Rooikoppie Gravel ...... 47 7.2.2 Colluvial Rooikoppie Gravel ...... 48 8 MINERALIZATION ...... 50
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8.1 NATURE OF MINERALISATION ...... 50 8.2 SURROUNDING ROCK TYPES/REGIONAL BEDROCK GEOLOGY ...... 51 8.3 GEOLOGICAL CONTROLS ...... 53 8.4 MINERALISATION ON KLIPDAM/HOLPAN MINE ...... 53 9 EXPLORATION ...... 56
9.1 REMOTE SENSING (SATELLITE IMAGERY / AERIAL PHOTO INTERPRETATION) ...... 56 9.2 GEOPHYSICS ...... 56 10 DRILLING ...... 58
10.1 LOCATION ...... 59 10.2 RESULTS ...... 60 10.3 REPRESENTATIVENESS ...... 62 11 SAMPLING METHOD AND APPROACH ...... 63
11.1 LOCATION ...... 63 11.2 MINING/EXCAVATION METHODOLOGY ...... 65 11.3 SAMPLE PROCESSING AND FINAL RECOVERY ...... 66 11.3.1 Rotary Pan Plant on Klipdam ...... 67 11.3.2 DMS Plant on Holpan ...... 68 11.3.3 Final Recovery ...... 71 11.4 DRILLING, SAMPLING AND RECOVERY FACTORS ...... 72 11.5 SAMPLE QUALITY ...... 74 11.6 REPRESENTATIVENESS ...... 74 11.7 FUTURE BULK-SAMPLING ...... 75 12 SAMPLE PREPARATION, ANALYSES AND SECURITY ...... 76
12.1 SAMPLE SECURITY ...... 76 12.2 TRACER TESTING QA/QC ...... 78 13 DATA VERIFICATION ...... 79 14 ADJACENT PROPERTIES ...... 81
14.1 SLYPKLIP NORTH ...... 84 15 MINERAL PROCESSING AND METALLURGICAL TESTING ...... 86
15.1 RESULTS ...... 87 15.1.1 Grades ...... 87 15.1.2 Values ...... 89 15.1.2.1 Diamond Size Distribution...... 90 15.2 REPRESENTATIVENESS ...... 92 16 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES ...... 93
16.1 PREVIOUS RESOURCE ESTIMATES ...... 94 16.1.1 De Decker & Associates Resource Evaluation Report (2006) ...... 94 16.1.2 Explorations Unlimited (March 2007, November 2007, May 2008) ...... 95 16.1.3 Explorations Unlimited (December, 2009) ...... 97 16.2 CURRENT (2010) RESOURCE ESTIMATION ...... 97 16.2.1 Key Assumptions ...... 97 16.2.2 Volume ...... 99 16.2.2.1 Specific Density ...... 99 16.2.3 Diamond Grade ...... 99 16.2.3.1 Cut-off Grades ...... 99 16.2.4 Diamond Value ...... 100 16.2.5 Resource Statement ...... 100 16.2.6 Resource Reconciliation ...... 102 16.2.7 Prospecting and Mining risks ...... 103 16.2.8 Specific Mining risks ...... 105 Page 3
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16.2.8.1 In South Africa ...... 106 17 OTHER RELEVANT DATA AND INFORMATION ...... 107
17.1 EXPLORATION TARGETS/POTENTIAL ...... 107 17.2 TRIAL-MINING...... 107 17.3 MINING OPERATIONS ...... 108 17.3.1 Mining Method ...... 108 17.3.1.1 Excavation ...... 108 17.3.1.2 Rehabilitation ...... 109 17.3.2 Survey ...... 110 17.3.3 Mine Plan ...... 110 17.3.3.1 Pit Design ...... 111 17.3.3.2 Geotechnical Considerations ...... 111 17.3.3.3 Mining rates ...... 112 17.3.3.4 Mining dilution factors ...... 112 17.3.4 Earthmoving fleet ...... 113 17.3.4.1 Fleet Maintenance ...... 113 17.4 RECOVERY PROCESS ...... 114 17.4.1 Mineralogical Testing ...... 114 17.4.2 Concentration/Process plant ...... 114 17.5 FINAL RECOVERY ...... 114 17.6 INFRASTRUCTURE ...... 115 17.6.1 Water ...... 115 17.6.2 Power ...... 116 17.6.3 Communication ...... 117 17.6.4 Transportation ...... 117 17.6.5 Tailings disposal ...... 118 17.6.6 Coarse dumps ...... 118 17.6.7 Waste Disposal ...... 120 17.6.8 Fuel storage and supply ...... 120 17.6.9 Accommodation and offices ...... 120 17.6.10 Sensitive landscapes ...... 121 17.6.11 Security ...... 121 17.6.12 Staff/Labour ...... 122 17.6.13 Essential services ...... 123 17.7 MARKET STUDIES AND CONTRACTS...... 124 17.7.1 Market Studies ...... 124 17.7.1.1 Global diamond production ...... 124 17.7.1.2 The Diamond Pipeline ...... 124 17.7.1.3 International Diamond Market Trends ...... 125 17.7.2 Rockwell Sales and Contracts ...... 127 17.7.2.1 Diamond Sales...... 127 17.7.2.2 Sales Contracts ...... 128 17.8 ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL/COMMUNITY IMPACT ...... 129 17.8.1 Environmental ...... 129 17.8.2 Mine Closure ...... 130 17.8.3 Social Responsibility ...... 131 17.8.3.1 Social and Labour Plan (SLP) ...... 131 17.8.3.2 Special projects ...... 134 17.9 TRIAL MINING RESULTS ...... 135 17.9.1 The annual production of diamonds ...... 135 17.9.2 The annual revenue from the sale of diamonds ...... 135 17.9.3 The annual cash cost of production ...... 136 17.9.4 The annual cash liability for royalties ...... 136 17.9.5 The annual level of cash capital expenditure ...... 137 17.9.6 Project (trial-mining) Cash Flow ...... 137 17.9.6.1 Sensitivity Analysis ...... 139 17.10 COUNTRY PROFILE ...... 140
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17.10.1 South African Economy ...... 140 17.10.2 The Mining Industry ...... 142 17.10.2.1 South African diamond production ...... 144 17.10.3 South Africa’s Mineral Legislative Environment ...... 144 17.10.3.1 Mineral Policy ...... 144 17.10.3.2 Mineral and Petroleum Resource Development Act 28 of 2002 (“MPRDA”) ...... 145 17.10.3.3 Broad Based Black Economic Empowerment (BBBEE) and the Mining Charter ...... 147 17.10.3.4 The Minerals and Petroleum Resources Royalty Bill ...... 148 17.10.3.5 The Diamond Amendment Bill ...... 150 17.10.3.6 Diamond Export Levy Bill 2007 ...... 151 17.10.3.7 Precious Metals Bill and the Beneficiation Strategy ...... 151 17.10.3.8 Kimberley Process ...... 152 18 INTERPRETATION AND CONCLUSIONS ...... 154 19 RECOMMENDATIONS ...... 157 20 REFERENCES ...... 159 DATE AND SIGNATURE PAGE ...... 162 21 CERTIFICATE OF AUTHORS ...... 163
21.1 TANIA RUTH MARSHALL ...... 163 21.2 GLENN ALAN NORTON ...... 165
Figures
Figure 1.1: Location of Rockwell owned properties in South Africa (Rockwell, 2010) ...... 15 Figure 1.2: Corporate shareholdings of Rockwell ...... 16 Figure 3.1: Location of the Klipdam/Holpan Project in the Northern Cape Province ...... 20 Figure 3.2 Locality map for the Klipdam/Holpan project ...... 21 Figure 6.1: The General Geology of South Africa ...... 34 Figure 6.2: Schematic stratigraphic representation of the gravels of the lower Vaal River basin, showing Older Gravels (above) and Younger Gravels (Below) (Marshall, 2004) ...... 36 Figure 6.3: Location of known, mapped terraces between Windsorton and Barkly West (redrawn after Helgren, 1979) ...... 37 Figure 7.1: Diagrammatic representation of relationships among colluvial, eluvial and fluvial-alluvial gravels in the Vaal River system (Wilson, et al., 2006) ...... 46 Figure 7.2: Formation of eluvial gravels (Marshall, 2004) ...... 47 Figure 7.3: Formation of Eluvial Gravels (Marshall, 2004) ...... 47 Figure 7.4: Formation of colluvial gravels (Marshall, 2004) ...... 48 Figure 8.1: Schematic view of coarser gravel channel bars in a braided river system ...... 51 Figure 8.2: Bedrock geology surrounding the project area (Council for Geoscience). Ra – Ventersdorp Lava (Allanridge formation; Qc – Quaternary cover (calcrete); DA – alluvial diamond occurrence ...... 52 Figure 8.3: Fixed and mobile trapsites and their depositional environments (Jacobs, 2005) ...... 53 Figure 8.4 Bedrock contours of gravel in glacial scour on Klipdam/Holpan ...... 54 Figure 9.1: Aerial photograph interpretation of the Rietputs-Klipdam/Holpan area (N Lockett, c. 1998) ...... 57 Figure 10.1 Location of drilling and pitting on Klipdam/Holpan ...... 59 Figure 10.2 Contours of fluvial-alluvial gravels ...... 60 Figure 10.3 Contours of Rooikoppie gravels ...... 61 Figure 11.1 Location of bulk-sampling activities on Klipdam/Holpan during 2006-2008 ...... 64 Figure 11.2: Location of drilling, pitting and sampling on Erf 2001 and Erf 2004 (the legend for the Rooikoppie thickness background can be seen on Fig. 10.3) ...... 65
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Figure 11.3 Flowsheet for the processing and final recovery on Klipdam (Rockwell, 2007) ...... 70 Figure 11.4 Flow sheet for the processing and final recovery on Holpan (Rockwell, 2007) ...... 71 Figure 11.5: Schematic distribution of alluvial diamonds within an alluvial deposit – random distribution of clusters of points (Rombouts, 1987)...... 73 Figure 14.1 Location of properties where alluvial diamonds have been mined economically between Windsorton and Kantien Koppie at Barkly West (Source: Google Earth) ...... 82 Figure 14.2 Location of the Slypklip North project (www.paramountmining.com) ...... 84 Figure 15.1 Location of mining activities during the period February 2009 – November 2010 ...... 86 Figure 15.2: Model for large stones for (a) Holpan and (b) Klipdam (Oosterveld, 2010) ...... 90 Figure 15.3: Diamond size frequency for the combined Klipdam/Holpan population ...... 91 Figure 16.1: The extremely low concentrations of diamonds, combined with low homogeneity results insignificant difficulties in the evaluation of alluvial diamond deposits (after Lock, 2003) ...... 98 Figure 16.2: Resource estimation on Klipdam/Holpan mines at 30 November, 2010...... 101 Figure 16.3 Correlation between estimated and recovered grade on Klipdam/Holpan (January 2007 – November 2010) ...... 102 Figure 17.1: Water balance estimation for Klipdam/Holpan (Esterhuise, 2010) ...... 116 Figure 17.2: Slimes dam configuration on Klipdam ...... 118 Figure 17.3: Slimes dam configuration on Holpan ...... 119 Figure 17.4: Global diamond production per country by volume and value, 2008 (Chamber of Mines Annual Report, 2009) ...... 124 Figure 17.5: The Diamond Pipeline ...... 125 Figure 17.6: IDEX index for cut-stones for the period Nov 2009 to Oct 2010 ...... 126 Figure 17.7 Long term rough diamond supply/demand outlook 2000 to 2018, prepared by WWW International Diamond Consultants Ltd using January 2009 values (redrawn from Read and Janse, 2009)...... 127 Figure 17.8: Revenue sensitivities to changes in key variables ...... 140 Figure 17.9: Cash operating cost sensitivities ...... 140 Figure 17.10: South African GDP growth rate Jan 2006 to Oct 2010 (www.tradingeconomics.com) . 142 Figure 17.11: Expenditure of the South African Mining Industry, 2008 (Chamber of Mines, 2009 Annual Report) ...... 143 Figure 19.1: Location of planned trial-mining during 2011 ...... 157 Figure 19.2: Planned pitting programme on Erf 2004, for 2011 ...... 158
Tables
Table 3.1: UTM Co-ordinates of the Klipdam/Holpan Mine mining and prospecting properties .... 22 Table 3.2 Summary of Holpan-Klipdam landholdings ...... 23 Table 3.3 Schedule of rehabilitation guarantee payments ...... 26 Table 6.1 Simplified Stratigraphy of the Cainozoic alluvial deposits (Modified after SACS, 1980, De Wit et al., 2000) ...... 35 Table 11.1 Production data for 2006/2008 bulk-sampling programme ...... 63 Table 15.1: Production results from Klipdam/Holpan for Feb 2009 – Nov 2010...... 87 Table 15.2: Recovered grades for the period 2009/2010 ...... 88 Table 15.3: Diamond sales figures for Klipdam and Holpan for 2009/2010...... 89 Table 15.4: Estimation of the number of large stones expected on Holpan and Klipdam ...... 91 Table 16.1: 2006 Resource estimate for Holpan-Klipdam (De Decker, 2006) ...... 95 Table 16.2 Resource statement as at March 2007 ...... 95 Table 16.3 Resource statement as at October 2007 ...... 96 Table 16.4 Resource statement as at May 2008 ...... 96
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Table 16.5: Resource statement as at 28 February 2009 ...... 97 Table 16.6: Resource statement for the Klipdam/Holpan mine as at 30 November 2010 ...... 100 Table 17.1 List of owner-operated earthmoving fleet on Klipdam and Holpan ...... 113 Table 17.2: Total expected expenditures budgeted for the Social and Labour Plan in 2009-2011 – Klipdam and Holpan Mines will only pay a pro-rata percentage of these amounts ..... 132 Table 17.3: Simplified on-mine revenue vs. cash costs for the period 2009/2010 ...... 137 Table 17.4: Operational budgets for Klipdam and Holpan mines for the year ending 28 February, 2012 ...... 138 Table 17.5: Economic indicators for South Africa (October 2010) ...... 141
Plates
Plate 4.1 Flat, glaciated plain on which the Klipdam/Holpan deposits were formed (view to the NW, Holpan mine in centre) ...... 29 Plate 4.2: Thin grassland, low bush and sparse trees typical of the Holpan and Klipdam properties ...... 30 Plate 4.3: Approaching thunderstorm over the northern Cape bush ...... 31 Plate 6.1 Example of calcreted fluvial-alluvial deposits at Klipdam ...... 39 Plate 6.2 Highly calcreted basal gravel from the palaeochannel on Holpan ...... 40 Plate 6.3 Rooikoppie deposits formed in makondos developed in the calcreted fluvial-alluvial deposits on Holpan...... 41 Plate 6.4 Rooikoppie deposits formed in makondos developed on Ventersdorp lava bedrock on Klipdam ...... 42 Plate 6.5: Rooikoppie deposits, as exposed on Erf 2004 (above) and Erf 1 (right) ...... 43 Plate 10.1: Logging and sampling drill-cuttings on Holpan (2007) ...... 58 Plate 11.1 Mining thin Rooikoppie gravels and underlying calcreted alluvial gravels ...... 66 Plate 11.2: Removal of Rooikoppie gravels from the bedrock ...... 67 Plate 11.3: Rotary pan sampling plant on Klipdam (2007) ...... 68 Plate 11.4 DMS processing plant on Holpan (2007) ...... 69 Plate 11.6 Glove-box, in which the diamonds were sorted on Holpan ...... 72 Plate 12.1 Locked secure box into which the FLOWSORT concentrates are sent...... 77 Plate 12.2 Secure sorting, weighing and cleaning facilities ...... 77 Plate 14.1: Mining of alluvial diamonds along the Vaal River prior to the turn of the 20th century (de Wit, 2008) ...... 81 Plate 14.2: Fluvial alluvial gravels on Van Zoelens Laagte (photo courtesy of Rockwell) ...... 83 Plate 14.3: Rooikoppie operations on the Van Zyl’s claims between Klipdam & Holpan ...... 83 Plate 17.1: Excavating of fluvial alluvial gravel on Klipdam (photo courtesy of Rockwell) ...... 109 Plate 17.2: Rehabilitation (in progress) on Klipdam (photo courtesy Rockwell, 2010) ...... 110 Plate 17.3: Grave site on the Holpan mine property (photo courtesy of Rockwell) ...... 121 Plate 17.4: Brick/tile making project at Holpan mine (Photo courtesy of Rockwell) ...... 134
Units and Abbreviations
Unit Description Ma Millions of Years before Present ct Carat(s) ct/st Carats per Stone
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ct/100m3 Carats per 100 cubic metres cpht Carats per 100 Tonnes tph Tonnes (metric) per hour m Metres M Million SG Specific Gravity BBBEE Broad Based Black Economic Empowerment (the more correct term of the usually shortened BEE (Black Economic Empowerment) and used in this report DMR Department of Mineral Resources (Previously known as Department of Minerals and Energy (DME)) DWAF Department of Water and Forestry DTM Digital Terrain Model QP Qualified Person, as defined by National Instrument 43-101 CP Competent Person, as defined by SAMREC DMS Dense Media Separation plant Bottom cut-off Bottom cut-off refers to the smallest size diamond (in mm) that is recovered in the sampling and mining process – in this case, no diamonds smaller than 2mm are recovered. JSE Johannesburg Stock Exchange OTCBB Over-the-Counter Bulletin Board TSX Toronto Stock Exchange
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SUMMARY
This technical report uses background information and drill and sample data, including data for the bulk- sampling and trial-mining programmes, derived from the property up to 30 November 2010. It is prepared to document the results of exploration work and the resource estimate on the properties as summarized in the Company’s Annual Information Form and in support of a private placement by Rockwell, which is planned for completion by the end of June 2011. In addition, the results of trial- mining over the period 2009-2010 are also summarised.
The Klipdam/Holpan Mine properties are situated in the Barkly West District of the Northern Cape Province, approximately 45km NNW of Kimberley and some 770km from Johannesburg. The Barkly West district and, particularly, the towns of Barkly West and Windsorton, are important historical diamond mining centres, where both alluvial and kimberlite deposits have been mined for over 100 years. The Klipdam/Holpan Mine properties lie some 6km to the west of the Vaal River on a well- defined palaeochannel of Tertiary (presumed early-Miocene) age. The project is comprised of the Klipdam and Holpan mining properties and the Erf 1 and Erf 2004 prospecting properties. The details of these landholdings are summarised as:
Permit Property Name Area (ha) Mineral Right Renewal Date Number
Remaining extent Mining Right Protocol 2,370.0518 12 April 2020 of Holpan 161 (HCVWD) 07/2010
06 December 2022 (This permit is currently under Remaining extent Mining Right 44/2008 1,466.0095 Section 11 cession from of Klipdam 157, (KDMC) CMR Klipdam Mining (Pty) Ltd to HCVWD. Submitted on 16 May 2008) 24 February 2010 Prospecting Right Erf 1, Windsorton 183.8177 1193 PR Application for renewal (HCVWD) accepted at DMR 16/02/2010 In Process Erf 2004, Prospecting Right 587.7319 1787PR 8 April 2015 Windsorton (Batla Resources)
Erf 2004, Prospecting Right 374.6630 2131PR 29 August 2013 Windsorton (HCVWD)
The stratigraphy of the middle-lower Vaal River is relatively simple. The bedrock consists of +2,700 million year old Ventersdorp lavas overlain by younger Dwyka tillites and Ecca shales. Overlying these rocks is a series of mostly Cainozoic gravel deposits that have long been mined for their diamond content. Prior to the (Palaeozoic/Mesozoic) Karoo period, the (pre-Karoo) Vaal River cut a network of channels closely approximating the present floodplain. These channels were later utilised by the Dwyka (continental-type) glaciers and were filled with tillites and shales (at ± 280-250 million years). The post- Karoo Vaal River, subsequently, incised into these formations and deposited gravels and large quantities of fine-grained sediments in numerous cycles during the late Cretaceous to the Holocene.
The terrace exposures in the Windsorton – Barkly West area are best known for the wealth of diamonds
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that have been produced. Several levels of terrace development above the present Vaal River have been recognised and subdivided into Older terrace deposits and Younger gravels on the basis of lithological and topographical observations. In addition to the development of the primary, fluvial- alluvial deposits, eluvial and colluvial re-working has resulted in the accumulation of extensive Rooikoppie deposits. These deposits represent a derived gravel and consist mainly of sub-angular to well-rounded and polished siliceous pebbles and reddish coloured sand. The clastic material is believed to originate from the fluvial alluvial gravel units and consists of its most resistant components, in particular, chert, agate, jasper, quartzite and vein quartz. Due to the decomposition and winnowing of the less resistant clastic and matrix material, there has been a substantial concentration of the more durable components in the original gravel, including diamonds. Iron has stained the entire assemblage, giving it a reddish colour and hence the name Rooikoppie, literally meaning ‘Red Gravels on a Hill’. In the past, Rooikoppie gravel was mined throughout the region by small-scale prospectors using unsophisticated mining and diamond recovery techniques. These (colluvial) Rooikoppie deposits can be formed during any cycle of landscape formation and any pre-existing deposit may be remobilised several times. Consequently, it is possible to have similarly looking colluvial Rooikoppie deposits developed across terraces of different ages and in different locations. As a result, they are not time specific deposits.
The amount of outcrop on Klipdam, Holpan, Erf 2004 and Erf 1 is minimal, due to the mature level of planation of the gravel surface and the introduction of wind-blown sand found over large areas of the area. Where exposed, bedrock outcrop is generally in the form of Ventersdorp lava. The most common indication of the existence of these rock types below the surface is large loose blocks strewn over the surface. All of the properties are, typically, covered with derived/Rooikoppie gravels which may, or may not, be underlain by varying thicknesses of fluvial-alluvial deposits. To date, fluvial-alluvial gravels have not been identified on the prospecting properties of Erf 1 and Erf 2004. The derived gravels, typically, overlie Ventersdorp lavas. Much of the fluvial-alluvial gravel deposits, however, are underlain by glacial valley tillites of the Dwyka Group, which have incised into the underlying Ventersdorp lava bedrock. Dolerite dykes are known to intrude the entire sequence.
The Rooikoppie units located on the Klipdam/Holpan properties are, primarily, of colluvial origin – the downcutting of the Vaal River has resulted in the erosion of pre-existing gravels and their re-distribution across the landscape. Two sub-varieties of colluvial gravels are recognised – (a) where the gravel is deposited on relatively flat, weathered bedrock and (b) where the bedrock (Ventersdorp lava) has been deeply weathered to produce large corestones, around which the younger, diamond-bearing gravel has concentrated.
Since diamonds are heavy minerals, they are typically concentrated preferentially in the lower portions of the gravels units within the alluvial profile. Although diamonds may also be present in the sandy units, their low concentration levels and small average size combines to make them uneconomic and thick units of sand and sandy gravels are excavated so as not to dilute the grade of the gravel units. Thinner, internal sand lenses are, however, excavated as part of the mining process. In addition, diamonds may settle into cracks in the bedrock surface, especially where it is weathered. In these instances, some 10-20cm of soft footwall is excavated along with the gravels and this decreases the recovered grade.
A total of 4,4711 Reverse Circulation (RC) boreholes and prospect pits have been drilled on Klipdam/Holpan, Erf 1 and Erf 2004 for a total depth of 11,412.2m. The boreholes/pits were located on both a detailed 100x50m and a reconnaissance 100x200m grid. Drill results are used, primarily, to
1Boreholes and prospect pits are used interchangeably depending on depth of gravels and ease of access. They are located on the same grid and the same information is obtained – the deeper fluvial-alluvial deposits are, generally, drilled and the shallower Rooikoppie gravels are pitted. Page 10
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define the presence of gravel units and to estimate their thicknesses. The boreholes are all vertical and the gravel deposits are horizontal (since they are very young, geologically, and are not affected by large scale tectono-structural upheavals). Therefore, the gravel thicknesses (as determined from drilling) are true thicknesses.
Since regional gravel grades are, typically, less than 0.5ct/100m3 and average diamond sizes are typically >1carat per stone (ct/st), boreholes are not sampled for diamonds. Furthermore, no other minerals or elements that can be assayed are known to show positive (or negative) relationships with diamonds in alluvial deposits. Consequently, borehole samples are not collected for assay, nor are intersections composited.
During February 2009 to November 2010, trial-mining operations were conducted on the Klipdam/Holpan mine. During this period, some 3,177,851m3 was processed for an average recovered grade of 0.99ct/100m3. The sale of some 7,547.72 ct from Klipdam and 5,937.46ct from Holpan through 2010 resulted in a weighted average value of USD1,049/ct for Klipdam and USD1,229/ct for Holpan.
Rockwell has estimated the following Indicated and Inferred resources for the project as at 30 November 2010. They were estimated by Rockwell’s Manager, Resources, G. Norton, (Pr. Sci. Nat.), a qualified person who is not independent of the Company and reviewed by T.R. Marshall, PhD, (Pr. Sci. Nat.), a qualified person who is independent of the Company and is responsible for the estimate.
Description of Volume* of Gravel Volume* of Gravel Grade# Value Gravel Resource (m3) at Indicated (m3) at Inferred (ct/100m3) (USD/ct) Classification Classification Holpan Fluvial- alluvial Gravel 517,800 527,000 0.95 1,229 Holpan Rooikoppie gravel Klipdam Fluvial- 989,100 alluvial Gravel 1.21 1,049 Klipdam 1,102,100 949,000 Rooikoppie gravel Erf 2004, 404,700 127,000 0.63 986 Windsorton TOTAL 3,013,700 1,603,000 ∗ Volumes fully diluted of sampling and mining for the period 2008-Nov 2010 (Totals rounded off to reflect the fact that it is an approximation.) # Grade estimated with bottom cut-off stone size at 2mm
Rockwell continually reconciles recovered grades with estimated resource grades for all of their deposits and mines. The increasing recovered mine grade in 2010 is a reflection of the fact that, in addition to fluvial-alluvial gravels, only non-sandy colluvial (Rooikoppie) gravels are currently being mined. Further, in comparison with 2009 data, the 2010 resource inventory reflects a significant decrease in resources. As a result of the trial-mining, Rockwell considers that the very sandy gravel (which requires significant modifications to the plant) may never, in fact, be mined. As a result, this volume (5-6Mm3 with anticipated grade ranges of 0.5-0.9ct/100m3) of gravel has been removed from the resources and re-categorised as Exploration Target gravels. The potential quantity and grade of these exploration targets is conceptual in nature and there has been insufficient exploration to define a Page 11
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mineral resource; it is uncertain that further exploration will result in the target being delineated as a resource.
During 2009/2010 a trial-mining programme was initiated on both Klipdam and Holpan to determine the most effective method of mining the gravels. Since the trial-mining operation was on-going for some 22 months, it was deemed appropriate to use in-house staff for these assessments. Capital costs of plant and equipment was determined through formal quotations acquired from suppliers. Operational parameters and operating costs were determined both during the bulk-sampling and, subsequent, trial-mining phases on Klipdam/Holpan and from Rockwell's experience on their other operational alluvial diamond mine (Saxendrift).
The excavation of the gravel samples as well as the method of processing and the final recovery of diamonds are, essentially, similar, to the bulk-sampling operations, except for the volumes processed). The mining of the gravels at Holpan-Klipdam was undertaken using mechanised, shallow opencast earthmoving techniques: • The topsoil (which is generally minimal to non-existent) is removed and stored separately for use in later rehabilitation activities. • The Rooikoppie gravel is then loaded into Articulated Dump Trucks (ADT’s) by either excavator or front-end loader for transport to the plant. • The calcretised overburden to the Primary gravel is removed so that the gravels are exposed and can be mined by bulldozers and excavators. Care is taken to ensure the sterile excavation of the gravels such that no contamination by the footwall lithologies occurs. Excavation continues to the base of the gravels where higher basal grades are expected to occur. The shales and tillites forming the bedrock in the project area are friable and are a distinctive greyish-green colour, while the lavas tend to present as large blocky units. Where the bedrock is soft, approximately 20cm of bedrock is excavated with the gravels, so that any diamonds in the weathered rock will be recovered.
During early 2008, SRK Consulting completed an assessment of the Klipdam mine bench for current and future mining and to report on remedial measures to reduce risk. This study indicated that bench heights are stable to 5m, with berms also 5m wide. It was, further, recommended that the company nominate and train personnel to serve as spotters when deeper benches are used, regardless of how short the duration of this mining. However, due to the shallowness of the deposit, the mining pits seldom exceed 20m in depth. Consequently, sidewall stability is not a significant factor in mining on Klipdam or Holpan. Where the gravels exceed 5m the pit is benched to allow safe access.
The fluvial-alluvial gravels are transported by ADT’s to the diamond recovery plants. Surveying of the box cuts is undertaken on a monthly basis by the mine surveyor in order to obtain precise volumes for the fluvial-alluvial gravel, the calcrete and the Rooikoppie gravel, against which diamond production could be reconciled and grade determined.
The trial-mining programme has quantified various issues relating to: • Internal dilution of the gravels with minor (non-diamondiferous) finer-grained lenses contained within the gravel units. • Lower than budgeted gravel volume through the processing plant. Rockwell is continuing with mining and processing assessments designed to measure the effect of the dilution on the mining operation and to prevent the processing problems.
A double-18 ft rotary pan-plant system used to process gravels at Klipdam and a Dense Media Separation (DMS) plant is used at Holpan. Processing rates (ROM) for each of the two plants is approximately 360 tph. Concentrates are processed through FLOWSORT X-Ray recovery and grease- belt systems, before final hand-sorting in secure glove-boxes. QA/QC is maintained through the use
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ROCKWELL DIAMONDS INC, KLIPDAM/HOLPAN MINE November 30, 2010
of tracers – both bort diamonds (supplied by Steinmetz) and ceramic balls. These tracers are introduced into different parts of the plant to ensure optimum diamond recovery. Fluorescent slingshot tracers and bort diamonds are used to continuously test for maximum equipment performance. Daily, 20 tracers are inserted into each FlowSort machine. Recoveries are monitored and problems with tracer recoveries are reported immediately to the plant superintendent who deals with the matter directly.
Trial-mining of the main deposit at the Klipdam-Holpan mine, is planned to continue during the rest of 2011. On-going technical and engineering studies are being conducted so that a decision may be reached regarding whether the sandy colluvial gravels can be processed commercially. Specific budgets for these studies are not required since they are conducted as part of the trial-mining (2011 trial-mining costs are budgeted at R53.5M for Klipdam and R52.2M for Holpan).
Bulk sampling will continue on Erf 2004 so that diamond grade and value can be estimated with reasonable confidence, so as to allow for the estimation of a resource by the end of calendar 2011. Further, 1,100 pits will be excavated on Erf 1 to increase the confidence in the estimate of the volume in order to estimate a resource for the property. ZAR60,000 has been budgeted for this exercise (a significant portion of the costs will be absorbed by the current mining budget on Klipdam/Holpan mine.
Due to the lack of encouraging trial-mining results on Holpan, the results are being reviewed carefully, with a view to halting these operations by the end of February 20122 – dependent on the results of the bulk-sampling of Erfs 1 and 2004 as well as Klipdam trial-mining, these operations may continue.
The author has examined both the proposed programme and budget and is of the opinion that they are relevant to the stage of the project.
2 Subsequent to the completion of this document, Holpan encountered operating difficulties in the 4th quarter of F2011 and, as a result, was closed by the company on Friday, May 6, 2011. Page 13
ROCKWELL DIAMONDS INC, KLIPDAM/HOLPAN MINE November 30, 2010
1 INTRODUCTION
1.1 Terms of Reference and Scope of Work
Explorations Unlimited (“EU”) was retained by Rockwell Diamonds Inc. (“Rockwell” or “the Company”) to prepare a Technical Report for the Klipdam/Holpan Mine (which includes the prospecting properties, Erf 1 and Erf 2004 Windsorton) in the Barkly West District of the Northern Cape Province, South Africa. This technical report is based on background information and drill and bulk-sample3 data, including the results of trial-mining4 programme derived from the property up to 30 November 2010. It is prepared to document the results of exploration work, resource estimate and trial-mining progress on the properties.
Six documents, relating to the Klipdam/Holpan mine, have been submitted to the JSE Limited Stock Exchange and filed on www.sedar.com. 1. “Technical Report on the Holpan and Klipdam Alluvial Diamond Mines, Barkly West District, Northern Cape Province, South Africa” by De Decker and Associates Consulting Services, of 30 March 2006. 2. “Technical Report on The Klipdam and Holpan Alluvial Diamond Properties, Barkly West District, The Republic Of South Africa” dated 30 March 2007, by T R Marshall 3. “Technical Report on The Klipdam and Holpan Alluvial Diamond Properties, Barkly West District, The Republic Of South Africa” updated on 31 October 2007, by T R Marshall 4. “Technical Report on The Klipdam and Holpan Alluvial Diamond Properties, Barkly West District, The Republic Of South Africa” updated on 31 March 2008 (by T R Marshall, in conjunction with G Norton) 5. “Technical Report on the Klipdam/Holpan Alluvial Diamond Properties, Barkly West District, The Republic of South Africa”, for Rockwell Diamonds Inc., effective date 28 February 2009 (by T R Marshall , in conjunction with G Norton) 6. “Technical Report on the Klipdam/Holpan Alluvial Diamond Properties, Barkly West District, The Republic of South Africa”, for Rockwell Diamonds Inc., updated 22 December 2009 (by T R Marshall, in conjunction with G Norton)
Explorations Unlimited (EU) is a South African based exploration consultancy owned by Dr Tania R Marshall that has been in operation since 1996. EU provides a variety of exploration and prospecting consulting services to the international minerals community, in particular with respect to geological, evaluation and (financial) valuation of alluvial diamond mineral properties. This Technical Report was prepared, primarily, by Dr T R Marshall (Pr. Sci. Nat.). Dr Marshall has over 20 years experience in the alluvial diamond industry, including a background in international mineral exploration and evaluation studies and has had direct experience with alluvial-eluvial diamond mining operations as a consulting geologist and, also, as an operator. Dr Marshall’s experience includes operational and financial aspects of alluvial diamond mining, including mine-planning and costing. Rockwell has accepted that the qualifications, expertise, experience, competence, and professional reputation of Dr Marshall are appropriate and relevant for the preparation of this Report.
Rockwell, listed on the TSX (RDI), the JSE (RDI) and the OTCBB (RDIAF), is a company involved in the exploration and mining of alluvial diamond deposits. In South Africa (Fig. 1.1), Rockwell and its wholly- owned subsidiary Rockwell Resources RSA (Pty) Ltd (“Rockwell RSA”) owns, and Rockwell RSA operates,
3 In this document, bulk-sampling is taken to be the initial period of sampling during which reconnaissance targets are investigated and inferred and indicated resources are identified. 4 Once significant indicated resources have been identified, the trial-mining programme investigates the extent to which the resources can be mined economically. Page 14
ROCKWELL DIAMONDS INC, KLIPDAM/HOLPAN MINE November 30, 2010
the Klipdam/Holpan mines (Barkly West); has operated the Wouterspan mine (currently on Care & Maintenance) and owns the Makoenskloof Prospect (Middle Orange River) through a 74% shareholding in HC Van Wyk Diamonds Limited. Rockwell and Rockwell RSA also own 74% of Saxendrift Mine (Pty) Ltd, the vehicle which holds the project that is the subject of this technical report (Fig. 1.2). Rockwell's 26% BEE partner of choice on the HCVWD and SAX projects is African Vanguard Resources (Pty) Ltd. Further, during 2009/2010, Rockwell signed a term sheet with Etruscan Diamonds Limited whereby the Company will purchase (74%) Etruscan’s Blue Gum diamond operation in the Ventersdorp region, South Africa. All conditions to complete this sale have been fulfilled, except the completion of a section 11 cession to Rockwell Diamonds NW (Pty) Ltd, which is in progress.
Rockwell also owns a 20% stake in Flawless Diamond Trading House (Proprietary) Limited ("FDTH"), which provides a unique marketing and sales arm for the Company at a fee which is well below the market norm. This holding, further, provides Rockwell with access to additional revenue, and allows the Company to gain insight into diamond sales trends which assists with its short and long term production and growth plans.
Figure 1.1: Location of Rockwell owned properties in South Africa (Rockwell, 2010)
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Rockwell Diamonds Inc (RDI-TSX/JSE)
Rockwell Etruscan Resources RSA Diamonds (Pty) Ltd (Pty) Ltd
Saxendrift H C Van Wyk Klipdam Mining Mine (Pty) Ltd Diamonds Ltd Company Ltd Bluegum Diamonds ("HCVWD") ("SAX") ("KDMC") (Pty) Ltd
Saxendrift Mine Holpan Mine Niewejaarskraal Erf 1, Erf 2004 Klipdam Mine Mine Wouterspan Mine Tirisano Mine Zwemkuil Project Rietputs Project
Figure 1.2: Corporate shareholdings of Rockwell5
The technical report was compiled, primarily, by Dr Marshall. Where the document refers to “the author”, the senior (independent) QP, Dr Marshall, is referenced, unless otherwise indicated. The document was co-authored by Mr. Glenn Norton who is the Mineral Resource Manager for Rockwell Diamonds Inc. Mr. Norton has eight years experience in the exploration and exploitation of alluvial diamonds throughout Africa and is Rockwell’s in-house Qualified Person. The mining, processing and financial data summaries presented in section 17 of this technical report was completed as part of a pre-feasibility study, under the supervision of Dr T R Marshall and Mr. G A Norton.
This Technical Report has been prepared in accordance with the Canadian NI 43-101 Standards Of Disclosure For Mineral Projects, the NAPEGG guidelines for the Reporting of Diamond Exploration Results, Identified Mineral Resources and Ore Reserves and the Best Practice Guidelines prepared by the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) to assist the Qualified Person(s) (QP) in the planning, supervision, preparation and reporting of Mineral Resource and Mineral Reserve (MRMR) estimates. The resource estimate has, further, been prepared with specific reference to the SAMREC code (“South African Code for Reporting of Mineral Resources and Mineral Reserves”). In particular, the SAMREC Code provides guidelines for the diamond industry. The SAMREC Code has also been incorporated into the Johannesburg Stock Exchange (JSE) Listings Rules. Since Rockwell is dual listed in both Canada and South Africa, reference will continually be made to both CIM and SAMREC resource estimation codes (with CIM taking preference as the company’s primary listing is the TSX).
5 The Etruscan transaction is not yet complete as the mining rights have not yet been ceded to Rockwell. Page 16
ROCKWELL DIAMONDS INC, KLIPDAM/HOLPAN MINE November 30, 2010
The conclusions expressed in this independent resource estimate are appropriate as at 30 November, 2010. The appraisal is, therefore, only valid for this date and will change with time in response to ongoing exploration and production results as well as with variations in diverse external factors.
1.2 Sources of Information
The comments and recommendations in this report, specific to the Klipdam/Holpan property, are based, primarily, on information and technical documents and production data supplied by Rockwell. Underlying legal contracts, permissions and agreements have not been reviewed by the author. Other technical/scientific papers and miscellaneous documents referred to are identified within the text or have been referenced in Section 21.
Since Dr Marshall was not on the project site for the full period of the prospecting, bulk-sampling and trial-mining much reliance was placed on the technical management of Rockwell who provided production data and internal audit reports for review. Dr Marshall has reviewed this data and considers it to be reasonable for the purpose of this report. In these aspects, reliance has been placed upon the relevant individuals providing the information, specifically Mr. Norton (Mineral Resources Manager for Rockwell), who is registered with SACNASP and may act as a QP/CP in his own right.
An independent assessment of the mine diamond size frequency distribution, with special emphasis on the expected recovery of large stones was completed by Dr M M Oosterveld in February 2010. Dr Oosterveld is an acknowledged expert in this field, and is registered with SACNASP. The author has not independently verified the findings of this study, but has accepted them to be materially accurate in all respects.
The mined volumes are surveyed by an independent professional surveyor (F J van der Merwe) who is registered with PLATO6 and who may act as a CP in his own right. These are provided to Rockwell under certification on a monthly basis. From September, Rockwell has employed a full-time surveyor, who will be working along with Mr. van der Merwe, who will still, ultimately, be responsible for the certified mining volumes. The author has relied on these mined volumes in all sections dealing with bulk-sample and trial-mining results. Steps taken to verify this information are presented in section 11.
1.3 Units and Currency
All values are metric, unless otherwise stated. Historical grade and tonnage figures are reported in units as originally published. All budget costs are presented in South African Rands (R) and United States Dollars (USD), for which a nominal exchange rate of USD1 = R6.8 has been used. Diamond values are expressed in United States Dollars.
1.4 Field involvement of Qualified Persons
A site visit to the project was undertaken by Dr Marshall during the week of 30 Aug – 2 Sept 2010. During these visits a review was made of all geological, technical and administrative procedures and
6 South African Council for Professional Land Surveyors and Technical Surveyors Page 17
ROCKWELL DIAMONDS INC, KLIPDAM/HOLPAN MINE November 30, 2010 protocols being practiced by Rockwell personnel. In addition, numerous discussions were held with the management and technical personnel of Rockwell, who readily provided all requested information. EU’s extensive experience in this area (including previous visits to the Property) as well as that gained from prior investigations of other, nearby deposits was also drawn upon as required.
Mr Norton is Rockwell’s Mineral Resource Manager and, as such, visits the Klipdam and Holpan mines on a weekly basis.
1.5 Use of Data
Neither Explorations Unlimited nor family members have a business relationship with Rockwell or any associated company, nor with any other company mentioned in the Report which is likely to materially influence the impartiality of the Report, or create the perception that the credibility of the Report could be compromised or biased in any way. The views expressed herein are genuine and deemed independent of Rockwell. Moreover, neither the author of the report nor family members have any financial interest in the outcome of any transaction involving the properties considered in this Report, other than the payment of normal professional fees for the work undertaken in its preparation (which is based upon hourly charge-out rates and reimbursement of expenses). The payment of such fees is not dependent upon the content, or conclusions, of this Report or any consequences of any proposed transaction.
Rockwell has warranted that a full disclosure of all material information in its possession or control has been made to EU, and that it is complete, accurate, true and not misleading. Draft copies of the Report have been reviewed for factual errors by Rockwell. Any changes made as a result of these reviews did not involve any alteration to the conclusions made. Hence, the statements and opinions expressed in this document are given in good faith and in the belief that such statements and opinions are not false and misleading at the date of this Report.
Written consent is provided for the filing of the Technical Report with any stock exchange and other regulatory authority and also for any publication by them of the Technical Report for regulatory purposes, including electronic publication in the public company files on their websites accessible by the public. EU reserves the right, but will not be obligated, to revise this Report and conclusions if additional information becomes known to EU subsequent to the date of this Report.
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2 RELIANCE ON OTHER EXPERTS
2.1 Legal Opinion
An opinion regarding the underlying legal contracts, permissions and agreements has been provided by Chris Stevens (director) of Taback & Associates (Pty) Ltd on 12 August, 2010 – Rockwell Diamonds Inc: Title Opinion in respect of H C van Wyk Diamonds (Pty) Ltd and Klipdam Diamond Mining Company (Pty) Ltd.
The author has not independently verified the status of these contracts, permissions and agreements but has accepted that the legal opinion represents a materially accurate situation. The author has relied on this opinion for the compilation of Section 3.3
2.2 Diamond Valuation
Valuation of the recovered diamonds has been through the industry standard practice of putting representative diamond parcels up for sale through a contracted third party – Flawless Diamonds Tender House (“FDTH”). FDTH is a, marketing and tender sale company (held 20% by Rockwell) that operates a professional run, fully transparent “sealed-bid tender system”. Details of this process are described in a later section. Values obtained for diamonds by this process represent actual sales completed in competitive market related process by registered, practicing, international diamond buyers whose qualifications are unknown. In fact, all of the bidders (potential buyers) are anonymous, since the tender system relies on a sealed-bid technique.
Since the values thus obtained are actual, realised sales figures, and not simply a valuation with no obligation to purchase, there are no risks associated with the diamond values used in this technical report. These sales values have been relied upon by the author in all sections relating to mineral resources and reserves as well as for the economic assessment and DCF. The author has checked each brokers note and Kimberley Process Certificate to verify the information provided.
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3 PROPERTY DESCRIPTION AND LOCATION
3.1 Property description and location
The Klipdam/Holpan Mine properties are situated in the Barkly West District of the Northern Cape Province, approximately 45km NNW of Kimberley (Fig 3.1) and some 770km from Johannesburg. The Barkly West district and, particularly, the towns of Barkly West and Windsorton, are important historical diamond mining centres, where both alluvial and kimberlite deposits have been mined for over 100 years (de Wit et al., 1997; Marshall, 1987).
Figure 3.1: Location of the Klipdam/Holpan Project in the Northern Cape Province
The Klipdam/Holpan Mine properties lie some 6km to the west of the Vaal River on a well-defined palaeochannel of Tertiary (presumed early-Miocene) age. The project is comprised of the Klipdam and Holpan mining properties and the Erf 1 and Erf 2004 prospecting properties. The details of these landholdings are summarised in Fig. 3.2. The surveyed co-ordinates of the properties are given in UTM units in Table 3.1.
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Figure 3.2 Locality map for the Klipdam/Holpan project
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Table 3.1: UTM Co-ordinates of the Klipdam/Holpan Mine mining and prospecting properties
POINT UTM Y UTM X POINT UTM Y UTM X A 6,863,306.25 262,211.94 CC 6,865,022.55 271,970.35 B 6,866,310.95 265,252.71 DD 6,865,059.50 272,383.76 C 6,864,009.69 266,939.07 EE 6,865,009.96 272,390.25 D 6,866,612.22 269,603.88 FF 6,865,052.17 272,606.95 E 6,865,565.96 270,284.52 GG 6,864,836.29 272,632.37 F 6,866,778.80 271,942.11 II 6,864,794.62 272,418.36 G 6,866,322.74 272,402.84 JJ 6,863,666.91 272,564.13 H 6,866,649.31 272,801.18 KK 6,863,551.36 271,609.51 I 6,867,291.09 272,354.77 LL 6,864,965.32 270,683.08 J 6,867,370.79 272,427.63 MM 6,864,975.78 270,782.72 K 6,867,438.88 273,337.89 NN 6,864,863.20 270,814.95 L 6,867,346.14 273,542.36 OO 6,864,866.05 270,961.81 M 6,867,588.46 273,846.73 PP 6,864,986.10 270,926.09 N 6,867,646.32 273,569.20 QQ 6,862,679.36 272,180.25 O 6,867,443.66 273,063.37 RR 6,862,426.32 271,015.02 P 6,867,433.94 272,686.53 SS 6,860,836.78 269,260.56 Q 6,868,203.92 273,361.31 TT 6,862,395.76 268,119.78 R 6,868,095.07 273,866.50 UU 6,862,314.10 268,071.40 S 6,865,606.10 274,972.51 VV 6,861,883.10 268,294.95 T 6,865,317.96 274,744.21 WW 6,861,826.33 268,055.35 U 6,865,793.61 273,737.09 XX 6,861,595.33 268,060.78 V 6,864,009.10 275,543.70 YY 6,861,434.50 268,281.59 W 6,863,808.37 274,394.59 ZZ 6,860,958.49 268,602.97 X 6,864,939.28 274,091.10 AZ 6,860,779.01 268,418.05 Y 6,864,926.47 273,890.77 BY 6,860,143.49 268,805.26 Z 6,865,074.68 273,773.98 CX 6,859,858.33 268,614.82 AA 6,865,026.99 273,541.83 DW 6,859,312.80 266,669.08 BB 6,865,187.13 273,299.74
The total area of the mine properties are 3,836.0613ha, which includes sufficient space for (current and future) mine offices and out-buildings, processing and final recovery facilities, as well as for the necessary, fines disposal (tailings) ponds, transitory coarse dumps and more permanent water supply dams. The prospecting right areas on Erf 1 and Erf 2004 only cover 183.8177ha and 587,7319ha, respectively but, since they are adjacent to the Klipdam/Holpan mine property and form a natural extension to the existing resources, they will not form an independent operation.
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3.2 Permits, Contracts and Agreements
3.2.1 Royalty Payments
As with all mining properties in South Africa, the Klipdam/Holpan mine is subject to a State royalty. Details are presented in Section 18.2.3.4 but the minimum and maximum rates for diamonds (unrefined minerals) are 0.5% and 7.0%, respectively.
In terms of the Mining and Petroleum Royalties Act (“Royalty Act”), royalties are payable from March 1, 2010. The deadline for the registration of mining and minerals firms, under the Act, had closed on January 29, 2010. In compliance with this requirement, Rockwell has registered as a royalty payer with the South African Revenue Service (“SARS”).
3.2.2 Surface ownership / land use rights
The surface rights (as well as the land ownership7) of the farms Holpan and Klipdam are held by HC van Wyk Diamonds (Pty) Ltd and Klipdam Mining (Pty) Ltd, respectively.
Erf 1, Windsorton, is part of the Windsorton municipal grounds. Rockwell’s portion of this property is not occupied. Other portions may have informal settlements or other diggers present.
The surface and land rights of Erf 2004 Windsorton are held by a third party (MJA Boerdery cc) with whom Rockwell has a land use agreement. There are a number of clauses in the agreement dealing with surface use, granted by M J A Boerdery CC to HCVWD. There are detailed provisions dealing with surface use for prospecting and mining, roads, generators and electric cables, boreholes and water extraction, rehabilitation, etc. It is recorded in the surface use clause that HCVWD has been appointed by the holder to conduct exploration and mining operations on the property. It is then recorded that all of the entitlements and conditions granted and contained in the agreement shall, ipso facto, be applicable and binding on the contractor.
3.2.3 Mineral rights
The mining/prospecting properties are currently, held under five different licences (Table 3.2). Consolidation into a single mining right will be undertaken once the Klipdam cession has been obtained.
Table 3.2 Summary of Holpan-Klipdam landholdings
Permit Property Name Area (ha) Mineral Right Renewal Date Number
Remaining extent Mining Right Protocol 2,370.0518 12 April 2020 of Holpan 161 (HCVWD) 07/2010
06 December 2022 Remaining extent Mining Right 44/2008 1,466.0095 (This permit is currently under of Klipdam 157, (KDMC) CMR Section 11 cession from
7 Under South African law, land may also be owned privately (in contrast to State-owned land where an individual only leases the surface right) Page 23
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Klipdam Mining (Pty) Ltd to HCVWD. Submitted on 16 May 2008) 24 February 2010 Prospecting Right Erf 1, Windsorton 183.8177 1193 PR Application for renewal (HCVWD) accepted at DMR 16/02/2010 In Process Erf 2004, Prospecting Right 587.7319 1787PR 8 April 2015 Windsorton (Batla Resources)
Erf 2004, Prospecting Right 374.6630 2131PR 29 August 2013 Windsorton (HCVWD)
3.2.3.1 Mining Right
R/E Holpan 161: • In terms of the MPRDA, the Old Order Mining Right (Mining Licence ML 1/2002), in the name of HCVWD, was converted to a New Order Mining Right, which was notarially executed on 13 April 2010. This right has still to be registered at the Mining Titles office. • The Mining Right is valid for 10years, to 12 April 2020. • During 2009, annual payments of R165,000/year payment to the State were paid for taxes and royalties under the terms and conditions of the old order mining right. From 1 March 2010, however, the terms of the new Royalty Act will apply.
R/E Klipdam 157: • An application for the Conversion of the Old Order Mining Right (Mining Permit MP 86/2002) in terms of the MPRDA was accepted by DMR on 21 June 2004 and converted/executed on 7 December 2007 (Protocol No 66/2007 and file number NC003MRC). • The right was registered at the Title Deeds Registry as 44/2008 CMR on 25 July 2008. The right is valid for 15 years to 6 December 2022. • Klipdam Diamond Mining Co is a wholly owned subsidiary of Rockwell Diamonds and holder of the right. A section 11 cession was applied for to cede the converted right to HCVWD and to notify regarding change of ownership of KDMC on 16 May 2008. In order to facilitate the cession, an updated EMPR was submitted to DMR on 30 April 2010 and is awaiting approval.
3.2.3.2 Prospecting Rights
A prospecting right over the Erf 1 Windsorton Mineral Area was issued to HCVWD with Prospecting Right Nr 1193PR and registered with the Mining Titles Office on 27 March 2009. The prospecting right, granted in respect of diamonds, endures for a period of two years which commenced on the 25th February 2009 and is valid for 1 year until 24 February, 2010. A renewal application has been submitted to DMR and accepted on 16 February 2010.
The Erf 2004 prospecting property comprises two separate surveyed portions of Erf 2003 Windsorton, held under Prospecting Rights 1787PR and 2131PR. • Prospecting Right 2131PR is held by HCVWD (right granted 30 August 2010, but not yet executed. The application was for 36 months and should expire on 29 August 2013. • Prospecting Right 1787PR was held by Batla Resources (Pty) Ltd and was the subject of a prospecting agreement with HCVWD. This option was exercised by HCVWD on 30 September 2010.
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ROCKWELL DIAMONDS INC, KLIPDAM/HOLPAN MINE November 30, 2010
In terms of the agreement HCVWD paid and amount of R1million on 6 October 2010; a second R1million will be paid on 30 November 2010; thereafter a payment of R400,000 will be made monthly for 10 months to complete the purchase price of R6million. This prospecting right will now be ceded to HCVWD under a section 11 application.
3.3 BEE Compliance
The Black Economic Empowerment (BEE) partner for the Rietputs project is African Vanguard Resources (Pty) Ltd (AVR). In addition, Mr. Sandile Zungu, of AVR sits on the Rockwell Board of Directors, the Compensation Committee as well as the Nominating and Governance Committee, of which he is the Chairman. AVR is, further, actively engaged in the management and development of both Rockwell and HCVWD and plays a key role in the long term implementation of Rockwell’s social responsibility programmes.
The AVR group advised Rockwell in fiscal 2009 that it was unable to complete its financial obligations, and was pursuing other funding mechanisms to meet its obligations. At November 30, 2010, AVR owed Rockwell approximately ZAR32.7 million (CAD4.8 million). A minority interest of 15% is recognized with the consolidation of Klipdam Mining Company Ltd. and HCVWD, until such time as the outstanding loan by the BEE group is fully repaid, at which time the Company will increase the non-controlling interest to 26%.
Rockwell RSA has, in conjunction with AVR, endeavoured to identify alternate sources of funding to complete AVR’s investment in the HCVWD projects and, currently, negotiations are being progressed with the Industrial Development Corporation (“IDC”) of South Africa. Rockwell RSA is in ongoing discussions with AVR, and through the assistance of its legal counsel, has engaged the Department of Mineral Resources to address the completion of the BEE participation. The shares for the outstanding equity purchases are held in trust by legal firm Tabacks pending conclusion of the transaction.
3.4 Environmental
There is an existing EMPR approved in terms of section 39 of the Minerals Act of 1991 on both Klipdam and Holpan. During 2010, however, an updated Environmental Management Programme (“EMPR”) has compiled and submitted to DMR (30 April 2010) to take into account the recent proposed updates to the mining programme on the mine properties and the adjacent prospecting land. Details of the environmental programme are described in Section 17.6.1.
3.4.1 Environmental Rehabilitation
An ongoing rehabilitation programme is important to the mining operation. At Klipdam/Holpan, rehabilitation normally entails the immediate or near immediate (following short-term side-casting) backfilling of overburden into pits concurrent with the advance of the pit face. All oversize material and tailings derived from processing is returned to the excavations using Articulated Dump Trucks (ADT’s) on their return cycle. In the case of slimes, such material is pumped to the dam as normal and once sufficiently dry, is removed and spread over the mined out areas in order to give a smooth natural profile to the rehabilitated area. The final stage in the rehabilitation process is the replacement of topsoil, which is removed and stockpiled prior to excavation. The topsoil contains a significant proportion of highly resistant root systems and plant seeds, which appear to assist in the rapid
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establishment of a secondary plant succession comprising grass, followed by small shrubs within approximately 2 year. Rehabilitation takes place on an ongoing basis in order to diminish costs at closure. Land use after mining will revert to that in the pre-mining period, namely extensive livestock or game farming.
The quantum of the financial provision contemplated in Regulation 54 of the MPRDA will be revised and adjusted accordingly annually, based on a survey assessment of the environmental liability of HCVWD. Surveys of excavations are conducted by a registered surveyor and results are forwarded to the Environmental manager who calculates the outstanding rehabilitation as per the approved table provided by the DMR. A bank guarantee is prepared for the amount and submitted to the DMR. The requirement to maintain and retain the financial provision remains in force until the Minister issues a certificate in terms of Section 43 of the MPRDA to such holder. The Minister may retain such portion of the financial provision as may be required to rehabilitate the closed mining operation in respect of latent or residential environmental impacts. Any inadequacies with regard to the financial provision will be rectified by the holder of the mining right in an amendment of EMPR within the timeframe provided, or as determined by the Minister.
Rehabilitation guarantees are held as scheduled below (Table 3.3). The moneys are held in a term deposit (5 year savings plan effect) with Standard Bank in Kimberley, into which about R150,000 is deposited monthly. When the DME requires rehabilitation guarantees then Standard Bank will issue such on the back of this fund account. Rockwell, further, has the following investment policies in place, which are being used by the bank to secure their DME and Eskom guarantees: • Momentum Life R4,471,000 Guaranteed capital bond - Started 1/11/06 ends 1/11/11 • Liberty Life R 1,500,000 Guaranteed capital bond - Started 1/01/07 ends 1/12/12 • Liberty Life R 100,000 per month (value at 20/04/07 was R301,374) ends 1/02/12
Table 3.3 Schedule of rehabilitation guarantee payments
PROPERTY BANK GUARANTEES TOTAL 14/09/2005,Nedbank 662/26423804 R2,000,000
14/12/2006, Standard Bank, M473384, R500,000
Holpan 161, 31/08/2007, Standard Bank, M482738 (HCVWD) R4,000,000 R500,000
10/11/2008, Standard Bank, M498301 R500,000
11/02/2009, Standard Bank, M501035 R500,000.00 26/03/2002, Standard Bank, M405702 R1,000,000 Klipdam 157, R2,500,000 (KDMC) 14/12/2006 Standard Bank, M473394 R500,000
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31/08/2007, Standard Bank, M482745 R500,000
10/11/2008, Standard Bank, M498280 R500,000 Erf 1 Windsorton 29/06/2007, Standard Bank, M480275 R100,000 (HCVWD) R100,000 Erf 2004, (Ptn Erf 2003), 30/03/2010, Standard Bank, M513563 R150 000 Windsorton R150 000 R6,750,000
These funds are fully utilised except for approx. R200,000, which is held as a guarantee for ESKOM
Calculation of total current rehabilitation liabilities for the Klipdam and Holpan properties is R9,396,112 (R6,582,748 for Klipdam and R2,813,364 for Holpan). In an attempt to reduce this liability, Rockwell is pursuing an aggressive rehabilitation programme. In addition, in order to catch up on outstanding rehabilitation values, the company has undertaken to increase the guarantee payments every four months by R 500,000.
3.4.2 Water permits
Water is available to the farms Holpan and Klipdam by means of water licences and quotas obtained from the Department of Water Affairs and Forestry (DWAF). The water for Holpan is obtained by pumping an allowed quota of 3 x 203,906m3/ha/year plus an additional 4,108m3 /month from the canal. An additional 114,693m3/ha/year is obtainable from the canal on Klipdam. The cost of this water is calculated at R713.88/ha per year, payable to DWAF in advance. An extra allowance of 3,600,000m3/year on Holpan and 2,400,000m3/year on Klipdam was applied for on 04/12/2007 and 10/07/2007 respectively. In terms of the updated EMPR that has been prepared, new submissions are being made to DWAF to comply with current legislation.
3.5 Social Responsibility
Along with focused business objectives, Rockwell's social responsibility values and commitments form an integral part of the mining operations. Rockwell is committed to providing increased returns to shareholders while sharing the value created from the operations with a wider set of stakeholders through the alignment and linkage of business and social responsibilities.
3.5.1 Social and Labour Plans
According to the MRPDA a Social and Labour Plan (SLP) is required to be submitted to the DMR along with the other requirements for a mining right. The objectives of the SLP (according to the MPRDA) is to promote employment and advance the social and economic welfare of all South Africans; to contribute to the transformation of the mining industry; and to ensure that holders of mining rights contribute toward the socio-economic development of the areas in which they are operating, as well as the areas from which the majority of the workforce is sourced. In harmony with these objectives, the SLP
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ROCKWELL DIAMONDS INC, KLIPDAM/HOLPAN MINE November 30, 2010 requires that the company address literacy levels and life skills within the workforce as well as implement career progression paths, mentorships, internships and bursary plans for its employees. In addition, the company is required to contribute to the upliftment and development of the local communities through procurement, establishment of a Future Forum and the creation of Small, Micro and Medium Enterprises (SMME’s). Further details of Rockwell's SLP are given in Section 17.6.5.1.
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4 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY
4.1 Topography, elevation and vegetation
The Klipdam/Holpan mine properties are situated in a region of largely flat, infertile ground punctuated, in places, by hills (koppies) in a narrow strip of dry savannah between the fertile plains of the Free State province to the east and the Karoo, an area of sparse, arid semi desert that occupies much of central South Africa.
The project area itself is almost completely flat (Plate 4.1), a result of both continental glaciation and subsequent fluvial planation. The major topographic features include a very subtle rise in the middle of the Klipdam property, and a gentle rise of the project area towards the western limit of the Holpan property. Such features are seen to affect the Rooikoppie gravel distribution. Very subtle hollows, some of which host minor ephemeral drainages also occur within the project area.
Plate 4.1 Flat, glaciated plain on which the Klipdam/Holpan deposits were formed (view to the NW, Holpan mine in centre)
The project area lies in veld type 32, Kalahari Plains Thorn Bushveld (van Rooyen & Burger, 1974) - three veld types can be defined, namely Acacia tortilis (Umbrella thorn) savannah, the camphor bush (‘vaalbos’) shrub veld and the mixed Blackthorn/Camphor Bush/Raisin bush shrub veld. A fourth modified veld type is related to the mined and rehabilitated areas (Plate 4.2). No endangered species or rare plants were recorded in the mining area. The camel thorn tree, Acacia erioloba, protected under the terms of the Forestry Act no. 84 of 1998, occurs in certain areas presently not earmarked for mining. Permits would have to be obtained from DWAF should the need arise for the removal of such trees.
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Plate 4.2: Thin grassland, low bush and sparse trees typical of the Holpan and Klipdam properties
A number of species recorded on site are weeds, declared weeds and potential. Such weeds are opportunistic and their appearance marks the start of the succession process to restore the bush. The more invasive and potentially harmful weeds will be eradicated as part of the company’s continuing environmental management programme.
The EMPR has identified 12 mammal, 52 bird, three reptile and two amphibian species on the property. Two Red Data Book (RDB) 13 species, namely the Aardvark and African Wild Cat, were recorded. Both species are highly mobile and mining activities should not negatively affect them. Mining at Klipdam/Holpan is not expected to have any detrimental effect on the investigated fauna of the area.
4.2 Access and infrastructure
Access to the project area is by tarred roads and compacted, high-speed gravel roads from Kimberley (~45km along route R31 and 374) and Barkly West (~23km). A network of farm tracks gives good access to all areas of the property. For reference, Kimberley is some 570km from Johannesburg and can be accessed by national road, rail and air services.
To the extent determined by the pre-feasibility study, the sufficiency of surface rights for mining operations, the availability and sources of power, water, mining personnel, potential tailings storage areas, potential waste disposal areas, and potential processing plant sites are all described in Section 17.4 of this document.
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4.3 Climate
The area forms part of the high plateau (or Highveld) of South Africa and receives some 200-450mm of rain annually, which falls mostly during summer, in afternoon thunderstorms (Plate 4.3). The winter months are almost completely dry. Vegetation is, typically, limited to thin grasses, low bush and succulent plant species. Winter temperatures range from 0°C at night to approximately 14°C during the day, and summer daytime temperatures often reach 45°C.
The mine has a year round operating season and prevailing climatic conditions do not impact on the mining operation to any significant degree. Disruptions do occur due to poor road conditions following heavy rains and three-to-four hour down-time may occur when soaked gravel stockpiles are too wet to process efficiently.
Plate 4.3: Approaching thunderstorm over the Northern Cape bush
During years of exceptional rainfall flooding may occur, resulting in significant disruptions to production, as well as damage to infrastructure (municipal as well as on-mine).
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5 HISTORY
The first alluvial diamond discovery in South Africa was on the farm De Kalk 37 near Hopetown in 1866. However, it was the discovery of alluvial diamonds along the banks of the Vaal River near Barkly West in 1868 that led to the great South African diamond rush and the development of the diamond industry as it is known today (De Wit, 1996). Diggers from Barkly West subsequently uncovered the ‘dry-diggings’ in the adjacent Kimberley area, leading to the development of the Kimberley diamond mines. The Vaal River, along with the section of river between the towns of Windsorton and Barkly West, the Longlands/Gong-Gong gravel splay downstream of Barkly West, and the Riverview splay adjacent to Windsorton became famous for the mining of alluvial diamonds. The Holpan/Klipdam properties are located within this area, roughly midway between Barkly West and Windsorton. Both Holpan and Klipdam were mined from the earliest days and are well known for yielding large diamonds (for example, a 220ct stone was valued at £2,420 (USD180,000 at 2006 values) and a 412.5ct stone was sold for approximately £5,000 (USD370,000 at 2006 values) (Beetz, 1931).
Due to the regular yield of large diamonds, Holpan and Klipdam have been the site of digging and mining of surface deflation Rooikoppie deposits since the discovery of the Barkly West diamond fields. Such artisanal operations in this area were particularly active in the late 1800’s and early 1900’s when production fell dramatically with the commencement of World War I. Digging during the 1880’s and early 1890’s around Barkly West exhausted many of the richer Rooikoppie deposits, leading the prospectors to move farther upstream to Warrenton, Christiana and Bloemhof and into the Transvaal.
With the strong decline of the Rand against the Dollar during the 1990’s and the availability of abundant cheap electrical power, alluvial diamond mining became attractive again. Activity along these large drainage systems and small scale mining or digging operations once again became common in the Kimberley region along the Vaal River. In the Kimberley region, the main areas of interest were once again concentrated around Windsorton, Riverview, Riverton, Holpan, Klipdam and Barkly West.
5.1 Previous Ownership
In 1994, the Van Wyk family began operations on claims on the Holpan property and shortly thereafter Sonora Gold Inc., a Toronto listed company started operating on an adjacent part of the Holpan property. In 1996, Sonora Gold Inc acquired KDMC. Subsequently, in 1999, the company changed its name to Sonora Diamond Corporation (TSE-SON). During this time, the Van Wyks also acted as earth-moving contractors to Sonora.
The Van Wyk operations (incorporated in the company HC van Wyk Diamonds (Pty) Ltd in 2001) were initially small but, with the discovery of larger diamonds and the purchase of larger earth moving equipment, they were able to sustain and enlarge their operations. Key to their ongoing success was the purchase of a large bulldozer used to rip and clear the calcretised layer overlying buried gravels on Holpan. The HCVWD operation grew steadily on Holpan, while the Sonora venture stuttered and eventually collapsed, largely due to operating problems and lack of capital. Records show that, subsequent to 2000, HCVWD had grown to a sizable operation on Holpan and acquired Sonora Diamonds, thereby expanding the company’s presence on Holpan and Klipdam. Success of the HCVWD operation hinged on the use of large earth-moving equipment, processing of increasing volumes of gravel and the regular recovery of large, high value diamonds.
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5.2 Previous Exploration/Development
5.2.1 Historical
Few records exist of the diamond production from the area prior to 2000. However, it is known that the Rooikoppie gravels were extensively exploited. A report by R Cooke (in Van der Merwe, 2005) refers to 9,338.63 carats which had been recovered by the Klipdam Diamond Mining Company during the period 1933-1986. The same report also records that 266.56 carats were produced from a bulk-sampling programme (44,368 tonnes treated) conducted by Star of Africa (Pty) Ltd in 1987.
From 1995-1997, R Cooke and E Gerryts assessed the potential of the properties. The exploration target for all gravels ranged from 6,800,000 to 16,900,000 tonnes grading 0.5-1.5 cpht, including fluvial and Rooikoppie gravels. A limited bulk sampling program turned an average grade of 0.66cpht (R. Cooke, 1997). It is important to note that these statements of potential quantity and grade are conceptual in nature, that there has been insufficient exploration in these areas to define a mineral resource and that it is uncertain if further exploration will results in the targets being delineated as a mineral resource.
The Klipdam Mining Company (KDMC) produced 18,333 carats between July 1996 and February 1999 from the Klipdam Farm, with +80% gem quality stones (Norman & Cooke, 2001). Based on a size distribution analysis (Van Wyk, 2003), diamond production indicates that 20% of the diamonds by weight should be larger than 8 carats per stone and 10% larger than 32 carats per stone.
In February of 2000, Majestic Resources NL of Perth, Australia, announced its intention to purchase KDMC. In terms of the agreement, Majestic would pay USD 2.5M for the 5Million immediately-mineable tonnes, and a further USD 0.30/tonne for agreed economic gravel tonnes in the “New Discovery” area, to a maximum of USD 2.4M. An initial payment of USD 1.5M had been placed in trust, subject to certain terms and conditions in the agreement. By August of the same year, negotiations had broken down and the agreement was dissolved. At the same time, a document was commissioned by KDMC (Colliston and Saner, 2000), in which the results of an exploration drilling programme was discussed – 1,706 boreholes were drilled, defining an area that became a focus of later exploration by HCVWD.
Erf 1 forms part of the Windsorton municipal lands and has, mostly, been used for cattle grazing by the local community. No modern diamond mining activities are known from the property, except in early 2010 a local illegal artisanal digger was found on the property (and, subsequently, evicted). No information is available regarding his activities.
Although portions of Erf 2004 were held by Batla Resources for alluvial diamonds – no prospecting activities are known from the property.
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6 GEOLOGICAL SETTING
6.1 General Geology and Mineral Deposits of South Africa
The geology of South Africa (Fig. 6.1) is extremely varied and spans a period of about 4 billion years (SACS, 1980). The northeast portion of the country is dominated by the granitic rocks and belts of volcanic and sedimentary rocks forming the Archaean Kaapvaal Craton. Much of the rest of the country is covered by Phanerozoic sediments.
The earliest clusters of diamondiferous kimberlites, namely Kuruman and Cullinan, intruded into South Africa during the Proterozoic. The main kimberlitic (both diamondiferous and barren) event took place in the late Mesozoic, however. All the economically viable kimberlites occur on the Kalahari Archon (Kaapvaal and Zimbabwe Cratons), while those occurring in the surrounding Proterozoic basement are non-diamondiferous (Gurney, et al., 1991). Over 2,000 kimberlite pipes, blows and fissures have been recorded across South Africa, Lesotho, Swaziland, Botswana and Zimbabwe, spanning emplacement age range of approximately 1,700 – 40 Ma. Kimberlite emplacement was followed by the liberation and entrainment of diamonds and the subsequent deposition of terraces on the ancient Vaal and Orange Rivers.
Klipdam/Holpan Mine
Figure 6.1: The General Geology of South Africa
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6.2 The Alluvial Diamond Fields of the Middle Vaal River
The stratigraphy of the middle-lower Vaal River is relatively simple. The bedrock consists of +2,700 million year old Ventersdorp lavas overlain by younger Dwyka tillites and Karoo shales. Overlying these rocks is a series of mostly Cainozoic gravel deposits that have long been mined for their diamond content (Table 6.1). Prior to the (Palaeozoic/Mesozoic) Karoo period, the (pre-Karoo) Vaal River cut a network of channels closely approximating the present floodplain (Partridge & Maud, 1987). These channels were later utilised by the Dwyka (continental-type) glaciers and were filled with tillites and shales (at ± 280-250 million years). The post-Karoo Vaal River, subsequently, incised into these formations and deposited gravels and large quantities of fine-grained sediments in numerous cycles ranging from the late Cretaceous to the Holocene.
Table 6.1 Simplified Stratigraphy of the Cainozoic alluvial deposits (Modified after SACS, 1980, De Wit et al., 2000)
Upper A3 Gravels (Riverton alluvial gravels) Pleistocene Middle A2 Gravels (Rietputs alluvial gravels) MESOZOIC - Pleistocene CAINOZOIC Pliocene Intermediate Gravels (Proksch Koppie and Wedburg units) DEPOSITS CALCRETISATION Miocene A1 Gravels (Holpan Sequence) Upper A0 Gravels (Nooitgedacht Deposits) Cretaceous
The terrace exposures in the Windsorton - Delportshoop area are best known for the wealth of diamonds they have produced. Partridge and Brink (1967) and Helgren (1979) recognized several levels of terrace development above the present Vaal River and subdivided the alluvial deposits of the Lower Vaal basin into “Older” (Nooitgedacht, Holpan, Proksch Koppie and Wedburg) terraces deposits and “Younger” (Rietputs and Riverton Formations) gravels on the basis of lithological and topographical observations (Fig. 6.2 and 6.3).
At Warrenton, a structural bench of Ventersdorp volcanics developed at +21 to +23m is covered with colluvial Rooikoppie gravels of probable “Older Gravel” age. Other locations of similar “Older Gravels” are found at Sydney’s Hope, Witrand, Klipdam/Holpan, Spence’s Kop, Waterval as well as numerous other, sporadically occurring patches between Windsorton and Barkly West. Many of these high-level gravels exhibit extensive colluvial redistribution.
The Wedburg terrace forms a morpho-stratigraphic marker throughout the lower Vaal River basin. At Windsorton this terrace occurs on both sides of the Vaal River at +22 to +24m above the river. Vestiges of the Wedburg terrace can be traced almost continuously around Windsorton and east of Riverview Estates. Between Windsorton and Barkly West the Wedburg terrace is irregularly preserved on both sides of the river. The type exposure of the “Younger Gravels” is at Windsorton where the Rietputs and Riverton I formations are part of a +12 to +14m terrace. Younger Riverton formations (IV and V) are located on lower +8 to +9m and +4 to +5m terraces, respectively. Unlike the older gravels, the gravels of the Rietputs formation, which mostly lie buried beneath the Riverton deposits between Windsorton and Barkly West, are often thick and record primary depositional structures with significant facies variation.
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Figure 6.2: Schematic stratigraphic representation of the gravels of the lower Vaal River basin, showing Older Gravels (above) and Younger Gravels (Below) (Marshall, 2004)
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Figure 6.3: Location of known, mapped terraces between Windsorton and Barkly West (redrawn after Helgren, 1979)
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6.2.1 Geochronology
The changes in local geomorphic environment recorded at Holpan are impressive, although they lack definitive temporal references, as no diagnostic fossils or artefacts have been found here (Helgren, 1979): • The chronology begins with erosion of the Karoo sediments from the Holpan platform. The preservation of striations on both Dwyka tillite and Ventersdorp volcanics indicates the inefficiencies of post-glacial erosional processes, even though a major river must have flowed over at least part of the Holpan platform. Basal fluvial-alluvial deposits of the Holpan gravels suggest a mid-channel bedload deposit, now preserved in glacial scours (refer section 8.3). • Subsequently, the major (Vaal) river gradually slid eastwards, down the pre-Karoo slope. Erosional processes, probably related to a tributary stream, removed part of the basal fluvial alluvial unit to leave a smooth erosional bevel on its surface. • The fluvial-alluvial deposits were later calcreted. (During the late Miocene the South African interior was subjected to extensive calcretisation. This has been used to define the Holpan sequence in time.) During a subsequent period, makondos (solution hollows) formed in the calcreted surface of the fluvial-alluvial unit. The residual surface sediments created at this time were yellowish red, fine sands which now fill the makondos. • Subsequently, fluvial processes were reactivated across parts of the platform, the composition and bedding of which suggests torrential ephemeral streams (tributaries). • A brief hiatus followed with limited erosion and weak calcretisation of a unit of “Derived gravels”. This calcretisation is estimated to be of Pleistocene age. • The end of this hiatus was marked by rapid aggradation of a second, thick “Derived gravel” unit. • The “Derived gravels” were then calcreted and, still later, partly decalcified and lateritized through weathering of the Ventersdorp lavas. Co-incident, in part, with this lateritizing event, was local colluvial remobilisation of the gravels near the surface.
Since there has been no significant tectonic activity in the lower Vaal River basin since the late Cainozoic, the cut-and-fill events described above have been attributed to repeated and significant changes of hydrological regime (Helgren, 1979). The basal fluvial-alluvial deposits are ancient (early Miocene or older?) but the later cut-and-fill events may correlate with some of the younger “older gravels” (Proksch Koppie or Wedburg) or even with “Younger gravel” events, such as Rietputs and Riverton deposits.
6.3 Property Geology (Klipdam/Holpan)
The amount of outcrop on Klipdam, Holpan, Erf 2004 and Erf 1 is minimal, due to the mature level of planation of the gravel surface and the introduction of wind-blown sand found over large areas of the area. Where exposed, bedrock outcrop is generally in the form of Ventersdorp lava. The most common indication of the existence of these rock types below the surface is large loose blocks strewn over the surface.
All of the properties are, typically, covered with derived/Rooikoppie gravels which may, or may not, be underlain by varying thicknesses of fluvial-alluvial deposits. To date, fluvial-alluvial gravels have not been identified on the prospecting properties of Erf 1 and Erf 2004. The derived gravels, typically, overlie Ventersdorp lavas. Much of the fluvial-alluvial gravel deposits, however, are underlain by glacial valley tillites of the Dwyka Group, which have incised into the underlying Ventersdorp lava bedrock (ref: Fig. 6.2). Dolerite dykes are known to intrude the entire sequence.
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6.3.1 Fluvial-alluvial Deposits
The alluvial diamond deposits at Holpan-Klipdam, typically, comprise two well developed palaeochannel features containing extensive coarse gravel sequences (Plate 6.1) which are capped by calcretised sand and silt layers and a few coarser gravel lenses. They form deposits of considerable thickness, often in excess of 5 m, and consisting of rapidly aggraded or dumped material, ranging in size from large boulders to sand. The gravels are compacted and frequently cemented with secondary lime to form calcretised cobble and boulder deposits. In situ the gravels show little evidence of stratification with a few arenaceous zones. The primary fluvial-alluvial gravel deposit appears to be devoid of any obvious size gradation of the component clasts upwards through the succession, a characteristic which has been attributed to the high stream velocity and rapid deposition. Clasts consist mainly of Ventersdorp lava with minor banded iron formation, chert, quartzite and quartz and the total sequence may be 1 - 8 m thick.
The fluvial-alluvial gravels typically rest directly on the bedrock. The basal units are often extensively calcretised (Plate 6.2). and the thickness of the gravel bed varies from about 1-6m, although on average is approximately 3m thick The Primary gravels comprise a poorly sorted assemblage of large boulders (up to 45 cm in diameter at the base of the unit), cobbles and pebbles set in a sandy matrix that is considered to have been deposited by a large middle stage braided river system.
Plate 6.1 Example of calcreted fluvial-alluvial deposits at Klipdam
These deposits represent a derived gravel and consist mainly of well-rounded and polished siliceous pebbles and reddish coloured sand. The clastic material is believed to originate from the fluvial alluvial gravel units (Marshall, 2004) and consists of its most resistant components, in particular chert, agate, jasper, quartzite and vein quartz. Due to the decomposition and winnowing of the less resistant clastic and matrix material, there has been a substantial concentration of the more durable
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ROCKWELL DIAMONDS INC, KLIPDAM/HOLPAN MINE November 30, 2010 components in the original gravel, including diamonds. Iron has stained the entire assemblage, giving it a reddish colour and hence the name Rooikoppie, literally meaning ‘Red Gravels on a Hill’. In the past, Rooikoppie gravel was mined throughout the region by small-scale prospectors using unsophisticated mining and diamond recovery techniques.
Plate 6.2 Highly calcreted basal gravel from the palaeochannel on Holpan
6.3.2 Derived (Rooikoppie) Deposits
Typically, Rooikoppie gravel may occur as both eluvial and colluvial varieties:
Eluvial Rooikoppie Gravel
A thin veneer of red oxidized soil with coarse cobble clasts and windblown sand overlies the calcretised sequence. In places, potholes in the surface of the calcretised layer host pockets of this material. Calcretisation of pre-existing sedimentary sequences, such as alluvial deposits, has been shown to develop according to a definite generic sequence. In fine grained sediments, as are generally found at the top of alluvial sequences, calcrete nodules coalesce to form a honeycomb calcrete, the voids of which are finally filled to form a hardpan deposit. In the underlying more sandy or gravelly sequences, calcification proceeds along similar lines, but more slowly. At the surface, all but the siliceous or resistate clasts including diamonds, become calcreted to form a hardpan conglomerate at the surface.
If calcretes are covered by soil for any length of time, the uppermost layer undergoes a form of decomposition resulting in the formation of makondos – a type of solutional weathering feature that has the appearance of a pothole (Plate 6.3). These makondos may be infilled with diamond-bearing resistate alluvial gravels and later surface material and the whole sequence may or may not be subsequently calcretised. Where diamond-bearing resistate gravels, in reality a concentrate, infill makondos, the eluvial deposit will be richer in diamonds than the original alluvial deposit.
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Plate 6.3 Rooikoppie deposits formed in makondos developed in the calcreted fluvial-alluvial deposits on Holpan
Colluvial Rooikoppie Gravel
These deposits are typically 10 – 20 cm thick and consist of uncemented, granular-to-pebbly, resistant clasts, composed mainly of quartz, quartzite and agate set in a matrix of dark red, fine-to-medium sand. All the larger clasts are of locally derived material (typically Ventersdorp lava), which contains large core-stones at the base of its weathering profile. The deposits are very extensive (often covering many square kilometres) and drape bedrock irregularities with uneven thicknesses. The gravels, in turn, may often be overlain by thin layers of Kalahari Sands. These derived deposits are best preserved as matrix- supported gravels in pockets in deeply weathered Ventersdorp lavas where the palaeosurface has produced pseudokarst features by laterization processes.
The main driving forces behind the formation of these types of deposits appear to be the processes associated with laterite and or ferricrete development as well as slope downwearing and backwearing. Laterite is generally formed as a ferruginous cementing precipitate. In one model of laterite formation, the original precipitates form within the narrow depth range of fluctuation of the groundwater table, which sinks as the landsurface is reduced by erosion. These precipitates accumulate as an increasingly thick layer in the lower parts of the soil profile. When downwasting ceases and the water table stabilises, the residuum is hydrated and transformed into a massive variety of laterite. A pallid zone develops beneath the laterite as a result of leaching of the saprolite during subsequent landscape cycles. Crustal uplift causes additional leaching which depletes the underlying saprolite to form pseudokarst features. During leaching and pseudokarst development, retreat of the slope permits older armoured, diamond-bearing alluvial gravels to move downslope and to concentrate as resistate particles within the pseudokarst solution cavities.
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As the landscape is lowered by weathering and deflation resulting from more than one episode of post- Cretaceous uplift or sea-level lowering the original alluvial gravels are eroded and distributed over the surrounding surface to form thin, laterally extensive, [derived] deposits that have been formed or modified by colluvial or hill-slope processes. This complex process of redistribution of pre-existing, diamondiferous alluvial units may result in significant [lateral] displacement of commercial deposits.
These (colluvial) Rooikoppie deposits can be formed during any cycle of landscape formation and any pre-existing deposit may be remobilised several times. Consequently, it is possible to have similarly looking colluvial Rooikoppie deposits developed across terraces of different ages and in different locations. As a result, they are not time specific deposits. Their main use in geologic interpretation is twofold; primarily as an indicator of a hiatus at the end of a depositional cycle, and secondarily as a climatic indicator since the better-developed colluvial deposits are more likely to have formed under warm, humid conditions.
Colluvial Rooikoppie on Klipdam/Holpan is also found as an extensive layer blanketing the land surface outside of the main palaeochannel areas. In this case, the bedrock is primarily Ventersdorp lavas. In these areas, the Ventersdorp lavas have weathered into large (to very large) boulders (as seen in Plate 6.4) and the gravel has concentrated in the spaces between these boulders.
Plate 6.4 Rooikoppie deposits formed in makondos developed on Ventersdorp lava bedrock on Klipdam
Similar deposits have been identified on the farm Nooitgedacht 66 (De Wit, 2004), located on the east bank of the Vaal River, just upstream of Barkly West, some 25km directly south of Klipdam/Holpan. The sheet geometry of the deposit and the absence of obvious channels, was used to infer that the process of deposition occurred in a shallow and wide depression. The dominant matrix supported and poorly sorted nature of the deposit suggested that deposition was through sheet-wash or hill-wash processes. It was, further, proposed that these Nooitgedacht Rooikoppie deposits represent remnants of an early
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tributary to the palaeo Vaal River that existed in the Cretaceous. As a result of significant reduction in landscape denudation during the Early Tertiary, associated with major changes in climatic conditions, the higher level derived gravels were left as elevated terraces or platforms. Consequently, the Nooitgedacht deposit has been associated with the African erosion cycle (sensu Partridge and Maud, 1987).
Due to the similarities seen in the Rooikoppie deposits on Klipdam/Holpan, as well as in elevation, it is suggested that these deposits formed in the same manner and at the same time and that they, too, are remnants of a Cretaceous age drainage line that has been, subsequently, deflated across an extensive area.
6.4 Property Geology (Erfs 1 and 2004)
Rooikoppie deposits, essentially similar to those located on the Klipdam/Holpan mine properties, have been identified on both Erf 1 and Erf 2004 (Plate6.5). Both properties are, effectively, an extension of the Klipdam gravels eastwards.
Plate 6.5:
Rooikoppie deposits, as exposed on Erf 2004 (above) and Erf 1 (right)
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7 DEPOSIT TYPES
The diamondiferous gravels occur on a number of terraces along the Vaal River (ref. Section 6). These terraces have been divided stratigraphically into Older and Younger Gravel units (Helgren, 1979). The stratigraphic units being targeted for prospecting and sampling on the Klipdam and Holpan mine properties are the Older (typically, Holpan) gravels – both fluvial-alluvial and derived (Rooikoppie) varieties.
7.1 Fluvial-Alluvial Deposits
7.1.1 Older gravels
The highest and oldest gravels occur between some 80-120m above present river level and include the Nooitgedacht (A0) deposits. These deposits appear to have been deposited in the late Cretaceous. Generally these Older Gravel deposits can be divided into two horizons; the overlying “Rooikoppie Gravels (also known as “Red Older Gravels “or “Potato Gravels”) and the basal alluvial gravels.
The uncemented Rooikoppie Gravels are a weathered and (colluvially) reworked residual of the calcreted basal older gravels (remnants of a pre-existing diamondiferous fluvial alluvial deposit) and, being a concentrate, contained a greater proportion of diamonds and have been almost entirely mined out where they were either outcropping or covered by thin overburden. These Rooikoppie deposits are typically 1 0-20cm thick and consists of uncemented, granular to pebbly, sub-rounded to sub-angular, resistant clasts, composed mainly of quartz, quartzite and agate set in a matrix of dark red, fine to medium sand. All the larger boulders are of locally derived Ventersdorp lava, which contains large core- stones at the base of its weathering profile. The deposits are laterally very extensive and drape bedrock irregularities with uneven thickness. The gravels are, in turn, overlain by Kalahari Sands. The underlying basal (alluvial) gravels are often preserved in hollows (“sluits”) in the Ventersdorp lavas (Spaggiari, 1993).
The next suite of older gravels (Holpan Gravels (A1) consists of well-preserved, variably calcreted, primary fluvial sediments at approximately 60m above present Vaal River level. A large remnant channel meander has been preserved at Windsorton on the farms Klipdam and Holpan. This palaeochannel is between 75m and 400m wide and is covered by 4-12m of calcreted fine-grained fluvial sediments (de Wit et al., 1997) and is characterised by elongate bodies of gravel surrounded by finer grained material, typical of a low energy braided river system. Gravel thickness varies from less than 1m to 8m (with an average of 3.7m). The gravels consist predominantly of well rounded, densely packed, cobble to boulder gravel. The average gravel clast size varies from 50-100mm but lava boulders up to 1m in diameter are present. The matrix contains well rounded pebbles of lava, epidote, banded ironstone, quartzite, agate, quartz and dolerite. In places, the gravels are cemented by calcium carbonate (calcrete). The bedrock consists of Ventersdorp lava with isolated thin remnants of Karoo sediments preserved in depressions. The degree of calcretisation associated with the Holpan gravels is typical of Miocene age gravel deposits throughout much of southern Africa, reflecting the extremely dry prevailing climates.
A veneer of loosely packed, derived (Rooikoppie) gravels flanks the channel. These gravels lie on an irregular but generally planar surface of Ventersdorp lava and Dwyka shale. Overburden, where present, usually consists of a thin layer of soil, windblown Kalahari sand and calcrete, in places. The gravel thicknesses vary from a single layer of pebbles up to deposits of metre scales. Most of the pebbles are chert, agate, quartz, quartzite and banded ironstone and range in size from 5-60mm. The matrix consists of variable proportions of sand and clay.
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Older gravels (Intermediate gravels) occur also on the Proksch Koppie terrace (30-45m) and the Wedburg terrace (21-30m), whose remnants are preserved from Windsorton to Delportshoop (Helgren, 1979). These gravel deposits are very similar to those developed on the higher (Nooitgedacht) terrace in that both derived Rooikoppie gravels and underlying remnants of calcreted alluvial gravels are known to exist. These gravel terraces, however, are less calcified than the 60m (Holpan) terraces, reflecting less arid prevailing climates. The Wedburg deposits have yielded a sparse, poorly-provenanced vertebrate fauna representing ages of about 4.5 to 3.5 Ma (Pliocene).
7.1.2 Younger gravels
As the Vaal River continued incising it deposited the Younger Gavels. These alluvial deposits have been subdivided into the Rietputs and Riverton Formations (Cooke, 1949; Butzer et al., 1973). Partridge and Brink (1967) suggested that the Rietputs Formation (A2), which form the +12-14m floodplain terrace, are all part of one formation with three distinct erosional and depositional (or aggradational) units, designated Rietputs A, B and C. Fossil evidence and the presence of Acheulian artefacts indicate that these Rietputs sediments are of Middle Pleistocene age (Partridge and Brink, 1967).
Rietputs A: The Rietputs A gravels comprise a crudely stratified granule-boulder conglomerate with a pale brown sandy matrix. Rare fine sandy lenses up to 30cm thick are also known to occur within the sequence. Total thicknesses may have been in the order of 25m. These deposits often have a rudaceous, red, winnowed lag or a palaeosol developed at the surface. The upper surface may also be calcreted. Rietputs A gravels are known and mined along the Vaal River from Windsorton to Winters Rush (few outcrops are visible in this area, however, since the Rietputs gravels are overlain by younger Riverton deposits). Rietputs A deposits are the result of incision and deposition under a humid climate. The channels of known Rietputs A deposits vary in width from some 360m to over 2,500m (at Windsorton). Calculations of possible river volumes suggest that the Rietputs A Vaal River had a discharge four to five times that of the present river (Helgren, 1979) under which conditions rivers would produce relatively straight and locally over-deepened (unusually deep potholes) channels.
Rietputs B: Rietputs B gravels comprise crudely horizontally bedded granule-coarse cobble conglomerate with a pale brown silty-sand matrix. Silty-sand, sand and calcrete over bank deposits are also known to occur. The sequence is typically calcreted and thicknesses are in the order of 3-10m. Rietputs B deposits accumulated under a climate more arid than at present as is evidenced by the abundant calcretisation. Palaeohydrological speculations are inappropriate since arid climates typically support low water episodes interspersed with less frequent floods, resulting in a very broad floodplain in which numerous discontinuous gravel deposits are scattered.
Rietputs C: The Rietputs C gravels are a 1-6m thick sequence of typically calcreted massive gravels in which no lenses of fine material or overbank deposits are known to occur. Climatic conditions during Rietputs C times appear to have fluctuated from semi-arid to humid. Rietputs C gravels are nearly always found in or near the present river channel and have mostly been completely mined out.
Following the deposition of the Rietputs Formation is the Riverton Formation (A3), a complex, cut-and- fill sequence of sands, silts and clays that eroded through all of the pre-existing Rietputs deposits. Riverton Formation sediments occupy the +8 to 9 m terrace (Butzer et al., 1973). Today these are mostly preserved along the Harts River and are not known to contain economically viable quantities of diamonds. Based on archaeological evidence these deposits are late Pleistocene to Holocene in age
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(Beaumont and Morris, 1990). The Riverton Formation provides classic examples of fine-grained deposition during a period of fluctuating regional climates, both more humid and more arid than present. The massive sands of Members I and III seem to suggest intervals of arid deposition, while the finer sediments and relict sinuous channel ways of Members, II, IV and V suggest deposition under humid climates, resulting in typical meander deposits.
The five units comprising the Riverton Formation are: Riverton I (Rv1): Up to 2m of sandy-silt, silty-sand, cross bedded clay-sandy-silt and laminated sands. Riverton II (Rv2): Up to 2m of clay-silt-sand, clay-sand-silt and clay-silt. Riverton III (Rv3): Up to 10m of massive inhomogeneous sands with minor gravel lenses and capped with a calcrete palaeosol. Riverton IV (Rv4): Up to 10m thick sequence of red sand and silty-sand with dispersed pebbles and <1m thick gravel lenses and pale brown to brown sandy silt, silty sand and massive sand, with a basal gravel (non-diamondiferous to poorly diamondiferous) that can be up to 3m thick. Riverton V (Rv5): A 4-5m thick sequence of sandy-silt and silty-sand.
7.2 Derived (Rooikoppie Gravels)
These deposits represent a derived gravel and consist mainly of well-rounded and polished siliceous pebbles and reddish coloured sand. The clastic material is believed to originate from the fluvial alluvial gravel units (Marshall, 2004) and consists of its most resistant components, in particular chert, agate, jasper, quartzite and vein quartz. Due to the decomposition and winnowing of the less resistant clastic and matrix material there has been a substantial concentration of the more durable components in the original gravel, including diamonds. Iron has stained the entire assemblage, giving it a reddish colour and hence the name Rooikoppie, literally meaning ‘Red Gravels on a Hill’. In the past, Rooikoppie gravel was mined throughout the region by small-scale prospectors using unsophisticated mining and diamond recovery techniques. Typically, Rooikoppie gravel may occur as both eluvial and colluvial varieties (Fig. 7.1):
Figure 7.1: Diagrammatic representation of relationships among colluvial, eluvial and fluvial- alluvial gravels in the Vaal River system (Wilson, et al., 2006)
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7.2.1 Eluvial Rooikoppie Gravel
A thin veneer of red oxidized soil with coarse cobble clasts and windblown sand overlies the calcretised sequence. In places, potholes in the surface of the calcretised layer host pockets of this material. Calcretisation of pre-existing sedimentary sequences, such as alluvial deposits, has been shown to develop according to a definite generic sequence. In fine grained sediments, as are generally found at the top of alluvial sequences, calcrete nodules coalesce to form a honeycomb calcrete, the voids of which are finally filled to form a hardpan deposit. In the underlying more sandy or gravelly sequences, calcification proceeds along similar lines, but more slowly. At the surface, all but the siliceous or resistate clasts including diamonds, become calcreted to form a hardpan conglomerate at the surface (Fig. 7.2).
Figure 7.2: Formation of eluvial gravels (Marshall, 2004)
If calcretes are covered by soil for any length of time, the uppermost layer undergoes a form of decomposition resulting in the formation of makondos – a type of solutional weathering feature that has the appearance of a pothole (Fig. 7.3). These makondos may be infilled with diamond-bearing resistate alluvial gravels and later surface material and the whole sequence may or may not be subsequently calcretised. Where diamond-bearing resistate gravels, in reality a concentrate, infill makondos, the eluvial deposit will be richer in diamonds than the original alluvial deposit.
Figure 7.3: Formation of Eluvial Gravels (Marshall, 2004)
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7.2.2 Colluvial Rooikoppie Gravel
These deposits are typically 10 – 20 cm thick and consist of uncemented, granular-to-pebbly, resistant clasts, composed mainly of quartz, quartzite and agate set in a matrix of dark red, fine-to-medium sand. All the larger clasts are of locally derived material (typically Ventersdorp lava), which contains large core-stones at the base of its weathering profile. The deposits are very extensive (often covering many square kilometres) and drape bedrock irregularities with uneven thicknesses. The gravels, in turn, may often be overlain by thin layers of Kalahari Sands. These derived deposits are best preserved as matrix- supported gravels in pockets in deeply weathered Ventersdorp lavas where the palaeosurface has produced pseudokarst features by laterization processes.
The main driving forces behind the formation of these types of deposits appear to be the processes associated with laterite and or ferricrete development as well as slope downwearing and backwearing. Laterite is generally formed as a ferruginous cementing precipitate. In one model of laterite formation, the original precipitates form within the narrow depth range of fluctuation of the groundwater table, which sinks as the landsurface is reduced by erosion. These precipitates accumulate as an increasingly thick layer in the lower parts of the soil profile. When downwasting ceases and the water table stabilises, the residuum is hydrated and transformed into a massive variety of laterite. A pallid zone develops beneath the laterite as a result of leaching of the saprolite during subsequent landscape cycles. Crustal uplift causes additional leaching which depletes the underlying saprolite to form pseudokarst features. During leaching and pseudokarst development, retreat of the slope permits older armoured, diamond-bearing alluvial gravels to move downslope and to concentrate as resistate particles within the pseudokarst solution cavities.
As the landscape is lowered by weathering and deflation resulting from more than one episode of post- Cretaceous uplift or sea-level lowering the original alluvial gravels are eroded and distributed over the surrounding surface to form thin, laterally extensive, [derived] deposits that have been formed or modified by colluvial or hill-slope processes (Fig. 7.4). This complex process of redistribution of pre- existing, diamondiferous alluvial units may result in significant [lateral] displacement of commercial deposits.
Figure 7.4: Formation of colluvial gravels (Marshall, 2004)
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Colluvial Rooikoppie deposits can be formed during any cycle of landscape formation and any pre- existing deposit may be remobilised several times. Consequently, it is possible to have similarly looking colluvial Rooikoppie deposits developed across terraces of different ages and in different locations. As a result, they are not time specific deposits. Their main use in geologic interpretation is twofold; primarily as an indicator of a hiatus at the end of a depositional cycle, and secondarily as a climatic indicator since the better-developed colluvial deposits are more likely to have formed under warm, humid conditions.
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8 MINERALIZATION
8.1 Nature of Mineralisation
Mineralisation in the Lower Vaal River is, typically, confined to alluvial fills preserved on terraces which are, typically, incised into the bedrock. Subsequently, an alluvial fill may be modified by a combination of eluvial and colluvial processes.
Terraces
A terrace is formed by the deposition and subsequent erosion of as an alluvial-fill package of sediments, leaving them perched above current river level. Where incision takes place in the centre of the valley- fill, terraces may be developed on both banks of the river. If incision is accompanied by lateral migration, as is often the case, the terrace is restricted to one bank only. The term “terrace” is, therefore, simply a morphological term, and any number of typical stream features can be displayed on the terrace - such as splays, chute bars, point bars, channels, and sand banks. The terrace initially preserves the morphology of the braided river deposits, but later erosion can dissect or totally remove the terrace.
On a regional scale, terraces tend to have an elongated sheet-like shape, with an overall gentle gradient downstream, but this gradient can be stepped at barriers across the river valley, such as lithological changes in bedrock, cross dykes, etc. Consequently, contemporaneous terraces can be deposited at differing elevations, and, conversely, terraces at the same elevation were not necessarily deposited during the same cycle, at the same time. Several attempts have been made to correlate terraces along the Vaal and middle Orange River using elevations, either above sea level or above the present river level, of the various deposits. These attempts at correlation have met with limited success. In addition to the problem of stepping, no allowance can be made for post-depositional regional warping. Subsequent differential incision of the river into the terrace platform can, further, complicate the issue.
Alluvial Fills
An alluvial fill is the record of a set of superimposed floodplains, reflecting an interval of net, but not necessarily continuous or homogenous, deposition along a river valley. The unconformities between alluvial fills record erosional phases when the main stream and its local tributaries incised earlier alluvium and bedrock surfaces, removing part of that alluvial record and leaving behind limited, and usually transitory, fill on eroded surfaces, destroying earlier terraces.
The alluvial sequences of the Vaal River record many such erosional and depositional phases. The interpretation of complex alluvial fills is difficult because the processes of sediment supply and those of erosion and transport are interrelated, not only to each other, but also to other factors in the wider geomorphic environment. In addition, the processes responsible for a cumulative history of incision and floodplain aggradation have variable magnitude, frequency, spatial location and temporal context. Such changes, further, do not occur with constant intensity through time; may have been accomplished by an assortment of events with variable magnitudes, durations and frequencies; and may not be uniformly distributed across the river valley at any particular time.
Phases of floodplain incision and deposition can occur in both arid and humid climatic settings. Under more arid conditions, such as appear typical of the palaeo middle Orange River, low stream flow
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typically results in wide, shallow channel sections. The valleys display moderate sinuosity and braiding may be frequent. Braided stream segments are highly transient environments. The braided channels are unstable through time and gravel bars are formed and destroyed continuously. Shifting bars and channels cause wide variations in local flow conditions resulting in varied depositional assemblages. Common features in braided stream deposits include irregular bed thicknesses, restricted lateral and vertical variations within the sediments, and abundant evidence of erosion and re-deposition. On a broad scale, most deposits are complex with units of no great lateral extent. The coarser-grained (gravel) units are commonly elongate and are surrounded by finer-grained units (Fig. 8.1).
The coarser units are, typically, the higher-priority diamond targets, but are generally too small to be targeted for selective mining techniques. The preferred mining method is to bulk mine both the coarse gravel bars and the intervening finer material. Consequently, the ratio of coarse to fine material is an important issue for sample representivity and grade estimation.
Figure 8.1: Schematic view of coarser gravel channel bars in a braided river system
Post-depositional erosion of fluvial-alluvial deposits results in the formation of colluvial and eluvial derived or Rooikoppie deposits. Since these are simply reworked alluvial fill deposits they are composed of the same coarser gravel-boulder clasts. The eluvial (calcreted) variety of derived gravels is found in the same locality as the underlying fluvial-alluvial units whereas the colluvial variety is spread out over much of the surface (covering pre-existing deposits or directly on top of bedrock (Marshall, 2004).
8.2 Surrounding Rock Types/Regional Bedrock Geology
The bedrock of the middle-lower Vaal River valley is dominated by Ventersdorp lavas and sediments of the Transvaal Supergroup. These basal rocks are widely overlain by a veneer of flat-lying Dwyka tillite as Page 51
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well as shales and siltstone of the Karoo Supergroup which are preserved only in local hollows or glacial scours. The Dwyka, typically, comprises matrix-supported diamictite with both local and transported pebbles and boulders as drop-stones in a rock-flour matrix. The bedrock is cut by faults and dolerite dykes, which are rarely exposed. Owing to the irregularity of the pre-Dwyka surface, several reaches of the river are superimposed on pre-Dwyka topographic highs, which, due to their relative resistance to erosion, give rise to more rugged topography. Here the Vaal River is confined to gorges with increased river gradients. In contrast, the more easily eroded Dwyka has been dissected by minor tributaries of the Vaal River, giving rise to a trellis-type drainage pattern.
As can be seen from the 1:250000 scale geology map (2824 Kimberley) supplied by the South African Council for Geoscience (Fig. 8.2), the project area is underlain predominantly by Ventersdorp Lavas and overlain by younger Quaternary cover (Qc).
Figure 8.2: Bedrock geology surrounding the project area (Council for Geoscience). Ra – Ventersdorp Lava (Allanridge formation; Qc – Quaternary cover (calcrete); DA – alluvial diamond occurrence
The majority of the soils in the area are of the Hutton type and of aeolian origin. In most places these soils are relatively shallow, especially where underlain by calcrete. These Hutton soils are prone to mostly wind erosion, but this is a function of vegetation cover. Surface runoff following an event such as a cloudburst could cause erosion, but these soils are generally of low erodability.
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8.3 Geological Controls
1. Numerous kimberlite pipes and fissures are known to exist within the Barkly West district of the Northern Cape Province. Grades of these kimberlitic intrusives vary dramatically from barren to highly economical. Erosion of these primary kimberlites as well as of older alluvial and colluvial/eluvial deposits has resulted in hundreds of thousands of carats being eroded into surrounding alluvial gravels. As the diamonds entered the alluvial system, a natural attrition process resulted in the destruction of poorer quality stones. These diamonds were deposited along the course of the river in favourable trap sites either in bedrock-traps or in point-bar complexes and within-channel bars, particularly in meanders, scour pools and areas of divergent flow (Fig. 8.2).
Figure 8.3: Fixed and mobile trapsites and their depositional environments (Jacobs, 2005)
2. Locally, bedrock geology and structural features play an important role in diamond concentration of the basal alluvial deposits. As has been described in Section 6.3, the bedrock is comprised of both Ventersdorp lavas and Dwyka tillite. The lavas, where they are not weathered too deeply, promote the development of potholes and trapsites along the palaeochannel. The tillite, however, is a friable, flat-lying sedimentary rock that does not, generally, form extensive trapsites and the deposits developed on this substrate are, typically, broad and highly braided.
3. Dykes and other linear structures can be seen on Google Earth. These trend NNW, sub-parallel to the main glacial scour (Fig. 8.4). A second structural fabric (trending NE) is also visible. The impact of these features on the depositional environment of the fluvial-alluvial gravels may vary from significant to negligible.
8.4 Mineralisation on Klipdam/Holpan Mine
Geologically the fluvial-alluvial gravel on the Holpan and Klipdam properties is Miocene in age (~25- 5Mya) and is located on the Holpan terrace, some 60m above the present Vaal River (Refer Fig.6.2). The fluvial-alluvial gravels are blanketed by colluvial gravels of varying ages and do not outcrop. Younger terraces are located to the east of these mine properties
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Geological mapping and drilling results indicated that this river system flowed in a wide meander-loop across the Klipdam and Holpan properties and has incised some 20m into the bedrock (Fig. 8.4). The location of the channel appears to be controlled by two dominant glacial scours, one in an ENE-WSW direction and another in a N-S orientation. These scours (filled with Dwyka tillites and younger gravels) were, likely, carved out along pre-existing fracture/joint patterns.
Figure 8.4 Bedrock contours of gravel in glacial scour on Klipdam/Holpan
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Significant volumes of fluvial-alluvial gravels have been preserved in these scours, despite the significant deflation of the region. However, as a result of the various periods of deflation, colluvial Rooikoppie gavels are wide-spread over the entire property. It is likely that these Rooikoppie gravels have been derived from the deflation and reworking of older alluvial gravels (of both fluvial and colluvial in origin).
Analysis of the diamond size frequency of the Klipdam/Holpan mine by Dr M M Oosterveld (2010) indicates that the upper size of gravels that should be processed through the final recovery plant is 40mm. With this upper limit, diamonds up to 590ct may be recovered. The lower economic cut-off is estimated at 2mm.
On the prospecting properties Erf 1 and Erf 2004, derived Rooikoppie gravels associated with the older gravel units, are considered high priority targets. Two sub-varieties of colluvial gravels are recognised: (a) gravel is deposited on a relatively flat, weathered bedrock and (b) a younger, diamond-bearing gravel concentrated around large corestones formed by deep weathering of the (Ventersdorp lava) bedrock.
Since diamonds are heavy minerals, they are typically concentrated preferentially in the lower portions of the gravel units within the alluvial profile. Although diamonds may also be present in the sandy units, their low concentration levels and small average size combines to make them uneconomic. Thick (mineable) units of sand and sandy gravels are excavated and stockpiled separately (as overburden) so as not to dilute grades unnecessarily (this is not an issue in the Rooikoppie gravels where the entire sequence is generally only 0.5m thick). Thinner, internal sand lenses are, however, excavated as part of the mining process.
In addition, diamonds may settle into cracks in the bedrock surface, especially where it is weathered. In these instances, some 10-20cm of soft footwall is excavated along with the gravels. Although this, effectively, decreases the recovered grade,
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9 EXPLORATION
9.1 Remote Sensing (Satellite Imagery / Aerial Photo interpretation)
During 1996, a detailed aerial photographic interpretation of the Klipdam/Holpan area was completed by Nick Lockett of Australia. This map was completed for Dr T R Marshall and was, subsequently, passed on to Rockwell in 2009 to assist with project planning. This map (Fig. 9.1), along with other satellite imagery, is currently being interpreted by Rockwell geological personnel.
9.2 Geophysics
No geophysical surveys have, yet, been conducted over the properties comprising the Rietputs project. Due to the presence of the Ventersdorp lava bedrock (which is both variably weathered and variably magnetised), it is unlikely that geophysical surveys will be effective here.
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s Rietput -
Klipdam Holpan
Figure 9.1: Aerial photograph interpretation of the Rietputs-Klipdam/Holpan area (N Lockett, c. 1998) Page 57
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10 DRILLING
All drilling by Rockwell was carried out using a conventional Reverse Circulation (RC) machine with a 76mm (diameter) bit and a 28 bar compressor. The drilling contractor is Champ Drilling CC, a local drilling company that has many years of experience drilling for alluvial gravels.
The level of contamination of the samples was kept to a minimum – minor amounts of soap may sometimes be added to assist with penetration. Samples representing every 1.0m advance are collected for observation (Plate 10.1). The drill was under constant observation and, as a result, the depth estimates of lithological contacts could be noted to within 0.50m. Each sample was logged by a geologist based upon macroscopic examination of the drill cuttings on each one metre interval. The results were noted in a field notebook. Observations in the field include grain-size, colour, degree of roundness (especially of quartzite and chert clasts), and end-of-hole lithology (bedrock). The logs were later summarised and gravel deposit types were assigned based upon their stratigraphic and sedimentological characteristics. All drill hole positions were surveyed and elevated. This method of drilling was found to be successful on the Klipdam/Holpan mining and prospecting properties with few drillholes having to be abandoned due to poor drilling conditions.
Plate 10.1: Logging and sampling drill-cuttings on Holpan (2007)
Due to difficulties with drilling conditions in areas covered by colluvial Rooikoppie, pits/trenches are dug with hydraulic excavators. The presence of old diggings makes it difficult to differentiate virgin gravel from dumped material in conventional drilling and accurate logging was made almost impossible. The pitting obviated this problem and a more precise estimate of gravel present can be determined. The pits are logged by a geologist, following similar procedures as for the drill holes.
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10.1 Location
A total of 4,471 Reverse Circulation (RC) boreholes and prospect pits have been drilled on Klipdam/Holpan, Erf 1 and Erf 2004 for a total depth of 11,412.2m. (Fig. 10.1). The boreholes were drilled on both a detailed 100x50m and a reconnaissance 100x200m grid. Boreholes and prospect pits are used interchangeably depending on depth of gravels and ease of access. They are located on the same grid and the same information is obtained – the deeper fluvial-alluvial deposits are, generally, drilled and the shallower Rooikoppie gravels are pitted.
Figure 10.1 Location of drilling and pitting on Klipdam/Holpan Page 59
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10.2 Results
Geological mapping and drilling results indicated that the Holpan-age river system(Fig. 10.2) flowed in a wide meander-loop across Erf 2004 and the Klipdam and Holpan properties and has incised some 20m into the bedrock (Refer to Section 6 for geological details).
Figure 10.2 Contours of fluvial-alluvial gravels
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The location of the channel appears to be controlled by two dominant sub-parallel, glacial scours oriented ENE-WSW. These scours (filled with Dwyka tillites and younger gravels) were, likely, carved out along pre-existing fracture/joint patterns. Significant volumes of fluvial-alluvial gravels have been preserved in these scours, despite the significant deflation of the region. Post depositional geomorphic processes have resulted in the erosion of much of the extension of the fluvial-alluvial gravels on Erf 2004 and eastwards. However, as a result of the associated deflation, colluvial Rooikoppie gavels are wide-spread over the entire property (Fig. 10.3), although relatively thin (usually less than 1m).
Figure 10.3 Contours of Rooikoppie gravels
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Contouring the drill/pitting data further highlights a number of interesting features: • As expected, fluvial-alluvial (palaeochannel) gravels are confined to the region of the glacial scours, with gravel thicknesses over 2m having been intersected. • It had been previously expected that the channel on Klipdam would continue on in a WSW- direction. However, the drilling indicates that it joins up with the Holpan channel instead. • The Rooikoppie gravels are spread out unevenly across much of both mine properties. • Indications are that both Rooikoppie and fluvial-alluvial gravels extend onto the two exploration properties, located adjacent to Klipdam on the NE. • It is interesting to note that the thickest Rooikoppie gravels do not overly the fluvial-alluvial channel, but seem to define the presence of an older drainage line, somewhat different to the younger channel gravels.
Drill results are used, primarily, to define the presence of gravel units and to estimate their thicknesses. The boreholes are all vertical and the gravel deposits are horizontal (since they are very young, geologically, and are not affected by large scale tectono-structural upheavals). Therefore, the gravel thicknesses (as determined from drilling) are true thicknesses.
Since regional gravel grades are, typically, less than 0.5ct/100m3 and average diamond sizes are typically >1 carat per stone (ct/st), boreholes are not sampled for diamonds. Furthermore, no other minerals or elements that can be assayed are known to show positive (or negative) relationships with diamonds in alluvial deposits. Consequently, borehole samples are not collected for assay, nor are intersections composited.
10.3 Representativeness
As can be seen from Fig 10.1 above, the completed, detailed drilling programme on both Klipdam and Holpan, as well as Erf 1 and Erf 2004 has covered all outcropping and sub-cropping gravels with a detailed grid. The results are, thus, extremely reliable.
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11 SAMPLING METHOD AND APPROACH
Due to the distinctive nature of alluvial diamond deposits, samples are not taken for assay as would be normal for precious or base metal prospects. Instead, bulk-samples of gravels are processed through an on-site plant to determine average sample grades and the recovered diamonds are, subsequently, sold on the open market for a determination of realised value.
In this document, bulk-sampling is taken to be the initial period of sampling during which reconnaissance targets are investigated and inferred resources are identified (typically, the first one or two years of prospecting). Thereafter, as the programme expands to estimate significant indicated resources, this is defined as the trial-mining period (described in this document in Section 15). Further, it is during this trial-mining, which may extend over another two-three years, that the relevant mining, processing and other economic factors are evaluated that may, ultimately, lead to the conversion of the indicated resources to probable reserves through a Pre-Feasibility Study (refer Section 17).
11.1 Location
The bulk-sampling programme on Klipdam/Holpan was conducted during 2006-2008 (Fig.11.1). During this period, a total of 4,516,771m3 of gravel was processed (Table 11.1) for a weighted average recovered grade of 0.79ct/100m3.
Table 11.1 Production data for 2006/2008 bulk-sampling programme
2006 2007 2008
Grade Grade Grade Volume Carats 3 Volume Carats 3 Volume Carats 3 (ct/100m ) (ct/100m ) (ct/100m )
Jan 69,993 611.64 0.87 111,530 1,047.60 0.94 106,221 362.36 0.34
Feb 120,220 798.64 0.66 119,570 1,145.07 0.96 287,780 1077.76 0.37
Mar 134,929 1,221.14 0.91 286,320 1,142.64 0.40 114,534 1,044.21 0.91
Apr 103,242 1,127.16 1.09 150,610 890.54 0.59 161,827 1,906.39 1.18
May 188,522 1,124.39 0.60 180,150 1,526.68 0.85 148,775 1,464.63 0.98
Jun 171,637 1,795.16 1.05 198,090 1,744.49 0.88 128,927 941.67 0.73
Jul 127,941 1,228.94 0.96 168,009 1,513.18 0.90 156,484 1,046.40 0.67
Aug 88,299 882.52 0.99 169,186 1,707.81 1.01 75,633 408.08 0.54
Sep 195,365 1,214.63 0.62 140,442 1,129.71 0.80 125,300 1,239.21 0.99
Oct 132,824 1,099.92 0.83 116,489 720.91 0.62 126,452 1,105.43 0.87
Nov 111,467 1,493.20 1.34
Total 1,444,442 12,597.34 0.87 1,640,396 12,568.63 0.77 1,431,933 10,596.14 0.74
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The disparities in sample grade are, generally, the result of variations in the relative amounts of Rooikoppie and fluvial-alluvial gravels processed. During 2007, however, dilution due to poor mining practice was identified as a major contributing factor. The problem practices were identified and Rockwell took steps to mitigate against it, by improving in-pit supervision.
Figure 11.1 Location of bulk-sampling activities on Klipdam/Holpan during 2006-2008
Bulk-sampling of Erf 2004 and Erf 1 was initiated in 2010 (Fig. 11.2). In July and August 2010, 44,826m3 of gravel was mined from Erf 2004 to recover 282.55ct (259 stones) for a sample grade of 0.63ct/100m3. During October 2010, 176ct from this sample were sold for an average of USD986/ct. Since these results are from two small samples, they cannot be viewed as representative of the entire property. However, it is worth noting that both the sample grade and diamond value are within the ranges recovered from the adjacent Klipdam property.
The gravel from Erf 1 is a continuation of the Rooikoppie gravel as mined on Klipdam, and so this is not seen as a new project. The gravel is mined as part of the trial-mining exercise.
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Figure 11.2: Location of drilling, pitting and sampling on Erf 2001 and Erf 2004 (the legend for the Rooikoppie thickness background can be seen on Fig. 10.3)
11.2 Mining/Excavation Methodology
The bulk-sampling of the gravels at both Klipdam/Holpan and Erf 2004 and Erf 1 were undertaken using mechanised, shallow opencast earthmoving techniques: • The topsoil (which is generally minimal to non-existent) was removed and stored separately for use in later rehabilitation activities. • Where underlying fluvial-alluvial gravels were present, the Rooikoppie gravel is loaded into Articulated Dump Trucks (ADT’s) by either excavator (Plate 11.1) or front-end loader for transport to the plant. • The calcretised overburden to the fluvial-alluvial gravel was removed so that the gravels were exposed and mined by bulldozers and excavators. After the calcrete overburden was removed for backfilling, stockpiling or use in road-building as appropriate, fluvial alluvial gravels were mined. The gravel was excavated very carefully to ensure that minimal contamination by the footwall lithologies occurred. The shales and tillites forming the bedrock in the project area are friable and are a distinctive greyish-green colour, while the lavas tend to present as large blocky units. Where the bedrock was soft (friable or decomposed Dwyka tillite), approximately 20cm of bedrock was excavated with the gravels, so that any diamonds in the weathered rock would be recovered.
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Plate 11.1 Mining thin Rooikoppie gravels and underlying calcreted alluvial gravels
• Where only Rooikoppie gravels were excavated directly from the Ventersdorp lava bedrock, a similar procedure was followed (Plate 11.2).
The fluvial-alluvial gravels were subjected to ‘in-pit’ screening to -48mm and transported by ADT’s to the diamond recovery plants. Box-cuts were surveyed on a monthly basis by the (independent) mine surveyor in order to obtain precise volumes for the gravels, against which diamond production could be reconciled and grade determined. At that stage the gravels were loaded onto ADT’s and transported to the screening plant which ran at 160tph and scalped at -74+40mm, with a secondary screen feeding the -32mm gravel to the processing plants.
11.3 Sample Processing and Final Recovery
During the sampling period (2006/2007), the samples were batch-processed through the rotary pan plant on Klipdam and the DMS plant on Holpan. Processing rates (ROM) for each of the two plants was approximately 360 tph. Prior to running these samples, the entire plant was cleaned thoroughly to prevent any contamination. After concentrating the gravels through the various plants, all concentrates were processed through the FlowSort and glove-box final-recovery plant on Holpan.
The samples from Erf 1 and Erf 2004 were processed through the Klipdam rotary pan plant and final recovery system that was set up for the trial-mining programme. The details of this process are described in section 17.2
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Plate 11.2: Removal of Rooikoppie gravels from the bedrock
11.3.1 Rotary Pan Plant on Klipdam
Material for the Klipdam rotary pan plant (Figure 11.2; Plate 11.2) was transported via trucks to the plant, where it was tipped into a bin and any oversize material (+70mm) was scalped off by the primary screen. Undersize material (-70mm) was transported via a series of conveyor belts to the plant feed stockpile. Stockpile material was then fed to the plant using a front-end loader. Material was withdrawn from the bin using a vibratory feeder which discharged onto the scrubber feed conveyor. This conveyor belt was equipped with a weightometer and a variable speed motor, allowing for the control of feed rate into the scrubber. The scrubber feed conveyor discharged into a scrubber feed chute where the material was combined with water introduced into the scrubber, from the Klipdam process water dam. The discharge of the scrubber was directly onto a double-deck screen which scalped the material at ±30mm. All oversize material was fed into an oversize bin before being trucked to open excavations for rehabilitation. Material from the bottom deck was fed to the pans via a conveyor belt equipped with a weightometer to record tonnage to the pans.
Undersized material and slurry from the screen was pumped to a separator cyclone situated above the pan tailings bin. The cyclone underflow discharges directly into the bin whilst the cyclone overflow discharged into a sump, which was then pumped to an agitated pulp header tank situated above the pans. Pulp from the header tank was introduced into the rotary distributor where it was combined with the feed material and discharged directly into either of the two pans. The rotary distributor ensured that material was equally divided amongst the two pans. The tailings from each pan (overflow) discharged continually onto an individual dewatering screen, oversize material discharged onto common tailings transfer conveyor and the screen undersize and slurry reported to a central sump. The slurry was pumped directly to the fine residue deposit.
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Plate 11.3: Rotary pan sampling plant on Klipdam (2007)
The oversize tailings were transported via conveyor belt to the pan tailings bin where it was combined with the separator cyclone underflow, this material was then trucked to the relevant open excavations as part of the on-going rehabilitation process. The bin was equipped with an automated valve, which was controlled by the truck driver.
The concentrate from each pan was removed as a batch using individual screw conveyors, which was undertaken every 30 minutes for a period of 6 minutes. The concentrate from the two pans were then combined and transported along a conveyor belt to a dewatering screen. Screened oversize material discharged onto a conveyor belt which transported the material to a concentrate bin. Screened undersize gravitated to the central sump where it was combined with the pan tailings slurry and pumped to the fine residue deposit.
Pan concentrate was withdrawn from the bin using two vibrating screens, the last of which was inclined with the introduction of water in the opposite direction, thereby removing any vegetation. Screen undersize and vegetation discharged into a central sump, which in turn gravitated into a central sump where it was pumped to the Klipdam process water dam. Oversize from the screen discharged into an attritioner for X-ray FLOWSORT recovery preparation.
11.3.2 DMS Plant on Holpan
The DMS plant at Holpan was designed, fabricated and commissioned by Bateman (Fig. 11.2 and Plate 11.3). The gravels from the mining blocks were hauled to the 600 tph trommel screen at the treatment plant where all the +70mm material was removed to the oversize dump. The -70mm material fell through the rotating trommel screen onto the belt conveyor from where it was dumped onto a stockpile.
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The stockpiled material was fed into the 360tph Scrubber. During this process clay and other particles were washed and broken from the matrix. This allows for the liberation of the diamonds to take place. As the material exited the Scrubber it flowed over a double-deck vibrating screen with water sprays, removing the +30mm and -2mm material. The +30 mm material reported, via a conveyor, to the oversize surge bin, from where the material was dumped into the Volvo A40D ADT’s for transport to backfilling areas. The -2mm material was pumped as slurry to the de-sanding operation from where the +0.3mm was extracted for rehabilitation; the -0.3mm was sent to the fine residue deposits and the water was recycled.
Plate 11.4 DMS processing plant on Holpan (2007)
The washed and screen -30mm to +2mm material was then conveyed to the surge bin in front of the DMS preparation screen. The surge bin fed the preparation screen via a belt conveyor. At the preparation screen, ROM gravel was scalped to discard the +70mm fraction with the remaining -70mm fraction being washed and screened to yield a product ranging from +2.0 to -30.0 mm, suitable for treatment by the DMS plant before being mixed with the Ferro-Silicon (Fe-Si) in the mixing box.
The density of the Fe-Si was automatically kept at 2.7 g/cm³ by a density controller located in the Motor Control Centre. From the mixing box the material was pumped up to the separation unit, which consisted of a bank of 400mm cyclones where the material was separated based on density. The density of diamond is approximately 3.53 g/cm³ and it will report to the concentrate (‘heavies’/’sinks’) while the material lighter than 3g/cm³ will report to the tailings (‘lights’/’floats’). The DMS plant features a two-stream system to enable it to continue to operate at 50% capacity during maintenance of one half of the machine.
The concentrate reported to the concentrate vibrating screen, while the tailings reported to the tailings vibrating screen, where the Fe-Si was washed off. From the tailings vibrating screen, the tailings then dropped onto a conveyor which conveyed them to the tailings bin, from where the tailings would be tipped into a Volvo A40D ADT for transport to the backfilling areas. Page 69
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ROOIKOPPIE GRAVEL ALLUVIAL GRAVEL RECEIVING GRAVEL
-400MM
-400+70MM TROMMEL SCREEN -70MM SECTION
STOCKPILE FOR SURGE
SCRUBBING DEGRITTING & -2MM SECTION -70+30M SCREENING (2 MODULES) -0.6MM -0.6MM PUDDLE -30+2MM -2+0.6MM
COARSE TAILS COMBINED BOKAMOSO TAILINGS PAN (BEE DISPOSAL SECTION BRICKWORK INITIATIVE) CONC. ALTERNATIVE
RECOVERY FINE RESIDUE REHABILITATIO PLANT DEPOSIT N
Figure 11.3 Flowsheet for the processing and final recovery on Klipdam (Rockwell, 2007)
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ROOIKOPPIE GRAVEL ALLUVIAL GRAVEL RECEIVING GRAVEL SECTION
-400MM
-400+70MM TROMMEL ADDITIONAL SCREEN LOAD -70MM SECTION CAPACITY
STOCKPILE -70MM FOR SURGE
SCRUBBING & DEGRITTING -2MM SCREENING SECTION -70+30MM
-30+2MM -2+0.3MM -
COARSE TAILS COMBINED BOKAMOSO
TAILINGS DMS (BEE
DISPOSAL SECTION BRICKWORK
INITIATIVE) CONC.
ALTERNATIVE
RECOVERY SLIMES REHABILITATION PLANT DISPOSAL
Figure 11.4 Flow sheet for the processing and final recovery on Holpan (Rockwell, 2007)
11.3.3 Final Recovery
The concentrate was conveyed, via a jet pump, to the top of the Final Recovery room where the concentrate was first screened into three size fractions. All fractions were then passed through six X-ray FLOWSORT units (three double-pass systems).
Tailings from the FLOWSORT process were, then, passed over grease belts equipped with automated recovery systems, the purpose being to ensure that any diamonds that failed to report to the FLOWSORT (through non- X-ray fluorescence or due to equipment malfunction) were also recovered. The final concentrate was then passed to the picking cabinets in which the material passed over small vibrating feeders to enable easy hand-picking of diamonds. Page 71
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The final diamond recovery was done in a glove box (Plate 11.4), the hands of the picker being inserted into gloves attached to the cabinet, avoiding direct contact at all times. All diamonds picked were dropped into a drop safe at the bottom of the glove box.
Plate 11.5 Glove-box, in which the diamonds were sorted on Holpan
11.4 Drilling, sampling and recovery factors
Details regarding drilling, gravel thicknesses, and geological controls on deposition are presented in Section 7 (Deposit Types) Section 8 (Mineralisation) and Section 10 (Drilling). A number of issues peculiar to alluvial diamond sampling in general have, however, been identified and these impact specifically on the size of the samples and the complexity of statistical estimations.
• Low grades The grade of a diamond deposit is the estimated number of carats contained in one hundred tonnes (cpht) or hundred cubic metres (ct/100m3) of gravel and, typically, averages ≤ 1cpht (roughly equivalent to 0.001 -0.0001ppm) for inland South African alluvial deposits (Lock, 2003).
• Low homogeneity of diamond distribution Individual diamonds are not evenly or uniformly distributed throughout an alluvial deposit; neither are they randomly distributed. Rather, their distribution has been described as a random distribution of clusters of points (Fig. 11.1), where the clusters are both randomly distributed in space, and the point density of each cluster is also random (Rombouts, 1987).
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Figure 11.5: Schematic distribution of alluvial diamonds within an alluvial deposit – random distribution of clusters of points (Rombouts, 1987).
• Large individual diamond size Diamonds constitute discrete units of varying size (weight). In all of the inland alluvial deposits of South Africa, average diamond sizes are in the range of 0.5-2.0ct/st. Consequently, they form discrete particle deposits as opposed to disseminated particle deposits. Often the size and value distribution from stone to stone is erratic and it is possible that the majority of the value of a parcel is attributed to a single stone.
• Depositional environments Alluvial streams are highly transient environments. The braided channels are unstable through time and gravel bars are formed and destroyed continuously. Shifting bars and channels cause wide variations in local flow conditions resulting in varied depositional assemblages. Common features in braided stream deposits include irregular bed thicknesses, restricted lateral and vertical variations within the sediments, and abundant evidence of erosion and re-deposition. On a broad scale, most deposits are complex with units of no great lateral extent. Locally, bedrock features play an important role in diamond concentration of the alluvial deposits, with diamonds occurring preferentially in natural traps such as gullies, potholes and gravel bars and, typically, reworked through one or more post-depositional colluvial or eluvial.
• Lack of associated minerals or geochemical signature In contrast to kimberlite deposits, alluvial diamond deposits are not characterized by any standard (or deposit-specific) satellite/indicator mineral assemblage that may occur in higher, more easily measureable, concentrations than the diamonds. The deposits also do not have any associated geochemical signatures that can vary according to diamond grade (or any other geological characteristic).
• Grade variation In a single gravel unit (or even within a few metres), diamond grades may vary from barren to over 100cpht, due to the development of localized trap-sites under favourable bedrock conditions, or hydraulic fractionation within a channel or bar. Consequently, the diamond distribution pattern (grade) of alluvial deposits is such that there is no repeatability of sample results, even from adjacent samples.
In order to account for all of these issues, alluvial diamond deposits can only be sampled through bulk- samples comprising tens-hundreds of thousands of cubic metres of gravel. Bulk-sampling is completed in much the same manner as the production mining would be, except on a smaller scale. With positive results, bulk-sampling naturally progresses to trial-mining, during which all of the modifying parameters are determined to allow a decision of whether to proceed to full production.
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Diamond recovery is dependent on mechanical recovery through the application of physical properties of both diamond and gravel – density and size variation (to concentrate the heavy mineral portion from the bulk gravel) and fluorescence and wettable properties of the diamond during final recovery. The processing and recovery plants are affected by various issues such as the nature and amount of calcrete in the gravels as well as the amount of clay in the matrix. The manner in which these issues are dealt with is described in Section 17.
11.5 Sample Quality
As has been described in section 11 of this document, alluvial diamond deposits can only be sampled through bulk-samples comprising tens-hundreds of thousands of cubic metres of gravel (often referred to as trial-mining). Further, the diamond distribution pattern (grade) of alluvial deposits is such that there is no repeatability of sample results, even from adjacent samples of tens of thousand cubic metres in size. Consequently “check-samples” such as are standard in the precious and base-metal industries, are not possible.
The fundamental issue with grade determination on Klipdam/Holpan mine is that, although the fluvial- alluvial and Rooikoppie gravels from the two mining blocks are excavated and processed separately, final recovery of the diamonds is combined. Consequently, it is unknown what the grade contribution of the fluvial-alluvial gravels is in comparison with the Rooikoppie gravels. It cannot even be assumed that the grade is contributed equally between these two gravel types. The recovered grade figure has no way of distinguishing how much Rooikoppie was mined and how much fluvial-alluvial gravel. So, any variation in grade may be related to the percentage of which gravel was mined, in addition to a host of other geological and production related issues. As a result, although it is possible to estimate gravel volume and diamond sales values for the two properties at an indicated resource classification, the grade remains at a slightly lower confidence level, due to this inherent uncertainty in the relative contribution of the Rooikoppie and fluvial-alluvial gravel units.
11.6 Representativeness
As can be seen from the sampling map, the bulk-samples are not taken along a systematic grid, neither are they sited so as to sample specific horizons. The key reasons for this are: • the extremely large size of the sample (refer Sections 8 and 11.3 for details on diamond distribution patterns). • the anticipated mining plan for the properties is based on high volumes (and low grades) and, therefore, the samples have to address average recoveries. Consequently, samples are not sited so as to intersect areas of anticipated higher (or lower) grade. • the mining plan combines both Rooikoppie (colluvial) and fluvial-alluvial gravels. As a result, these units have not been sampled separately.
These issues notwithstanding, the samples have been sufficiently large so as to produce reliable results, as is shown by the repeatability of the grades in the subsequent mining programme – see section 16.1.6 for resource reconciliation details.
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11.7 Future Bulk-sampling
Bulk-sampling operations are scheduled to continue on both Erf 1 and Erf 2004 for 2010/2011. The samples will be excavated in the same manner as on Klipdam/Holpan. All gravels will be batch processed through the rotary pan plant on Klipdam. The results will be presented in a forthcoming technical document.
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12 SAMPLE PREPARATION, ANALYSES AND SECURITY
Due to the nature of alluvial diamond deposits, samples are not taken for assay as would be normal for precious or base metal prospects. Gravel bulk-samples were processed through Rockwell’s plant to determine average sample grade and the recovered diamonds are then sold on the open market for a determination of value. Consequently, no samples were dispatched to any analytical or testing laboratories. Further, sample splitting and reduction methods were not employed.
Since the samples were processed through Rockwell plant, Rockwell personnel were involved from the excavation of the gravels through to the final recovery of the diamonds. However, no officers or directors of Rockwell were involved in any part of this process. The procedures of the recovery processes have been described in detail in section 11.3. Further, section 13 describes the processes employed by the authors to verify and validate the results.
As described above (in Section 11), alluvial diamond deposits can only be sampled through bulk-samples comprising tens-hundreds of thousands of cubic metres of gravel. Further, the diamond distribution pattern (grade) of alluvial deposits is such that there is no repeatability of sample results, even from adjacent samples of tens of thousand cubic metres in size. Consequently “check-samples” such as are standard in the precious and base-metal industries, are not possible.
12.1 Sample Security
During the final recovery process described in Section 11.3.3, all FLOWSORT concentrates are sent directly to a twin-locked secure box (Plate 21.1) before they are hand-sorted in a glove box. The entire FLOWSORT and grease plant is containerised in an attempt to improve security (Plate 12.2). Access to all areas of the final recovery is controlled and monitored by closed circuit television.
The area around the sort-house is declared a Red Zone and enclosed with high-security fencing and monitored by surveillance equipment. An automated security system has been installed at all plant sites and will form part of the planned integration able to monitor all areas of the operation remotely. The security system also includes closed circuit television on all sensitive areas of the plants and final recovery rooms, access control (fingerprint biometrics), motion detection and tracking technology as well as guard patrols. This one system will monitor all of Rockwell’s mines in the Northern Cape (Holpan/Klipdam, Wouterspan and Saxendrift) and will also be linked to the Johannesburg head office by a dedicated ADSL line.
Since the samples were processed through Rockwell plant, Rockwell personnel were involved from the excavation of the gravels through to the final recovery of the diamonds. However, no officers or directors of Rockwell were involved in any part of this process. The procedures of the recovery processes have been described in detail in section 11.3. Further, section 13 describes the processes employed by the authors to verify and validate the results.
In the opinion of the independent QP, the procedures taken by Rockwell, with respect to sample preparation and security, are reasonable and well executed and within accepted industry standard.
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Plate 12.1 Locked secure box into which the FLOWSORT concentrates are sent.
Plate 12.2 Secure sorting, weighing and cleaning facilities
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12.2 Tracer testing QA/QC
In order to determine the level of accuracy of the concentrating and final recovery plants, density tracers were used extensively during bulk-sampling operations. Density Tracers are plastic particles which incorporate powders or other materials to impart suitable combinations of properties including density and colour. They are used to determine partitioning characteristics of density separators and other units accurately, rapidly and at low cost. Density tracers with densities spanning the range of interest are added to the circuit feed and retrieved from the product and rejects streams, manually or with the assistance of magnets or X-ray sorters. After retrieval they are sorted into their various densities, and the resulting data are used to plot a partition curve. The form of the curve can indicate whether the metallurgist should take actions such as adjust medium density, replace a worn circuit component, or correct an overload or medium instability situation.
On a daily basis, and more often when problems were identified, 40 tracers (10 of each of the 3mm, 5mm, 8mm and 10mm blocks (supplied by Partition Enterprises of Brisbane, Australia) were fed, at random, into different parts of each processing plant to test the recovery efficiencies of the system. The tracers were fed primarily into the launder chute feeding the pans, but also into the classifier and directly into the X-ray Flow Sort itself. The recovery of the tracers is to be noted in the daily production report and incorporated into the final database. The recovery of the tracers is done by the diamond sorters and all inconsistencies reported to the Senior Operations Manager.
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13 DATA VERIFICATION
Procedures and protocols govern every phase of data collection – from drillhole location, through bulk- sampling and processing, to final recovery and sales. The independent QP was involved in the drafting up of these protocols and they are reviewed, updated and audited regularly – during each site visit, during the compilation of the technical report and prior to the initiation of a new phase of exploration or mining. Spot checks are carried out by the independent QP on various aspects of the operation during site visits and, in the opinion of the independent QP, the procedures, as applied on Klipdam/Holpan, are adequate and well executed by Rockwell staff and are adequate for resource estimates.
As part of the data verification and resource estimation processes the independent QP and the Mineral Resource Manager (MRM), Rockwell’s non-independent QP, work closely together at each step. Prior to the initiation of new procedures and protocols which may impact on resource estimation results, discussions are held on the potential implications for both short and long term gravel volume, and diamond grade and value assessments. Further, the independent QP audits (both interactively and independently) the procedures used by the MRM to produce the resource estimates and models.
It is important to note that, although every data verification and resource estimation process is reviewed and audited by the independent QP, Rockwell also evaluates these issues in parallel, as part of their internal corporate responsibility. Any discrepancies, as well as potential issues, are thus identified by both parties separately and combined and are dealt with before they can become problems. While the MRM has overall control and responsibility for the resource evaluation programme, QA/QC for individual portions of the project are the responsibility of the designated individuals. The standard of record keeping was found upon inspection to be very high and there was sufficient evidence to show that the internal checks referred to above were being carried out on a regular basis. Among the internal checks performed by Rockwell (and reviewed regularly by the independent QP) to ensure that data is complete and accurate are: • drill-logs are checked and signed off by two different individuals; • gravel volumes are reconciled by exploration/survey and operations personnel; • the production records are examined by the management for inconsistent or unexpected data; • management reconciles the data from the diamond recovery log, mine registry, production records, register of diamonds recovered, and sales slips and; • management regularly audits the buyers’ records of transactions to ensure that they agree with the sales slips received. • Advanced computer/network security and backup measures are applied regularly, ensuring minimal disruption in the case of computer failures.
The geological database is the critical starting point to effective resource and reserve estimation and maintaining the integrity of the database is fundamental. In order to verify the integrity of the data and to ensure compatibility across all of Rockwell's properties, the database is routinely processed through DatashedQAQCTM, a database programme which enforces compliance through various protocol levels. All drill data is captured by the Database Manager to ensure continuity and verified by the geologist who logged the hole. The independent QP has audited the borehole drilling and logging process from beginning to end, and regularly makes spot checks on the operation during each site visit.
During July 2009, a data audit was completed for the Rockwell Diamonds Inc Database by Maxwell GeoServices of Australia. This audit was conducted on the data that had been added to the database up to July 2009. Not only was the audit performed on the data, but the data was moved to the Maxwell MDM 4.4.2, which includes a number of new tables to better capture future data. This database has all
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the statutory triggers and foreign keys in the database. During the database audit, a number of minor issues were identified which needed attention. In response to this audit, Rockwell’s database manager updated and verified all recommendations (completed January 2010). A copy of both the Maxwell audit and the Rockwell update documents were forwarded to the independent QP.
Mined volumes are sent to Rockwell under certificate from an independent professional surveyor and subsequently captured onto the production database by the Database Co-ordinator and verified by the MRM. The procedures and protocols of the surveyor have been reviewed by the independent QP and found to be in accord with industry standard. In addition, the surveyor provides a DTM of the area surveyed to Rockwell. This DTM is imported into SURPAC, which then calculates the volume of the mined area. If the computer calculated volume differs from the surveyor’s volume by more than 5% then the area is re-surveyed. Further, if subsequent mine grades are unexpectedly high or low, the volumes are re-checked or potential errors. This is routinely done by Rockwell staff and reviewed by the independent QP
All diamond data (total carats and total stones as well a list of every individual stone recovered) is recorded on the relevant mine and forwarded to the Database Co-ordinator who adds it to the database. Verification and change reports are used to track changes to the digital database by the Database Co-ordinator; copies of which are forwarded to the MRM. The independent QP receives and reviews this data regularly.
Payment for diamond parcels is always received by electronic transfer and a formal broker’s note is provided from the buyer and this also serves to indicate compliance with the Kimberley Process. This data is, subsequently, added to the production database. The author has examined each brokers note and found them all to be present and correct.
As has been described in section 11 of this document, alluvial diamond deposits can only be sampled through bulk-samples comprising tens-hundreds of thousands of cubic metres of gravel (often referred to as trial-mining). Further, the diamond distribution pattern (grade) of alluvial deposits is such that there is no repeatability of sample results, even from adjacent samples of tens of thousand cubic metres in size. Consequently “check-samples” such as are standard in the precious and base-metal industries, are not possible. As a result, the author has had to rely substantially on the production and sales data collected by all the operational personnel. Random sample data have, however, been verified by the independent QP who has audited the information from drilling to modelling. The author has, furthermore, examined all of the original production and sales data files used in the resource estimation process.
With respect to both exploration and development programmes and budgets (referred to in sections 18 and 19), the independent QP has consulted with Rockwell's Mineral Resource Manager, Rockwell’s COO and CFO. During these consultations, all exploration and mining plans, costing exercises, formal quotations and final budget numbers were reviewed. All processes and the results have been found to be reasonable.
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14 ADJACENT PROPERTIES
Diamondiferous alluvial deposits are known from the entire middle and lower Vaal River region. Mining of these deposits have taken place more-or-less continuously since the late 1800’s (Plate 14.1).
Plate 14.1: Mining of alluvial diamonds along the Vaal River prior to the turn of the 20th century (de Wit, 2008)
Small-scale diamond mining operations are taking place, or have been recently active, on several properties in the vicinity of Holpan/Klipdam (Fig. 14.1). Although satellite interpretation, geophysical modelling and surface mapping appears to indicate that all these properties fall on related palaeodrainage systems, the mineralisation on these properties is not necessarily indicative of the mineralisation on Klipdam and Holpan. The author has not independently verified the resource information on any of these properties.
Extending southwards from Holpan, both calcreted fluvial-alluvial and Rooikoppie gravels are mined on what is assumed to be part of the same palaeodrainage system that is present on Klipdam and Holpan. Due to the informal and private nature of these operations, acquiring reliable information regarding tonnage, grade and diamond values has not been possible. • Holpan Hotel 364 – this property, which has been in the Wakeford family for many generations, is also currently being operated by Messrs C. & D. M. Wakeford • Harrisdale 226 – currently operated by Springfit Estates (Pty) Limited (owned by the Snyman brothers) • Ventersvilla 164, operated by D. Corms and W Mason. • Slangheuwel 160 (also known as Snydersrush) operated by K.D. Mining (Pty) Limited and Thunderstone Investments (Pty) Limited.
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Figure 14.1 Location of properties where alluvial diamonds have been mined economically between Windsorton and Kantien Koppie at Barkly West (Source: Google Earth)
The farm Van Zoelenslaagte 158 has a long history of mining. Portions have been mined historically by artisanal diggers and by professional operators (Zoutpan Diamonds CC in the mid 1990’s) and more recently, prospected for kimberlite by KimCor Diamonds PLC. This property is currently being operated by Evening Star Trading CC. The fluvial-alluvial gravel deposits on Van Zoelenslaagte (Plate 14.2) are, for the most part, somewhat younger than the Holpan/Klipdam assemblage, comprising Proksch Koppie and Wedburg terrace gravels. However, older Rooikoppie gravels are known to occur in the northwest quadrant of the property.
The Leicester kimberlite pipe and its satellites occur on Farm 159 to the SE of Holpan. This pipe was evaluated by SouthernEra in the early 1990’s and since then has been operated sporadically by a string of smaller companies.
Between Klipdam and Holpan are a number of small claims (“Van Zyl claims”), currently being mined by a professional digger (alluvial miner), who is currently processing Rooikoppie gravel (Plate 14.3)
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Plate 14.2: Fluvial alluvial gravels on Van Zoelens Laagte (photo courtesy of Rockwell)
Plate 14.3: Rooikoppie operations on the Van Zyl’s claims between Klipdam & Holpan
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14.1 Slypklip North
During December 2000, a geological and topographic survey was completed over portion of Slypklip North fruit farm (Fig. 14.4) by Geoventures (Pty) Ltd (Slade, 2001). This documented the presence of two distinct terrace gravel deposits (Wedburg and Riverton) as well as a third (Rietputs) terrace on which no gravel was obvious. The Rooikoppie gravels on the Wedburg terrace on the adjacent property to the north had been partially mined out historically, but no records were available.
A wide-spaced drilling and pitting programme estimated the potential presence of some 440,000m3 of gravel on the upper, Wedburg terrace and some 300,000m3 of gravel on the lower terrace – these estimates of volume would not be consistent with any resource classification. The drilling work focussed on the low terrace adjacent to the Vaal River, comprising a gravel bed which was identified as Rietputs gravels. A pothole feature, containing gravel 12 m thick, was also identified during this work, resulting in the expectation of large diamonds and grades in excess of 1-2 cpht.
Figure 14.2 Location of the Slypklip North project (www.paramountmining.com)
Subsequently, Paramount Mining Corporation Ltd (ASX – PCP) entered into an option agreement with the holder of the Mining Permit to investigate the alluvial diamond potential of Slypklip North Fruit Farm further. All the information from this project is available on the company’s website (www.paramountmining.com). The technical report on this property was compiled (9 October 2003) by Dr Manfred Marx of Manfred R Marx and Associates (Pty) Ltd, a competent person in terms of the JORC resource estimation code.
A small bulk sample of this gravel was treated by a local Kimberley digger on the farm during 2001. A total of 9.87 carats of diamonds was recovered from this bulk sample (sample size of 1,436T). A grade
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The grades recovered from this test were thought to be are on the low side of expectations for such deposits. Coupled with the small average stone size (and, consequently, relatively low carat value), Paramount considered that the deposit would not be economically viable at a small scale mining level. To test for commercial viability for larger scale mining, a much larger bulk sample would be necessary (Paramount Annual Report, October, 2009). Since then, no further work has been carried out on this project (Paramount Half yearly report, March 2010).
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15 MINERAL PROCESSING AND METALLURGICAL TESTING
This section covers the mineral processing and diamond recovery (trial-mining) on the Klipdam and Holpan operations from February 2009-November 20108. During this period, 2,868,111m3 of gravel was excavated from the two properties (Fig. 15.1). The excavation of the gravel samples as well as the method of processing and the final recovery of diamonds have been described in Sections 11.2 and 11.3 and will not be repeated here (these processes used in the bulk-sampling and trial-mining phases of the operation are, essentially, similar, except for the volumes processed). The information recovered from this trial-mining operation forms part of the pre-feasibility study on the Klipdam and Holpan mines, the technical results of which are presented in Section 17 of this document.
Figure 15.1 Location of mining activities during the period February 2009 – November 2010
The excavation, mining, processing and final recovery methods are similar to those employed during the sampling phase of the operation. These methods have been described in Section 11.2 and 11.3 and will not be repeated here, except to note that during late-2008 and 2009, minor improvements were made
8 Previous results were confirmed during the 2007/2008 programme, and form part of Rockwell's bulk-sampling programme on the Klipdam/Holpan mining area (reported on in the 2009 Technical Report by Marshall and Norton). During 2009/2010, the programme moved into trial-mining on Klipdam and Holpan mines. Gravels on the prospecting properties, Erf 1 and Erf 2004, have yet to be bulk-sampled and this will form part of forthcoming resource estimation programmes. Page 86
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to the plants, namely: • During December 2008 – January 2009, Rockwell erected a new dewatering screen to the DMS plant on Holpan. This was built on-site by Rockwell staff, from existing equipment and materials. • During 2009, a second dewatering unit was built in the same manner and added to the Holpan DMS. • During 2009, small incremental improvements were also made to the Klipdam plant. These improvements mainly involved minor re-engineering and training.
15.1 Results
15.1.1 Grades
During the period February 2009 to November 2010, some 3,030,582m3 was processed as part of the trial-mining exercise on Klipdam and Holpan mines (Table 15.1). The average recovered grade was 0.99ct/100m3 (Table 15.2).
Table 15.1: Production results from Klipdam/Holpan for Feb 2009 – Nov 2010.
Gravel treated (m3) Carats Produced # Stones
2009 TOTAL TOTAL TOTAL Holpan Holpan Holpan Klipdam Klipdam Klipdam
Feb 43,250 49,073 92,323 521.74 258.80 780.54 550 251 801
Mar 65,780 58,506 124,286 498.99 150.03 649.02 437 134 571
April 70,789 72,260 143,049 529.30 322.94 852.24 372 306 678
May 74,141 59,894 134,035 579.55 513.45 1,093.01 613 483 1,096
Jun 81,614 58,080 139,694 1,029.16 512.10 1,541.26 1,060 453 1,513
Jul 111,784 89,611 201,395 1,430.90 831.98 2,262.88 1,574 747 2,321
Aug 82,862 89,801 172,663 1,201.01 815.59 2,016.60 1,306 788 2,094
Sep 87,121 93,710 180,831 1,073.42 869.13 1,942.55 1,252 903 2,155
Oct 85,674 74,595 160,269 553.95 460.93 1,014.88 612 444 1,056
Nov 77,604 57,535 135,139 930.22 372.80 1,303.02 1,217 303 1,520
Dec 64,718 50,434 115,152 913.21 452.70 1,365.91 1,196 445 1,641 Sub- 845,337 753,499 1,598,836 9,261.45 5,560.45 14,821.90 10,189 5,257 15,446 total
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Gravel treated (m3) Carats Produced # Stones
2010 TOTAL TOTAL TOTAL Holpan Holpan Holpan Klipdam Klipdam Klipdam
Jan-10 37,978 36,292 74,270 466.57 363.62 830.19 557 334 891
Feb 55,604 65,207 120,811 463.54 732.89 1,196.43 628 550 1,178
Mar 57,326 57,764 115,090 595.09 681.53 1,276.62 718 582 1,300
April 64,413 66,317 130,730 892.02 507.35 1,399.37 950 381 1,331
May 94,344 74,949 169,293 1463.96 826.93 2,290.89 1,636 503 2,139
Jun 89,027 81,509 170,536 595.18 730.56 1,325.74 802 464 1,266
Jul 78,084 74,920 153,004 690.55 932.04 1,622.59 703 494 1,197
Aug 69,815 87,187 157,002 807.94 448.96 1,256.90 921 320 1,241
Sep 91,768 86,771 178,539 1,492.65 570.31 2,062.96 1,513 353 1,866
Oct 84,207 78,264 162,471 1,245.61 736.95 1,982.56 1,324 362 1,686
Nov 79,275 67,994 147,269 1,018.15 823.87 1,842.02 970 608 1,578 Sub- 801,841 777,174 1,579,015 9,731 7,355 17,086 10,722 4,951 15,673 total
2009- 1,647,178 1,530,673 3,177,851 18,993 12,915 31,908 20,911 10,208 31,119 2010
Table 15.2: Recovered grades for the period 2009/2010
2009 Klipdam Holpan TOTAL 2010 Klipdam Holpan TOTAL Feb 1.21 0.53 0.85 Jan-10 1.23 1.00 1.12 Mar 0.76 0.26 0.52 Feb 0.83 1.12 0.99 April 0.75 0.45 0.60 Mar 1.04 1.18 1.11 May 0.78 0.86 0.82 April 1.38 0.77 1.07 Jun 1.26 0.88 1.10 May 1.55 1.10 1.35 Jul 1.28 0.93 1.12 Jun 0.67 0.90 0.78 Aug 1.45 0.91 1.17 Jul 0.88 1.24 1.06 Sep 1.23 0.93 1.07 Aug 1.16 0.51 0.80 Oct 0.65 0.62 0.63 Sep 1.63 0.66 1.16 Nov 1.20 0.65 0.96 Oct 1.48 0.94 0.83 Dec 1.41 0.90 1.19 Nov 1.28 1.21 1.25 Sub-total 1.10 0.74 0.93 Sub-total 1.21 0.95 1.08
WEIGHTED AVERAGE 2009-2010 1.15 0.84 1.00
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This weighted average mine grade (1.00ct/100m3) is somewhat higher than the average sample recovered during 2006/2008 (0.72ct/100m3). This is, in part, the result of improved mining practices resulting in lower dilution of the gravel grade. Further, increased plant efficiencies have increased diamond recoveries significantly.
In addition, Rockwell’s trial-mining studies have indicated that the Rooikoppie gravels can be subdivided into two groups, on the basis of their sand content. The more sandy gravels are proving problematic for the current plant configuration, resulting in low diamond recoveries. Consequently, Rockwell has been processing only the non-sandy colluvial gravels which, in turn, results in an increased recovered (trial- mining) grade.
15.1.2 Values
During the period February 2009 – November 2010, a total of 30,660.43ct were sold for a combined average of USD804/ct (Table 15.3). However, looking in a little more detail, it is apparent that diamond sales for 2009 were still deflated. It is only from March 2010 that sales values (USD1,049/ct for Klipdam and USD1,229/ct for Holpan, with a weighted average of USD1,129/ct) have returned to reasonable levels, although still somewhat lower than 2007 and early 2008.
Table 15.3: Diamond sales figures for Klipdam and Holpan for 2009/2010.
Month Carats USD Revenue USD/ct Klipdam Holpan Klipdam Holpan Klipdam Holpan Feb-09 1,471.62 704.72 613,618.00 222,509.00 416.97 315.74 April 1,001.24 439.77 569,656.06 93,834.89 568.95 213.37 May 575.44 436.36 302,309.26 144,339.95 525.35 330.78 June 1,042.36 612.39 599,345.27 332,409.73 574.99 542.81 July 916.36 453.60 286,318.70 622,554.00 312.45 1,372.47 Aug 1,176.78 863.59 1,399,386.00 248,529.00 1,189.17 287.79 Nov 2,350.13 1,741.80 1,316,575.06 388,419.54 560.21 223.00 Total 2009 8,533.93 5,252.23 5,087,208.35 2,052,596.11 596.12 390.80 Jan-Feb 10 2,206.60 1,182.49 1,191,595.66 1,114,245.69 540.01 942.29 March-May 1,390.57 1,513.79 867,694.51 2,233,774.01 623.98 1,475.62 June-July 1,412.55 1,011.02 589,550.49 945,232.08 417.37 934.93 Aug 2,214.74 2,206.10 1,454,659.30 3,246,209.86 656.81 1,471.47 Oct 2,248.95 1,029.26 2,910,744.88 999,513.62 1,294 971.10 Nov 472.27 383.06 2,223,690 433,304 4,709 1,131 Total 2010 9,754.32 7,119.95 9,110,994.42 8,413,311.23 934 1,182
TOTAL 18,288.25 12,372.18 14,198,202.77 10,465,907.34 776 846
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15.1.2.1 Diamond Size Distribution
During February 2010, Dr M M Oosterveld analysed the diamonds recovered from the Klipdam and Holpan operations during 2007-2009 (Oosterveld, 2010). The purpose of this analysis was to investigate the occurrence of stones larger than 10ct.
HOLPAN
In a production of 18,274ct during 2007-2009, some 124 stones larger than 10ct/st were recovered. The cumulative frequency with respect to size (Fig. 15.2a) shows that, from +10ct to +40ct the graph is fairly straight, through which a linear model was fitted. Comparison of the observed results against the modelled results shows that in the +60ct size class, four stones were recovered against an expectation of two-three stones and that in the 100ct size class, one stone was recovered against an expectation close to one. These differences are most likely caused by the variability in the occurrence of larger stones and there is no indication that stones are lost due to theft or recovery efficiency. (a) (b)
Figure 15.2: Model for large stones for (a) Holpan and (b) Klipdam (Oosterveld, 2010)
For upper cut-off screensize and/or crushing considerations, a calculation was done to forecast how many large stones could be expected in a production of 100,000ct (Table 15.4). By end 2009, Rockwell had only recovered some 18,274 ct from Holpan. To produce a +400C stone from this deposit, on average a minimum production of 500,000ct would be required.
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Table 15.4: Estimation of the number of large stones expected on Holpan and Klipdam
Holpan Klipdam Stone size Expected # stones Recovered in Expected # stones Recovered in (Carats) (in 100,000ct) 24,068cts (in 100,000ct) 29,124cts 2007-(2010) 2007-(2010) +60 13 5 33 10 +100 4 2 13 3 +200 1 4 +400 1
KLIPDAM
The same procedures were followed as for Holpan. Comparison of the observed results against the modelled results (Fig. 15.2b) shows that in the +60ct size class, they were equal at seven stones and in the +100ct size class, two stones were recovered while nearly three could be expected. There are no indications of the loss of larger stones. For upper cut-off screensize and/or crushing consideration (if crushing is done) a calculation was done of how many stones could be expected in a production of 100,000ct (Ref. Table 15.4). By end 2009, only 21,657ct had been recovered.
During 2009/2010, some 31,908.17cts were recovered (31,119 stones) for an average stone size of 1.03ct/st (Fig. 15.3). Although the median value is only 0.57ct/st, a significant proportion of the diamond population is +20ct (57 stones, for a total of 2,352.83ct). While these stones form a minority of the population, they can fetch individual prices of up to USD18,000/ct.
Stones
8,000 7,000 6,000 5,000 4,000 3,000 2,000 Number of of Number Stones 1,000 0
Diamond Sizes (Ct)
Figure 15.3: Diamond size frequency for the combined Klipdam/Holpan population
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During the bulk-sampling exercise, diamond sizes averaged around 2ct/st. The decrease in average recovered stone size is not a reflection on a deteriorating ore-body but, rather, as a result of increased processing/plant efficiencies, recovering smaller stones that, previously, were lost.
15.2 Representativeness
As can be seen from Fig. 15.1 the trial-mining is representative of the areas which have been drilled on a detailed grid (and classified as Indicated Resource – see section 16 for details). Areas still classified as Inferred Resources have not yet been trial-mined.
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16 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES
CIM, SAMREC and JORC definition do not deal specifically with the peculiarity of alluvial diamonds when it comes to resource or reserve estimations. The reason for this is that, typically, alluvial diamond companies have not, historically, been significant public companies (other than De Beers) that have required guidance in these matters. Since resources have “a reasonable expectation of economic viability”, CIM requires cut off grades to be estimated for resources as well as reserves. Cut-off grades are better defined through feasibility studies that establish reserves. For reserve definition, different cut-off grades are applied to different deposits or sections of a mine at different times. Cut-off grades can vary as average ore value changes (e.g. diamond market conditions, exchange rate, diamond size variations) or as operating cost factors vary (e.g. amount of overburden, haul distance). Reserves for alluvial diamond mining inevitably change as deposits are mined.
The Indicated and Inferred Resource categories used in this Report follows the CIM (2005) definition. The resultant estimations are materially similar to those set out in the SAMREC Code (2007)
CIM Standards define Inferred Resources as: “ that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.”
Due to the uncertainty that may be attached to Inferred Mineral Resources, it cannot be assumed that all or any part of an Inferred Mineral Resource will be upgraded to an Indicated or Measured Mineral Resource as a result of continued exploration. Confidence in the estimate is insufficient to allow the meaningful application of technical and economic parameters or to enable an evaluation of economic viability worthy of public disclosure. Inferred Mineral Resources must be excluded from estimates forming the basis of feasibility or other economic studies.
For comparison, the 2007 SAMREC code defines an Inferred (Diamond) Resource as: “that part of a Diamond Resource for which tonnage or volume, grade and average diamond value can be estimated with a low level of confidence. It is inferred from geological evidence and assumed, but not verified, geological and grade continuity and a sufficiently large diamond parcel is not available to ensure a reasonable representation of the diamond assortment. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drillholes that may be limited or of uncertain quality and reliability.”
This category, which has a lower level of confidence than that applying to an Indicated Mineral Resource is intended to cover situations where a mineral concentration or occurrence has been identified and limited measurements and sampling completed, but where the data are insufficient to allow the geological and/or grade continuity to be confidently interpreted. Due to the uncertainty which may be attached to some Inferred Mineral Resources, it cannot be assumed that all or part of an Inferred Mineral Resource will necessarily be upgraded to an Indicated or Measured Mineral Resource as a result of continued exploration. Further, confidence in the estimate is insufficient to allow the meaningful application of technical and economic parameters or to enable an evaluation of economic viability worthy of public disclosure.
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CIM defines Indicated Resources as: “ that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics, can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.”
Mineralization may be classified as an Indicated Mineral Resource by the Qualified Person when the nature, quality, quantity and distribution of data are such as to allow confident interpretation of the geological framework and to reasonably assume the continuity of mineralization. The Qualified Person must recognize the importance of the Indicated Mineral Resource category to the advancement of the feasibility of the project. An Indicated Mineral Resource estimate is of sufficient quality to support a Preliminary Feasibility Study which can serve as the basis for major development decisions.
The 2007 SAMREC code defines an Indicated (Diamond) Resource as: “that part of a Diamond Resource for which tonnage and volume, densities, shape, physical characteristics, grade and average diamond value can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drillholes. The locations are too widely or inappropriately spaced to confirm geological and grade continuity but are spaced closely enough for continuity to be assumed and sufficient diamonds have been recovered to allow a reasonable estimate of average diamond value.”
The confidence level associated with the Indicated Mineral Resource is sufficient for this information to be applied to global mine design, mine planning; to allow the appropriate application of technical and economic parameters; and to enable an evaluation of economic viability.
16.1 Previous Resource Estimates
16.1.1 De Decker & Associates Resource Evaluation Report (2006)
In March of 2006, De Decker and Associates completed a NI43-101 compliant technical report on the Klipdam/Holpan properties for Rockwell Ventures Inc. A total of 3,243 boreholes with a combined depth of 14,486m were drilled on Holpan-Klipdam between 1994 and 2007. Boreholes were spaced at 50 m intervals along traverses 100 m apart. As of January 2006, the drilling programme, supported by bulk sampling test work and field observation, had outlined a gravel resource of approximately 7,500,000m3 of Rooikoppie and 4,300,000 m3 of Primary gravel on the Holpan-Klipdam properties (Table 16.1). A simple aggregated global average diamond grade of 1.16 ct/100 m3 was accepted, based on bulk sampling results. For the period June 2003 to December 2005, the average diamond value was USD848 per carat. The continuity of the geology and mineralisation, together with the degree of confidence in grade and stone value are considered sufficient to classify the diamondiferous gravels, as an Inferred Resource. The production information used to support this contention was derived from a mined volume of 3,267,400m3 and a total of 37,809 carats. It was, further, estimated that 4,800,000m2 of gravel that is visually similar to the Rooikoppie gravels (and, as such would be considered an exploration target), surrounds the area of the inferred resource.
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Table 16.1: 2006 Resource estimate for Holpan-Klipdam (De Decker, 2006)
Volume of Gravel Grade Average Value Gravel Resource Resource Category (m3) (ct/100m3) (USD/ct) Holpan 1,659,971 Palaeochannel Klipdam 3,035,920 1.16 848 Palaeochannel Inferred Rooikoppie (Holpan 7,643,776 & Klipdam)
TOTAL 12,339,667 1.16 848
16.1.2 Explorations Unlimited (March 2007, November 2007, May 2008)
Since the publication of the DDA report in March 2006 mining at both properties concentrated on Rooikoppie gravels. The (calcreted) palaeo channel basal (palaeochannel) gravels comprised only a minimal proportion of the mine production and the resource figures for these units remained unchanged from the DDA report. Depleting the volumes of Rooikoppie gravels mined and processed during the period January 2006 to March 2007, the resources estimated to exist on the Klipdam/Holpan properties is identified in Table 16.2. Based on the sale of 15,938 carats through Flawless Diamonds (Pty) Ltd during 2006/2007, the average value of the Holpan-Klipdam diamonds is USD876/ct.
The resources of March 2007 were estimated by Rockwell’s Manager, Resources, G. Norton, (Pr. Sci. Nat.), a qualified person who is not independent of the Company and reviewed by T.R. Marshall, PhD, (Pr. Sci. Nat.), a qualified person who is independent of the Company and is responsible for the estimate.
Table 16.2 Resource statement as at March 2007
Description of DDA gravel Volume of Gravel Volume of Gravel Sampled Grade Gravel Resource Volume (m3) mined (m3) remaining (m3) (ct/100m3) Holpan Primary 1,659,971 ------1,659,971 Gravel 1.16 Klipdam Primary 3,035,920 ------3,035,920 Gravel Rooikoppie (Holpan 7,643,776 1,889,308 5,754,468 0.81 and Klipdam) TOTAL 12,339,667 10,450,359 0.95
The 2007 close-spaced drilling programme on the Klipdam fluvial-alluvial (palaeochannel) gravels has increased the confidence in the presence of diamondiferous gravels and has, further, refined the resource estimate for this deposit. Since no separation of resources into Rooikoppie / fluvial alluvial deposits was made at the time, and the two properties were combined into a single mining entity, it was decided to present a single resource (Table 16.3).
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Depleting the volumes of Rooikoppie gravels mined and processed during the period January 2006 to October 2007 and supplementing the resources with volumes defined by the new drill data, the October 2007 estimate of mineral resource is tabulated below. They were estimated by Rockwell’s Manager, Resources, G. Norton, (Pr. Sci. Nat.), a qualified person who is not independent of the Company and reviewed by T.R. Marshall, PhD, (Pr. Sci. Nat.), a qualified person who is independent of the Company and is responsible for the estimate.
Table 16.3 Resource statement as at October 2007
Resource Volume of Mining/sampling Sales Values Classification gravel (m3) grade (ct/100m3) (USD/ct) TOTAL GRAVEL (Rooikoppie and Inferred 9,227,000 0.82 1,040 fluvial-alluvial)
Based on the sale of 24,783.82 carats through Flawless Diamonds (Pty) Ltd during the entire production period of 2006/2007, the average value of the Holpan-Klipdam diamonds was USD 1,040/ct. This figure was increased from the previous value of USD 848/ct as a result of the improved market for larger stones. During the period 31 October 2007 – 31 May 2008 the resources outlined above were, further, depleted by mining activities. Some 893,400m3 of mixed Rooikoppie and calcreted fluvial-alluvial gravel was processed to recover 7,951.26ct at an average grade of 0.89ct/100m3. These diamonds were sold on the open market for an average of USD1,318/ct. The increase in average diamond value was attributed, in part, to the worldwide increase in the value of gemstones as well as to the recovery of a number of large (+50ct) stones. The sample grade of 0.89ct/100m3 was due to a combination of improved grade control coupled with the mining of virgin Rooikoppie and fluvial-alluvial gravels. The weighted average grade, however, increased from 0.82ct/100m3 to 0.83ct/100m3.
The updated resource statement as at 31 May 2008 is given below (Table 16.4). They were estimated by Rockwell’s Manager, Resources, G. Norton, (Pr. Sci. Nat.), a qualified person who is not independent of the Company and reviewed by T.R. Marshall, PhD, (Pr. Sci. Nat.), a qualified person who is independent of the Company and is responsible for the estimate.
Table 16.4 Resource statement as at May 2008
Inferred Ave Grade Ave Value Resources (ct/100m3)* (USD/ct) TOTAL GRAVEL (Rooikoppie and 8,334,000 0.83 1,318 fluvial-alluvial) TOTAL 8,334,000 0.83 1,318 * At a bottom cut-off of 2mm9
9 Bottom cut-off refers to the smallest size diamond (in mm) that is recovered in the sampling and mining process – in this case, no diamonds smaller than 2mm are recovered. Page 96
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16.1.3 Explorations Unlimited (December, 2009)
During 2008 over 7,000cts were sold for over USD2,500/ct as a result of the positive diamond market. However, since late 2008 diamond prices fell dramatically, as evidenced by the average sales figures in February 2009 of USD130-190/ct. Rockwell sold stones from Klipdam and Holpan separately over much of 2008. No diamonds were sold from these mines during November 2008 to February 2009 due to the dramatic drop in international diamond prices. Rockwell modelled that the 2009 diamond prices would approximate 50% of the 2008 value, namely USD915/ct for Klipdam and USD671/ct for Holpan.
The updated resource statement as at 28 February 2009 is given below (Table 16.5). The resources were estimated by Rockwell’s Manager, Resources, G. Norton, (Pr. Sci. Nat.), a qualified person who is not independent of the Company and reviewed by T.R. Marshall, PhD, (Pr. Sci. Nat.), a qualified person who is independent of the Company and is responsible for the estimate.
Table 16.5: Resource statement as at 28 February 2009
Description of Volume* of Gravel Volume* of Gravel Grade Value Gravel Resource (m3) at Inferred (m3) at Indicated (ct/100m3) (USD/ct) Classification Classification Holpan Fluvial- 294,000 alluvial Gravel 2008 -1,157 0.74 Holpan Rooikoppie # 5,643,000 1,137,300 2009 - 671 gravel Klipdam Fluvial- 1,504,163 alluvial Gravel 2008 - 3,892 0.91 Klipdam # 1,312,000 1,135,200 2009 - 915 Rooikoppie gravel TOTAL 8,753,163 2,272,500 0.84 ∗ Volumes fully diluted of sampling and mining for the period 2008-Feb2009 (Totals rounded off) # Modelled values for 2009 (by Rockwell, 2009)
16.2 Current (2010) Resource Estimation
16.2.1 Key Assumptions
a) This study has applied the following criteria for the estimation of indicated and inferred resource estimates:
Indicated Resources • Of primary importance is the confidence that can be placed on the volume model. Rockwell has implemented a system whereby the volumes of mined out areas are regularly reconciled with the volumes predicted by the drilling. Where a good correlation is found (within 10% annually with a variance of less than 15% on a monthly basis) then adjacent areas are considered for indicated resource category; • A minimum drilling grid of 100x50m is preferred, except where mining (see above) has indicated both geological and grade continuity. • An indicated resource has to lie within 250m of a reference bulk-sampling pit from which a Page 97
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minimum of 3,000 – 5,000cts have been recovered (for confidence in the grade and value estimations). • Similarly, the geological environment is considered – indicated resource gravels need to lie within the same geological environment (channel or overbank, for example) as the reference bulk-sample.
Inferred Resources • A minimum drill grid on 200x200m • A minimum of 500cts from the property (for grade and value estimation) • Similar broad geological environment (same terrace, for example and same gravel type – no extrapolation from Rooikoppie to fluvial-alluvial units).
b) It is noteworthy that no measured resources are estimated on Rockwell properties. The CIM and SAMREC codes define measured resources as: “that part of a Diamond Resource for which tonnage and volume, densities, shape, physical characteristics, grade and average diamond value can be estimated with a high level of confidence. It is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drillholes. The locations are spaced closely enough to confirm geological and grade continuity and sufficient diamonds have been recovered to allow a confident estimate of average diamond value.”
Measured Resources, thus, cover the situation where all of these features can be estimated with a high level of confidence – sufficient to confirm geological and grade continuity.
Alluvial diamond deposits are well known for their extreme inhomogeneity and low grades (Fig. 16.1). The resulting scenario makes it extremely difficult to estimate the required parameters to a “high level of confidence” (with the exception of diamond value) without over-capitalising the project. M M Oosterveld, an acknowledged expert in the field of diamond distribution, has indicated that even kimberlite deposits may not be evaluated in terms of measured resources (Lock, 2003). He points to the Orapa kimberlite mine as an example where, although the grade over time has run at some 60cpht, the De Beers ore reserve managers still do not feel that they can claim a measured resource with full confidence.
Figure 16.1: The extremely low concentrations of diamonds, combined with low homogeneity results insignificant difficulties in the evaluation of alluvial diamond deposits (after Lock, 2003)
The industry standard for reserve estimation on alluvial diamond mines, based heavily on the De Beers alluvial deposits of Namaqualand and Namdeb, is to estimate slightly more than two years of Probable Reserves (at prevailing trial- mining production rates), two/three years of Indicated Resources and multiple years of Inferred Resources. As the reserves are consumed, there is a continuous cycle of resource/reserve rollover. Page 98
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16.2.2 Volume
Estimation of resource volume is completed in two software programmes – initially gravel thicknesses are plotted in Geosoft Target (v 6.4.1) and volumes are later calculated in Gemcom Surpac (v 6.0.1). • All borehole data is imported into Target which has numerous internal validation routines, ensuring data integrity. Bedrock elevation and gravel thickness maps are created, primarily to identify first- pass targets and geological anomalies. • The data is then imported into Surpac (which has further validation routines) for resource modelling through the creation of DTM’s. • Separate DTM’s are created for the bottom and top contacts of the gravel units. All boreholes that do not have gravel intersections are excluded from the model. The envelope around the boreholes was extended to one-half of the drill interval. • Constraining strings (mined out areas, farm boundaries, for example) are created. During this process all isolated outlier points are deleted from the data, in order not to introduce spurious errors. • A block model is then created, based on the external limits of the DTM. The block size is based on the geology – 1m3 has been used for the fluvial-alluvial sequence and 1x1x0.3m was used for the Rooikoppie unit. All partial blocks are excluded from the model, resulting in a fairly conservative result • The model is then, further constrained by the two DTM’s and the constraining strings, producing a volume.
16.2.2.1 Specific Density
Specific Gravity (SG) measurements are not routinely completed on alluvial gravels. SG’s of gravels vary considerably from unit to unit due to moisture, clay and heavy mineral contents and conversion to tonnages tend to compound problems rather than simplify them. Regional averages for specific densities of alluvial gravels can vary from as low as 1.6T/m3 to over 2.4T/m3, where the gravels contain large percentages of Banded Iron Formation (BIF). Typically, fluvial-alluvial gravels average 1.8T/m3 and Rooikoppie deposits are somewhat higher, as 2T/m3.
All mining, processing and reconciliation on Klipdam/Holpan Mine is done using gravel volumes and not tonnages. However, for the purposes of individuals wishing to estimate tonnages, an average of 1.85T/m3 can be assumed for the Klipdam/Holpan Mine, as well as for other similar gravels along the middle Vaal River (the marginally higher value being due to the impact of the Rooikoppie gravels that are processed along with the fluvial-alluvial gravels).
16.2.3 Diamond Grade
The grade of a diamond deposit is the estimated number of carats contained in one hundred tonnes (cpht) or hundred cubic metres (ct/100m3) of gravel. Alluvial diamond grades are often measured in carats per unit of volume due to the problems associated with accurately predicting the bulk density of gravels, which are highly variable over short distances due to the relative pebble to sand content of the gravel and the pebble rock type. In this report, grades are reported in ct/100m3.
16.2.3.1 Cut-off Grades
Cut-off grades are not entirely pertinent to alluvial diamond mines since grade is not the only gauge of profitability. A far more relevant measure is the cut-off sieve/screen size, as diamond size more closely approximates value. Although more stones may occur in the smaller size fractions, these do not make
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up the bulk of the value. Also, although the very large stones may contain high value, they may make up so small a percentage of the population that the additional cost of processing larger size fractions may tender their recovery uneconomical. Consequently, any mining operation has an optimum range of stone size recovery where realised value exceeds input costs. On both Klipdam and Holpan, the bottom cut-off (or minimum) sieve size is 2mm and the top cut-off (maximum) screen size is 40mm (see section 15.1.2.1 for the details of a study by MM Oosterveld to determine the optimum recovery range for this deposit).
Further, cut-off grades are not considered on Rockwell alluvial properties due to the fact that diamonds do not have a fixed, single price, but their values vary significantly from one stone to another. Consequently, income/carat is extremely variable. As a result, the mine works on an income/unit of volume rather than a simple cut-off grade. In addition, since Rockwell has a number of alluvial diamond mines in operation at any given time, individual operations may operate at a loss for a number of months before being put on Care& Maintenance. Accordingly, company-wide income/volume has to exceed cost/volume.
16.2.4 Diamond Value
Diamond values are quoted as USD/ct. Valuation of the better quality diamonds, which normally constitute most of the inherent value of the deposit, tends to be subjective and is best determined by sales values obtained on the open market in a free trading economy. During March-November 2010, Rockwell has sold some 13,485.18ct of diamonds through open tender to Flawless Diamonds during 2010 for an average recovered value of USD1,129/ct (USD1,229/ct for Holpan and USD1,049/ct for Klipdam).
16.2.5 Resource Statement
Based on the criteria described above, the Indicated and Inferred resource estimate for the project as at 30 November 2010 are summarised in Figure 16.2 and Table 16.6 (these figures represent volumes available in the ground, fully depleted of material removed by the bulk-sampling programme). They were estimated by Rockwell’s Manager, Resources, G. Norton, (Pr. Sci. Nat.), a qualified person who is not independent of the Company and reviewed by T.R. Marshall, PhD, (Pr. Sci. Nat.), a qualified person who is independent of the Company and is responsible for the estimate.
Table 16.6: Resource statement for the Klipdam/Holpan mine as at 30 November 2010
Description of Gravel Volume* of Gravel Volume* of Gravel Grade# Value Resource (m3) at Indicated (m3) at Inferred (ct/100m3) (USD/ct) Classification Classification Holpan Fluvial-alluvial 517,800 527,000 0.95 1,229 Holpan Rooikoppie Klipdam Fluvial-alluvial 989,100 1.21 1,049 Klipdam Rooikoppie 1,102,100 949,000 Erf 2004, Windsorton 404,700 127,000 0.63 986 TOTAL 3,013,700 1,603,000 ∗ Volumes fully diluted of sampling and mining for the period 2008-Nov 2010 (Totals rounded off to reflect the fact that it is an approximation.) # Grade estimated with bottom cut-off stone size at 2mm Page 100
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Figure 16.2: Resource estimation on Klipdam/Holpan mines at 30 November, 2010
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16.2.6 Resource Reconciliation
Since 2005, mining has concentrated on the Rooikoppie deposits, although some 30% of fluvial-alluvial gravels have been mined more recently. Historically, these gravels have been known to have a lower average grade than the basal alluvial gravels of the palaeochannel, but the average diamond sizes have been higher in the Rooikoppie – hence the penchant for mining them ( HC van Wyk, pers.com). With more prospecting taking place, currently, on the fluvial-alluvial gravels, especially on Klipdam, combined with the mining of large-boulder colluvial gravels, the grade on Klipdam has continued to increase – from 0.83ct/100m3 to current values of 1.21ct/100m3. During 2008 and 2009 the average grade on Holpan had decreased to 0.74ct/100m3 but has been seen to increase to 0.92ct/100m3 in 2010. Not only does this situation reflect the geology of the gravels mined on the two properties, but also the fact that processing efficiencies have improved greatly on both mines. With respect to the geological factors, more virgin fluvial-alluvial gravels (with higher average grade) were mined on Klipdam than on Holpan, combined with the fact that the known Rooikoppie on Klipdam contains larger boulders, a situation that, typically, traps more and larger diamonds.
Rockwell continually reconciles recovered grades with estimated resource grades on all of their deposits and mines. Where indicated resources are estimated, it is expected that the recovered grades/values must be within 15% of the estimated figures. Figs. 16.2 shows the correlation between sampled grade and recovered grade over the period January 2007 to November 2010, for the combined Klipdam/Holpan mine production. It is important to note that the monthly mine grade can vary significantly, as a result of internal variations in diamond concentrations, whereas the long-term average recovered mine grades (as depicted by the linear trend) are relatively smooth.
The increasing recovered mine grade in 2010 is a reflection of the fact that, in addition to fluvial-alluvial gravels, only non-sandy colluvial (Rooikoppie) gravels are currently being mined. Further, in comparison with 2009 data, the 2010 resource inventory reflects a significant decrease in resources. As a result of the trial-mining, Rockwell considers that the very sandy gravel (which requires significant modifications to the plant) may never, in fact, be mined. Consequently, this volume (5-6Mm3) of gravel has been removed from the resource classification and re-categorised as Exploration Target gravels (See section 17.1 for further details).
Mine Grade Sample Grade Linear (Mine Grade)
1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Jul 09 Jul 07 Jul 08 Jul 10 Jan 07 Jan 08 Jan 10 Jun 09 Jun Jun 07 Jun 08 Jun 10 Jun Oct 07 Oct 08 Oct 09 Apr 09 Apr 07 Apr 08 Apr 10 Sep 09 Feb 07 Sep 07 Feb 08 Sep 08 Feb 09 Feb 10 Sep 10 Dec 07 Dec 09 Dec Aug 09 Aug 07 Aug 08 Aug 10 Nov 07 Nov 08 Nov 09 Mar 08 Mar 09 Mar 10 Mar 07 May 09 May 07 May 08 May 10
Figure 16.3 Correlation between estimated and recovered grade on Klipdam/Holpan (January 2007 – November 2010)
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16.2.7 Prospecting and Mining risks
The prospecting and mining business is speculative. This Technical Report identifies some of the factors that are most likely to affect both the company and the project, as well as the value of its securities. However, this is not an exhaustive list and investors should seek professional advice for further clarification of the risks involved before deciding whether to invest in the diamond mining industry.
Whether a diamond deposit will be commercially viable depends on a number of factors, some of which are the particular attributes of a deposit, such as the diamond resource (size, quantity and quality), proximity to infrastructure, water availability, financing cost and governmental regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of diamond and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in the project not returning an adequate return on investment capital.
Further, general economic conditions may affect inflation and interest rates which, in turn, may impact upon the projects operating costs and financing. The future viability and profitability of the project is also dependent on a number of other factors affecting performance of all industries and not just the exploration and mining industries, including, but not limited to, the following: • The strength of the equity and share markets in Canada, Johannesburg and throughout the world; • General economic conditions in Canada and Johannesburg and their major trading partners and, in particular, inflation rates, interest rates, commodity supply and demand factors and industrial disruptions; • Natural disasters; • Social unrest or war on a local or global scale; • Financial failure or default by a participant in the project or other contractual relationship to which the Company is, or may become, a party; • Insolvency or other managerial failure by any of the contractors used by the Company in its activities; and • Industrial disputation. Underlying strategic risks for prospecting and mining companies do not vary significantly over time. However, the acuteness, and hence the priority of these risks, changes depending on the economic environment (Ernest &Young, Strategic Business Risk Report, 2009). The changes may be subtle, but significant enough to sometimes change the drivers of these risks as they develop along with the market. For example, the economic crash of 2008/2009 forced the landscape to transform dramatically and priorities have, therefore, morphed from boom-related restrictions on supply to those risks directly affecting cash flow. This report has identified the most significant strategic business risks for the mining and metals sector, for 2010, as:
Cost containment The spectacular fall in commodity prices has caused an even greater reduction in margins. Boom-time ‘production at any cost’ attitudes have left an unsustainable level of costs for mining and metals companies. However, cost reduction activities should not contribute to value erosion. Cost containment needs to be urgent and, most importantly, sustainable.
Access to capital The global credit squeeze and resulting global recession has severely limited mining and metals companies from freely accessing both the debt and equity markets to fund ongoing operations during a period of low or negative margins. As a result, funding of new projects or refinancing of maturing arrangements can be challenging.
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Maintaining a social license to operate There is great pressure on companies to reduce capital and operating costs, making the need to maintain a social license to operate more difficult. Mine closures or staff reductions can negatively impact on a community’s and government’s perception of a mining company. Therefore, a balance needs to be struck between cost optimization and environmental and community investment.
Climate change concerns As a major user of energy and a primary user of land, climate change is a major issue for the mining and metals sector which risks its reputation and social license to operate. Companies are introducing new initiatives to combat climate change, including using new sources of energy, improving water management, and developing new technology to harness carbon emissions and reduce energy consumption. There is also an increasing need for companies to respond to increased regulation of emissions including mandated carbon reporting and emissions trading schemes.
Skills shortage While a drop in demand resulting from the global financial crisis has checked industry growth, the long- term fundamentals, and hence chronic constraints on the expansion of supply, remain. With an inadequate supply of skilled workers and professionals for the sector, the challenge of recruitment, retention, development and deployment has become a significant strategic threat to the industry. This may delay future project development and production.
Infrastructure access Lack of sufficient infrastructure is creating bottlenecks in getting product to market in many countries. Traditional mining and metals companies are increasingly tempted to invest in infrastructure to solve the problem. If they don’t keep pushing forward infrastructure development, when demand returns, they will not be able to capitalize on the recovery.
Access to secure energy Mining and metals production is energy intensive and requires reliable, sustainable and efficient energy supplies. Under-investment in critical infrastructure by host governments is putting pressure on the reliability of existing supply, and limits the supply available for mine expansion or new projects. Resource nationalism During the boom, host countries owning the mineral resources were challenging whether they were extracting enough of an economic rent for the right of a mining company to exploit that resource. While predictably economic rents increased during the boom, there has been little change in the basis for these economic rents since the fall in commodity prices. In some instances, governments are looking to replace other areas of lost revenue with further imposts on the mining and metals sector.
Pipeline shrinkage Exploration is the life blood of the mining and metals sector, as known reserves waste with production. The general decline in exploration has been exacerbated by the drought in risk capital. The lack of exploration today will limit discoveries tomorrow and production in the years to come.
Price and currency volatility The extreme price (and linked currency) volatility witnessed during 2008 led many analysts to view the new challenges as one of the greatest threats facing the industry in 2009. This has had immediate impacts on cash flows, quotational period adjustments and hedge cover.
Exposure to distressed counter-parties As the effects of the global financial crisis widens, exposure to distressed counter-parties has become evident in customers, joint venture partners, financiers and key suppliers. To mitigate these risks, a
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ROCKWELL DIAMONDS INC, KLIPDAM/HOLPAN MINE November 30, 2010 recent Ernst & Young survey found that 32% of mining and metals companies reported they had broadened their customer base by entering new geographical markets or new market segments, and 50% increased their focus on key customers. Some 57% have negotiated longer-term contracts and 53% have narrowed their supplier base for more favourable terms.
Scarcity of water Population growth, urbanization and climate change are all contributing to increasing stress on water supplies. The mining industry can require up to 8,000 litres of water per tonne of ore extracted. Water scarcity will, therefore, directly impact the ability of the sector to produce at the current rate. Mining companies are being prompted to spend more to increase their water efficiency. Improved technology in the water industry provides a range of methods to improve water efficiency, including better ways of treating waste and saline water for reuse, and improved modelling of water systems.
Increased regulation As mining and metals companies have expanded their global footprint, they are exposed to greater regulation and greater diversity in regulation. Mining and metals companies are experiencing significant fatigue around managing the myriad of often redundant compliance and regulatory reporting activities, the cost of which is massive and burdensome. Increasingly, companies may seek risk convergence initiatives which allow them to coordinate the various risk and control processes. These will help to drive down costs and, perhaps most importantly, enable more comprehensive enterprise-wide risk reporting to senior management and the board.
New communication vehicles for community activism The internet has increased the visibility of the industry’s investment and development portfolio. Public concern over the role mining and metals plays in national economies and the green debate, for instance, are played out openly on this new media platform. To mitigate the risk, a number of corporations and governments are putting more resources into direct-to-the-public and non- government organizations communications, with facilities for feedback and debate.
Capital allocation As investment in mining and metals activities involves a variety of risk profiles (exploration, development, production and infrastructure) and hence expected levels of return vary, the allocation of capital in a mining and metals company is inherently complex. The level of gearing, the cost of debt and equity, all become important drivers in the optimal capital structures for mining and metals companies.
16.2.8 Specific Mining risks
In addition to the general risks described above, the following specific issues may affect the economic extraction of the estimated resources: • Since the mining plan is based upon low grades and high volumes, the drilling grid does not identify every sand or clay lense that may occur in the gravel unit (since these lenses may occur on metre scale, detailed drilling to identify all such features is not considered feasible). Consequently, during production mining of a resource block, small non-diamondiferous (or lower grade) units may be excavated and processed along with run-of-mine gravels and result in a decrease in grade. • Where the footwall rocks are highly decomposed, the mining plan calls for the excavation of some 10- 20cm of the bedrock, since diamonds often sink into the soft, weathered surface. While drilling is able to identify the nature of the bedrock on a coarse scale, the amount of bedrock included in any mined unit may vary, causing dilution of the anticipated grade. This variation in the amount of bedrock included cannot be quantified.
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• Where the bedrock is friable, more inexperienced excavator operators may, inadvertently, take more of the bedrock than necessary. • Varying gravel clast or matrix composition may result in plant recovery issues. For example, if more clay occurs in the gravel matrix, then screens may blind and processing rates may have to be decreased in order not to lose diamonds. Furthermore, an increase in heavy minerals may increase the local SG of the gravel, resulting in diamond loss. The percentage of each of these gravel/matrix components has been determined during the trial-mining exercise, but this is for the bulk gravel. Limited variations will occur over time and space and cannot be identified during testing. • The regulatory authorities may introduce new legislation regarding new permits, rehabilitation requirements, additional BEE ownership or even (partial or total) resource nationalism. • South Africa’s electricity supply situation will be even tighter than originally forecast over the next five years because of further delays in bringing the Medupi and Kusile power stations on line. Commercial operation of the first generating set at Kusile - already delayed by a year to mid-2014 – was now only expected at the beginning of 2015. A research report based on the two studies on SA’s energy situation future recently released by the government highlighted the very real possibility of the country running short of power for the most part of the next five years. These potential shortages and associated increases in power prices may have significant impact on the ability to plan major expansions in production. • Although stringent maintenance is carried out on Rockwell's earthmoving fleet, unanticipated, major breakdowns can result in significant delays in production.
16.2.8.1 In South Africa
The greatest risks pertaining to the general minerals and mining industry in South Africa are perceived to be the uncertainties relating to the various mining-related Acts and Bills passed since 1994. Together with crime and the skills shortage, the inadequacy of Southern African infrastructure (and more specifically power and water infrastructure), increases in fuel/power prices, labour unrest and strike action, are all viewed as a material constraint to investment. Not to be forgotten, also, is the uncertainty of the effect of HIV/Aids on the workforce as well as the ever-present threat of resource nationalism from various elements within the ANC Youth League.
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17 OTHER RELEVANT DATA AND INFORMATION
17.1 Exploration Targets/Potential
The exploration targets on Klipdam/Holpan can be subdivided into two categories – those areas for which in-situ volume, grade and diamond value has been established and those where little prospecting has taken place. The former refers to areas previously categorised as “inferred resource”, but which have subsequently been downgraded as a result of realised processing issues which may prevent them from ever being mined. The total volume of these deposits is some 5-6Mm3. Anticipated grade ranges are 0.5-0.9ct/100m3, based on historic sampling data.
It is important to note that these statements of potential quantity and grade are conceptual in nature, that there has been insufficient exploration in these areas to define a mineral resource and that it is uncertain if further exploration will results in the targets being delineated as a mineral resource.
17.2 Trial-Mining
The extent to which the estimates of mineral resources on a project may be mined commercially may be affected materially by various environmental, legal, financial, socio-economic, and marketing issues. In an attempt to quantify these variables, the following data (inter alia) is, generally, considered important in an economic consideration of a mineral deposit: • Mining and Production • Revenue • Operating Costs and Fees • Capital Costs • Taxes and royalties • Depreciation, interest and residual value
All of these factors have been considered during the trial-mining programme on Klipdam/Holpan which was initiated in February 2009. During this programme, mining and processing methods/plans have been developed. Due to the fact that trial-mining on this operation has been on-going for some 22 months, it was deemed appropriate to use in-house staff for these assessments. Capital costs of plant and equipment have been determined through formal quotations acquired from suppliers. Operational parameters and operating costs have been determined both during the bulk-sampling and, subsequent, trial-mining phases on Klipdam/Holpan and from Rockwell's experience on their other operating alluvial diamond mine (Saxendrift).
These studies and assessments are being carried out by relevant, professionally qualified Rockwell staff and are supervised by both the Rockwell Mineral Resource Manager (non-independent Qualified Person, Mr. G A Norton) and the independent Qualified Person (Dr T R Marshall). In addition, Mr. Graham Chamberlain (Rockwell’s COO) had direct involvement, as a non-independent Qualified Person, in the mining and engineering sections.
The independent QP has extensive experience with the operational aspects of alluvial diamond deposits, including mine planning and is familiar with costs associated with these businesses. Since the QP was not on-site for much of the 22-month duration of the trial-mining programme, much reliance has been placed on the information received from Rockwell. In addition, numerous studies have been
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carried out (are being carried out) by independent professionals – these studies have not been independently verified or duplicated by the QP, who has assumed them to be accurate and complete).
The results, to date, of the on-going trial-mining programme are described below. The independent QP has reviewed both programmes and costs (including the underlying objectives and data) and concurs that they are reasonable and realistic for this stage of the project. 17.3 Mining Operations
17.3.1 Mining Method
The preferred method of mining the alluvial gravels on Klipdam/Holpan mine is by means of strip- mining in a shallow, opencast operation. The diamondiferous alluvial gravels are relatively thin, unconsolidated to semi-consolidated, tabular bodies with generally less than 20m overburden and, accordingly, are amenable to opencast mining methods. In South Africa this methodology has been the industry norm for these deposits since the 1800’s – details changing with the introduction of newer technologies. Various other mining methods have been tried by professional “diggers” in the NorthWest and Northern Provinces: • Trial-mining of Rooikoppie gravels overlying the fluvial unit along the Middle Orange River experimented with excavation using a Wirtgen tar cutter during 2008/2009. Although generally successful for relatively small, thin and shallow deposits, this method was not deemed suitable for the volumes that would need to be excavated on Klipdam/Holpan. • Smaller operations have been mined successfully using bulldozers as the primary excavation tool. On Klipdam/Holpan, the depth/thickness of the gravels and the hardness of the calcrete overburden make this method undesirable as a mining technique. However, it has been found that ripping the calcreted gravels prior to excavation minimises clast/diamond lock-up, as described below. • Due to its unconsolidated nature, this material must be mined by opencast mining methods. The use of conveyors as a primary method of transporting gravels from the pits to the plant site was considered, but rejected as unsuitable because of cost (specifically related to haulage distances) and the relatively short lifespan on individual mining pits.
17.3.1.1 Excavation
The excavation of the gravels on Klipdam/Holpan will be undertaken by the same method as employed during the bulk-sampling and trial-mining operations: • Vegetation is cleared from the proposed mining block. As per environmental regulations, large trees are excluded from the mining area or, if this is not possible, they are uprooted whole and re- planted in rehabilitated areas. • The topsoil (where present) is removed and stored separately for use in later rehabilitation; • Where fluvial-alluvial gravels are mined on Klipdam, the calcreted sands are stripped off after the topsoil has been removed. Thereafter, the basal gravels are excavated, loaded into ADT’s and transported to the screening plant. • On both the Klipdam and Holpan properties, the entire Rooikoppie gravel unit is excavated, loaded into ADT’s and transported to the screening plant. • During excavation, care is taken to ensure that minimal contamination by the footwall lithologies occurs, especially where small pothole features need to be cleaned out. However, where the bedrock is soft, approximately 10-20cm of bedrock is excavated with the gravels, so that any diamonds in the weathered rock will be recovered; • Where the upper 2-3m of the fluvial-alluvial sequence is calcreted (usually at the laminar or
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hardpan levels), the mining block may need to be blasted prior to excavation (see 17.1.2.2 for further details). The broken calcrete material is ripped by a bulldozer ,then stripped off using hydraulic excavators, loaded onto ADT’s and transported to the plant site for further processing (Plate 17.1).
17.3.1.2 Rehabilitation
An on-going rehabilitation programme is a key part of the mining operation. The process at Klipdam and Holpan normally entails immediate or near immediate (following short-term side-casting) backfilling of the overburden into pits concurrent with the advance of the pit face. All tailings derived from the concentrating and final recovery processes are returned to the open excavations by the ADT’s on their return cycle. In the case of the fine tailings (slimes), such material is pumped to the fines tailings dam. Any stockpiled topsoil is spread out over the surface; the rehabilitated areas are contoured to fit in with the pre-mining topography and allowed to re-vegetate naturally (Plate 17.1). Primary vegetation starts to re-grow after the first rainy season.
Plate 17.1: Excavating of fluvial alluvial gravel on Klipdam (photo courtesy of Rockwell)
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Plate 17.2: Rehabilitation (in progress) on Klipdam (photo courtesy Rockwell, 2010)
17.3.2 Survey
Mine surveying is the responsibility of the company surveyor and an independent consultant (F J van der Merwe, PLATO). Weekly pre- and post profiling of all applicable surfaces is undertaken using a sub - 1cm accuracy Real Time GPS. A profile grid of ± 5m on even surfaces and 1m on uneven surfaces is set up. Volumes are calculated using the “Model Maker Systems” software package, a standard package, developed specifically for the technical- and land-surveying, engineering, mining, town-planning, landscaping, quantity surveying, irrigation design and construction industries. The standard checks implemented include: • Start up check maximum tolerance 1cm. • All profiling to be within 1cm accuracy. • Volume calculation - manual editing of all DTM’s where necessary and comparing total volume of excavations with grid volumes. • Careful record keeping of stockpiles at the plant and in pit. • Communication between survey and mining. • All volumes get reported at the middle and end of each month. • Accuracy to comply with SAMREC – error in the reported volume not to exceed 5%. • Elimination of grey areas, such as lack of profiling, stockpiles and excavations not surveyed.
Once the sample has been excavated and surveyed, the surveyor also supplies the RAW data, volume and DXF of the pit to the Geology department. This allows for independent calculation and comparisons of the resulting volume estimations, both in-house and by the independent QP.
17.3.3 Mine Plan
The general mine plan, based on the results of the trial-mining on Klipdam/Holpan), includes the fluvial- alluvial gravels and the non-sandy colluvial (Rooikoppie) gravels on the Klipdam and Holpan mine properties as well as on Erf 2004 and Erf 1. The sandy colluvial (Rooikoppie) gravels have been specifically excluded from the life-of-mine estimations until a commercial decision is made regarding the plant modifications necessary to make these gravels economically viable.
Mine planning is discussed by the Mineral Resource Manager, Mine Manager and Geologist on the specific site. The Pit design will have been done by the Geological department, which design will then be handed down to the necessary persons involved in the mining applications. Any changes in mining areas must be discussed with the Geological department prior to implementation. Mining proceeds: • Mining blocks will be set out as discussed with the Mineral Resource Manager according to the equipment at hand. • Gravel from each block is to be processed separately. • If two blocks are being processed at any one time then the blocks must be stockpiled separately. • Any overburden must be stripped to such an extent that the gravel is fully exposed and no overburden is left behind. • The mining of overburden with gravel to create porrel for density at the processing plant is not allowed. • Mining into the soft bedrock to depth of between 10cm and 30cm is allowed/preferred to ensure the reconciliation of all the gravel. • Overburden can be ripped with the bulldozer to make stripping easier. • The pushing off of overburden by the bulldozer may be done up until such a stage as the gravel contour permits, after which stripping should be done using an excavator. Page 110
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• The pushing off of overburden in #9 should be done to such an extent that the minimal area of any open face is disturbed or covered. • All the gravel units must be ripped and crushed by the bulldozer to ensure proper liberation of the unit. • Where the bedrock is too undulating to use the bulldozer, gravel should again be ripped, crushed by the bulldozer and then mined using an excavator. • Ore will be transported to the plant using ADT’s. • Stripping will be moved with ADT’s or Rigid Trucks • Main haul roads must have a minimum width of 25m, and secondary/pit roads must be 16m wide.
17.3.3.1 Pit Design
On both Klipdam and Holpan mines, pits, or “boxcuts”, are planned to cut across the direction of flow of the palaeo channel. From time-to-time, boxcuts may be excavated perpendicular to the flow direction to test the extent of geological features. Typical dimensions of individual boxcuts in the Rooikoppie gravels are 200x200m. In the case of the fluvial alluvial deposits, strips 50m wide are cut across the entire width of the deposit. Where necessary, a series of benches 5m high (with berm widths of 5m), are cut to access deeper gravels. Access ramps should have minimum widths of 25m (using Rigid10 trucks and 16m where ADT’s are utilised) and should have a maximum angle of 10°.
A series of adjacent boxcuts are planned to cover the entire width of a specific geological feature. Once the gravel has been removed from the open boxcut, it is systematically rehabilitated as the next boxcut is opened. The mining operation, consequently, comprises a number of boxcuts that are simply “rolled forward” on a continuous basis. Areas of higher and lower grade are blended to keep the number of carats recovered reasonably constant and to increase the life of mine. Surveying of the box cuts is undertaken on an on-going basis by a qualified surveyor in order to obtain precise volumes for the mined gravel units, the calcrete and the Rooikoppie, against which diamond production can be reconciled and grade determined.
Since the excavations are shallow, there is no need for extensive stripping ahead of the mining face. Each excavation is stripped only when it is mined. Backfill takes place concurrent with mining as part of the rehabilitation process.
17.3.3.2 Geotechnical Considerations
Since these deposits are shallow and thin and are mined open-cast, few geotechnical problems are encountered. Minor issues that receive consideration on the Klipdam/Holpan mines are:
Blasting Blasting is not, generally, required on the Klipdam/Holpan gravels. Where necessary, however, Champ Drilling CC is contracted to drill the holes and Quality Blast is contracted to do the blasting itself. Typically a staggered blasting pattern (4.5m x 4.5m) is utilised.
Sidewall Stability and Bench Heights During early 2008, SRK Consulting completed an assessment of the Klipdam11 mine bench for current
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and future mining and to report on remedial measures to reduce risk (Steyn & Terbrugge, 2008). This study indicated that bench heights are stable to 5m, with berms also 5m wide. It was, further, recommended that the company nominate and train personnel to serve as spotters when deeper benches are used, however short the duration. However, due to the shallowness of the deposit, the mining pits seldom exceed 20m in depth. Consequently, sidewall stability is not a significant factor in mining on Klipdam or Holpan. Where the gravels exceed 5m the pit is benched to allow safe access.
Gravel Specific Density Specific Gravity (SG) measurements are not routinely completed on alluvial gravels. SG’s of gravels vary considerably from unit to unit due to moisture, clay and heavy mineral contents and conversion to tonnages tend to compound problems rather than simplify them. Regional averages for specific densities of alluvial gravels can vary from as low as 1.6T/m3 to over 2.4T/m3, where the gravels contain large percentages of Banded Iron Formation (BIF). Typically, fluvial-alluvial gravels average 1.8T/m3 and Rooikoppie deposits are somewhat higher, at 2T/m3. All mining, processing and reconciliation on Klipdam/Holpan Mine is done using gravel volumes and not tonnages. However, for the purposes of individuals wishing to estimate tonnages, an average of 1.85T/m3 can be assumed for these operations, as well as for other similar gravels along the middle Vaal River.
Bulking Factors The importance of determining valid bulking factor measurements for the Klipdam/Holpan gravels was noted. Tests are underway to determine these factors for the Rooikoppie and fluvial-alluvial gravels.
Hydrological The mining pits on Saxendrift do not reach the water table. Neither are they located adjacent to any river. Consequently, no water-related issues are anticipated on the mine.
17.3.3.3 Mining rates
The proposed rate of mining (and processing) is 160,000m3/month. At this rate, the currently identified indicated resources would be depleted within 3.2 years.
17.3.3.4 Mining dilution factors
Since the diamondiferous gravels are appreciably younger than the bedrock substrate on which they are deposited and are separated from the overburden by an obvious discontinuity, it is relatively simple to excavate the gravels without significant contamination and, subsequent, dilution. However, minor issues do arise from time to time, when planned or unplanned amounts of these materials are excavated along with the gravels. During the bulk-sampling and trial-mining operations, the average dilution has been approximately 7-10% due, especially, to the planned mining of some 10-20cm of soft, weathered bedrock to prevent the loss of diamonds which may have migrated into the footwall.
A more significant dilution effect is the unknown amount of sand/silt lenses that may occur within the fluvial-alluvial gravel profile. Further, the amount of calcification may also vary considerably, dependent on the original depositional environment. In order to upgrade the concentrations of the gravels sent to
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the plant, Rockwell is using geological and diamond recovery data to create block-by-block mine plans ahead of the mining face. As a result of the braided environment in which the gravels were deposited, the dilution will not be constant. Consequently, a single factor cannot be added to the resource volume/grade to account for such dilution. It is anticipated that on-going geological research (by Rockwell staff) into the gravels will allow for a better understanding of dilution factors on this and other Vaal River deposits.
17.3.4 Earthmoving fleet
The mining on Klipdam and Holpan is supported by an earthmoving fleet as listed in Table 17.1. This list does not include incidental vehicles such as service trucks, diesel and water bowsers, or bakkies12
Table 17.1 List of owner-operated earthmoving fleet on Klipdam and Holpan
Machines Klipdam Holpan Excavators 2 1 Front-End Loaders 2 2 Articulated Dump Trucks (30-40T) 6 6 Bulldozers 2 Miscellaneous Grader 1 1 TLB 1 Long Haul/100t Rigid trucks 3 Forklift 2 Crane 1
No new machines will be purchased for the Klipdam/Holpan operation – any necessary earthmoving equipment will be sourced from surplus kit from Rockwell’s other operations.
17.3.4.1 Fleet Maintenance
All vehicle maintenance is done in-house by qualified staff. The maintenance department keeps a spreadsheet containing, inter alia, a list of all vehicles, hours per vehicle, service intervals and service history. All vehicles have pre-shift checklists filled in on each shift. The checklist contain standard checks for: lights, brakes, oil, tyre pressures, hours started, hours stopped, etc. Minor (non critical) problems are noted on the checklist. Major breakdowns are reported to the mining supervisor/ mining superintendent who in turn notifies the workshop staff immediately.
The checklists are imported and reconciled on a weekly basis. This data is then used to identify vehicles nearing service. Job cards are made out to the supply stores in advance, containing a list of parts needed. The mining department is notified on which machines are needed for service 1-2 days in advance. The machines are moved to the workshop and cleaned of mud, grease and dust before service. The job cards are signed off and closed after completion of each job. This process is repeated on a weekly basis.
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17.4 Recovery Process
The recovery process on an alluvial diamond mine comprises two phases – initially the screened gravel is concentrated to eliminate oversize and undersize clasts as well as materials which are too light or too heavy to contain diamonds. This is followed by the physical separation of diamonds from the gangue minerals/clasts. During the bulk-sampling and trial-mining phases of the operation, various parameters need to be determined to identify the optimum plant design and or combination of processes.
17.4.1 Mineralogical Testing
One of the most fundamental process issues relates to the size distribution of both gravel clasts and diamonds. The details have serious implications for top and bottom cut-off’s on the screening plants and final recovery systems. Too small screen-sizes at all locations will, ultimately, result in the loss of larger diamonds, but too large screen-sizes will flood the plant with material. The question of the size of diamonds passing through screens of certain apertures is extremely complex (and relates to both the shape of the diamond as well as the smallest crosscut of the diamond which presents itself to the screen. In addition, the behaviour of diamonds as they pass over a screen (in how many different ways they fall on the screen) is a further complicating issue. An interpretation of expected diamond recoveries (Oosterveld, 2010) has led to the selection of top- and bottom cut-off screen sizes of 40mm and 2mm respectively.
17.4.2 Concentration/Process plant
Typically, three different concentrating plants are available for use on alluvial diamond mines – Dense Media Separation (“DMS”) plants, Rotary Pans and In-line Pressure jigs (“IPJ”). Each of the plants has particular characteristics and requirements that make them advantageous to specific situations. On Klipdam, the gravels are processed through a rotary plan plant and at Holpan, the gravels are processed through a DMS. Rockwell’s general preference is for the rotary pan plant, because of its lower capital and operating costs (but, in the case of Holpan, the DMS was installed and operating on the mine at the time Rockwell purchased it). The main objection to the rotary plant has, historically, been the relatively low recovery efficiency (compared to the DMS). Extensive R&D by Rockwell engineering and metallurgical staff have introduced significant, proprietary, improvements to the standard rotary pan plant, which have the impact of increasing recovery efficiencies appreciably.
The processing for the rotary pan plant and the DMS are, essentially similar to that utilised during the bulk-sampling operation and will not be repeated here (refer section 11.3.2 for details).
17.5 Final recovery
Historically, various methods of diamond recovery have been employed. These, typically, exploit specific physical characteristics of the diamond, such as its hydrophobic nature (grease), weight/size (mechanical jigs), fluorescence (X-Rays) and other optical properties. On both Klipdam and Holpan mines, recovery is through X-ray FlowSort machines, as described in section 11.3.3, followed by final hand-sorting in a secure glove-box. In addition, grease plants are located on both Klipdam and Holpan.
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17.6 Infrastructure
Some of these issues have been discussed briefly in Section 4.2. Supplementary information is presented here, as necessary.
17.6.1 Water
The Vaal River is situated approximately five kilometres from the mining operation but the mining does not impact negatively on the river. The only other surface water is the artificially created slimes dams and raw water storage dams. The area is flat and water run-off is mainly through sheet run-off, rather than in drainage lines. The small drainage lines in the area will only carry water during exceptional rainfall events such as a big cloudburst, experience a flash run-off and be dry again after the run-off except for possible hollows in the drainage lines. Evaporation is high and surface water is hardly encountered in this area. There is no normal flow in dry weather conditions – it is devoid of any water.
The project sources water from the DWAF canal and from boreholes under licenses and quotas from DWAF. The water for Holpan is obtained by pumping an allowed quota of 3x 203,906m3/ha/year plus a further 4,108m3 /month from the canal. An additional 114,693m3/ha/year is obtainable from the canal on Klipdam. The cost of this water is calculated at R713.88/ha per year, payable to DWAF in advance. An extra allowance of 3,600,000m3/year on Holpan and 2,400,000m3/year on Klipdam were applied for on 04/12/2007 and 10/07/2007 respectively. Rockwell is still awaiting a DWAF response.
The depth of the water table in this area is approximately 5-8m at Holpan and 10m at Klipdam. There are four boreholes on Klipdam and three at Holpan as indicated on the Mining Authorisation Map. No fountains occur on the property. The boreholes vary in depth from 45-100m and their delivery rate varies from 400-2,000ℓ/hr. There are no other boreholes on adjacent properties within a kilometre radius of the mine.
No borehole water is used for mining; one of the holes is used for drinking water for the offices on Holpan. Ground water is pumped to a 5,000ℓ closed container from where it is used for drinking water for the staff at the Holpan offices.
During 2010 a preliminary analysis of the water resources on Klipdam/Holpan was prepared for Rockwell diamonds by SRK Consulting (Esterhuise, 2010), as part of the updated EMPR. The water balance calculation for Klipdam/Holpan, as determined by the SRK study, is shown in Figure.17.1). The salient points regarding the surface water use and groundwater resources, directly from this document are: • The surface water allocation for Holpan is 660,618 m3/annum and the rainfall recharge to the slimes dams and seepage ponds is ~ 33,850 m3/annum. This water is used as follows: ~6,500m3/annum is used during the washing process and dust control; o 3 o ~659,900m /annum is lost to evapo-transpiration at the slimes dams, seepage ponds and the reed-bed on Holpan; and 3 o ~27,500m /annum infiltrates down to the groundwater level. • The surface water allocation for Klipdam is 152,929.5m3/annum and the rainfall recharge to the slimes dams ~ 25,130m3/annum. Approximately 6,500m3/annum of this water is consumed during the washing process and dust control and the rest (~ 171,600m3/annum) is lost through evaporation from the slimes dams. Very little or no water is lost to infiltration down to the groundwater level at this property. Surface water that is used for the mining is of a good quality with a field measured EC13 of 35mS/m (better than the groundwater quality of the Holpan area).
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• The field measured EC of the water in the slimes dams at Holpan is 62mS/m compared to the field measured EC’s of 61 and 78 of the water in the two open pits. No chemicals are used during the washing process and the increased EC’s measured at the open, intersecting pits and the slimes dam are likely as a result of evaporation. (Note: During the evaporation process the total dissolved content of the surface water is increased as only pure water evaporates, leaving the dissolved salts behind.)
Figure 17.1: Water balance estimation for Klipdam/Holpan (Esterhuise, 2010)
• The higher pH-values noted in the open pits and slimes dam compared to the pH of the canal water is likely due to CaCO3 in the calcrete being dissolved during the washing and infiltration processes. • The hydrocensus data indicates that the median yield of the successful boreholes in this area is 0.56l/s. This corresponds well with the hydrogeological map for this area which indicates a median borehole yield of 0.1 – 0.5l/s. Due to the general low yield of successful boreholes in this area the underlying aquifer can be classified as a minor aquifer system. • Rest groundwater levels in the secondary fractured-rock aquifers of this area are generally <10mbgl14 as indicated by the hydrocensus results. • All the boreholes surveyed abstract groundwater from relative deep fractures in the otherwise impermeable lava. These fractures are generally associated with intrusive dolerite dykes, kimberlite fissures, faults and joints formed during cooling of the lava. • Generally, the groundwater quality is good and, based on the field measured EC’s, the groundwater can be classified as Class 1 (suitable for long term human consumption). • All the production boreholes in use at Holpan and Klipdam are utilised for domestic purposes only. • No groundwater is used for the mining processes, except water abstracted from the shallow seepage pits at Holpan. These pits intersect some of the seepage water from the slimes dams and it is re-cycled to the dams. • No other groundwater users are located downstream of Holpan and the effect of the infiltration of surface water at the Holpan slimes dams is negligible.
17.6.2 Power
On 22 February 2010, HCVWD signed an agreement with Blue Dust 7 (Pty) Ltd to purchase an Electrical Sub Station and 2.4km Power Line. Included in the deal is the sole and exclusive right to acquire the
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supply of electricity by ESCOM at Pole Number SLWA 143, Windsorton. The power is to be used in Rockwell’s prospecting and mining business on the Klipdam/Holpan and Rietputs mining operations. The purchase price (excluding VAT) for the deal is R3,500,000 for the sub-station and an additional R80,000/km (total of R192,000) for the 2.4km of power line: • A Deposit of R500,000 was payable by the purchaser to the seller within a period of three days calculated from the date of written approval from ESCOM. • The balance purchase price shall be payable by way of monthly payments of R250,000 on or before the 7th day of each month. • HCVWD shall have the right to pay the full outstanding balance at any time within the duration of this Agreement and shall upon payment obtain ownership. • Since the equipment has to be operated and maintained by qualified persons, Rockwell's qualified high-tension electrician will be appointed to the position of responsibility.
In the event of power outages, however, management has moved implement remedial actions to mitigate the consequences of the power outages, including: • All scheduled and planned maintenance is being conducted during periods of power outages to reduce overall plant downtime. • Two 1MvA backup generators have been installed at Holpan, and another 1MvA generator at Klipdam, to run the processing plants in the event of unscheduled power outages. • A back-up generator set has also been installed at the Barkly West management and administration office to ensure that there is minimal impact on normal business activities of the Company and that all computer functions, back-up servers, and CCTV monitoring systems remain operational.
17.6.3 Communication
A Siemens Hipath 3500 telephone system is, currently, installed at the Barkly West office. This system also has a HG1500 card installed to provide VOIP communication with Holpan and Klipdam. A similar system is present at Holpan, providing both outward telephony and direct inward dialling. No telephone system is located on Klipdam; however a Siemens IP Phone allows wireless communication with Holpan.
There are plans to upgrade the current telephone system to link Barkly West, Johannesburg, Saxendrift, Tirisano as well as Klipdam and Holpan. This will limit the cost of internal calls between the mine sites, drastically reducing monthly telephone bills. Internet access is provided via a 4MB and a 1MB ADSL line (on rental from TELKOM and Internet Solutions). A Sonicwall, connected to the bandwidth router, provides a VPN solution between Barkly West, Johannesburg and Saxendrift. Klipdam, Holpan and Rietputs are connected via a wireless infrastructure.
17.6.4 Transportation
Access to the project area is by tarred roads from Kimberley (~45km along route R31) and Barkly West (~23km along route R374). A network of farm tracks gives good access to all areas of the property. For reference, Kimberley is some 570km from Johannesburg and can be accessed by national road, rail and air services.
A network of gravel roads already exist on the Klipdam and Holpan properties. As mining areas are extended, Rockwell creates additional access to these areas by means of a road-grader, especially obtained for this purpose. All existing roads are maintained (graded and watered to minimise dust) on a permanent schedule.
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A large, national, airport is located at Kimberley, with daily flight to/from Johannesburg and Cape Town. A helipad is located on Holpan.
17.6.5 Tailings disposal
Two slimes dams have been constructed – one at each of the Klipdam and Holpan properties. The surface areas of the slimes dams cover approximately 6.5 ha at Klipdam and 12.4 ha at Holpan. Both slimes dams are designed to last throughout the life of the mine (Fig. 17.2 and 17.3).
Minor issues have been experienced with the beaching15 at both of the slimes dams. Fewer problems arise during summer when high associated evaporation rates are experienced than in winter.
Figure 17.2: Slimes dam configuration on Klipdam
17.6.6 Coarse dumps
The primary disaggregation and screening is done next to the plant and the overburden is then backfilled. Trucks take screened material to the treatment plant. The slimes will be pumped to the mine residue dams and the oversized tailings will be dumped, backfilled and landscaped.
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Figure 17.3: Slimes dam configuration on Holpan
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17.6.7 Waste Disposal
Septic tanks and French drains provide sewage disposal. Non-biodegradable refuse such as glass bottles, plastic bags, etc. will be sorted and stored in separate lockable containers at a central point. It will be disposed of at a recognised disposal facility twice a month. Refuse will not be dumped in the vicinity of the mining area. Waste material with regard to vehicle repairs will be kept in 200l steel containers in the maintenance/farmstead area. This material will be disposed of at a recognised disposal facility once a month.
17.6.8 Fuel storage and supply
The fleet is supported by a fully equipped workshop, lubricating bay and wash-bay, as well as fuel tanks (at Klipdam there are 2 x 23,000l and 1 x 50,000l diesel tanks and on Holpan there are 4 x 23,000l and 1 x 80,000l diesel tanks). The diesel tanks are all fully bunded and are environmentally compliant against accidental spills. Currently, AL2 Staedler is contracted to supply petrol and diesel, while Lubritene (Pty) Ltd supplies lubricants (oil and grease). Both contracts are subject to standard conditions will be reviewed annually. Oil, grease and related pollutants are regularly removed by a contractor (OILKOL).
Fuel usage is strictly managed by control sheets, constant measurement and reconciliation. Variations of more than 2% are investigated immediately. The reconciliation process is also reviewed by the financial controller.
17.6.9 Accommodation and offices
The company’s main administration office is located in Barkly West (15km from the mine). An on-site mine office, responsible for daily mining operations on the Klipdam and Holpan properties (including prospecting activities on Rietputs), is located on Holpan. On-site permanent offices include: • Main office building with five offices, small kitchen and ablutions • Mine stores with two offices • Mechanical Workshop with four offices and ablutions • Engineering workshop with two offices and ablutions • Training with four offices, small training hall and ablutions • First aid facility consisting of three rooms • Bokamosa Bricks with one office and ablutions • Main security gate with one office and ablutions • DMS plant with one office, small kitchen and ablutions
On Klipdam, permanent offices include: • Main office with one office and ablutions • Tearoom with ablutions • Engineering workshop and ablutions
The company maintains two soccer fields at the nearby Holpan community. Guest facilities are located at the Barkly West office, where senior management is also accommodated during the week.
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17.6.10 Sensitive landscapes
The Klipdam/Holpan area has been the site of mining since the 19th century. As a result of its long history, numerous grave sites are scattered throughout the property (Plate 17.3). No graves will be destroyed, damaged, altered, exhumed or removed from its original position without a license from the South African Heritage Resources Agency. In order to prevent accidental damage, grave sites identified within the mining area are fenced off to prevent any disturbance to the sites
Plate 17.3: Grave site on the Holpan mine property (photo courtesy of Rockwell)
Apart from the graveyards that may be of significance, the entire area is viewed as a very low intensity archaeological site. All mining will take place at least 100m from the sites, as is required by the National Heritage Resources Act, 1999 (Act No. 25 of 1999).
17.6.11 Security
Thorburn Security Solutions provide guards for patrol and access control. An integrated security system will be implemented that is able to monitor all areas of all the operation remotely – including closed circuit television on all sensitive areas of the plants and final recovery rooms, access control (fingerprint biometrics), motion detection and tracking technology, as well as guard patrols. This one system will monitor all of Rockwell’s operations in the Northern Cape (Holpan, Klipdam, Wouterspan, and Saxendrift/Niewejaarskraal) and NorthWest (Tirisano Mine) and is also linked to the Johannesburg head office by a dedicated ADSL line.
Security measures are in place throughout the mining and recovery process. Similar procedures are employed in the production mining phase as in the bulk-sampling and trial-mining phases, as described in section 11.3.3 above. In summary:
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• Due to the extremely low grades found in the in-situ gravels, no security measures are employed at the mine face. Under very specific circumstances, bedrock cleaners may be required to sweep the pit bottom. Under these conditions, security guards are required to supervise the activities. • At the plant, all areas where people may have access to gravels and, especially, concentrate, are fenced or caged off. • At the final recovery, the locked box into which the diamonds are dropped is removed and the diamonds are counted, weighed and put into a “zip-lock” envelope (all in another glove box). Both glove boxes are locked with padlocks and seals which have to be broken to be opened. The envelopes containing the diamonds are dropped into another locked container before being store in a high-security safe prior to dispatch to Johannesburg for sale. All external diamond transport is done by various different means and on varying schedules to further increase product security. • The area around the sort-house is declared a Red Zone, enclosed with high-security fencing, and monitored by surveillance equipment. Access to all areas of the final recovery is controlled and monitored by closed circuit television. The cameras on Holpan/Klipdam (Cathexis) record on-site and the data is streamed on-demand to the control centre in Barkly West via the wireless infrastructure (and recorded onto DVR’s), where it is monitored 24/7 by Thorburn Security personnel. The cameras still record (25 frames/second) even in the event of a linkage failure between the two sites. In addition, alarms attached to motion detection doors on the X-Ray machines, are also recorded on the Cathexis system.
17.6.12 Staff/Labour
The Klipdam/Holpan mines recognize the growing shortage of critical skills in the Mining industry in South Africa. Development of future leadership is a key strategic focus area. Human resource development (HRD) is managed across all levels of employment and is seen as a critical component of achieving the Company’s employment equity and gender equity targets. The Company’s HRD plans are being continuously aligned with the Workplace Skills Plans and integrated with the long-term business plan. In terms of this process, HRD plans are constantly assessed, reviewed and revised to cover the organization’s short-term, medium-term and long-term human capital development requirements.
A full time graduate Human Resources Manager (based at the Barkly West office) has recently been appointed, to ensure that the HRD receives specialised attention. In terms of budget the Company has allocated an amount of some R1,100,000 during 2010 for training (company-wide), and will increase annually by 15-20% over the next three years. This amount includes the 1% of payroll annual skills development levy, which includes core skills development and training programmes, but which excludes other, more specialized training programmes such as ABET (Adult Basic Education and Training), internships and bursaries. An annual Training Report and Workplace Skills Plan (01/04/2006 – 31/03/2007), has been submitted to and was approved by the Mining Qualifications Authority (MQA). In addition to issues regarding payroll, training, career progression, mentorships, internships and bursaries, the HR Manager will also deal with issues regarding HIV/AIDS, employment equity, the special role of women in mining and the application of all facets of the Social and labour Plan (SLP).
The combined permanent labour complement of the mines is 223 employees (Holpan has 140 permanent employees inclusive of shared services and Klipdam has 83 permanent employees) comprising: . Managers and supervisors . Mining and metallurgical engineers . Electricians and boiler makers . Mobile equipment operators . Excavation and loading operators
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. DMS and pan-plant operators . Final recovery operators . Human resources professionals . Health and Safety professionals . Cleaners and general assistants . Information technology specialists . Geologists . Drivers and store-persons
Other business related contractors include the following: . Gardening services . Cleaning services . Security services . Civil contractor services . Drilling & blasting contractors
The total monthly wage bill for the mine is R1,500,457, inclusive of shared services (Holpan at R1,074,377 and Klipdam at R426,680). This amount will increase with an additional 20% when 24/7 operations are implemented, possibly before year end 2010. Rockwell has an entry level wage scale of R1,800/month and has implemented plans to narrow the wage gap between lower and higher paid staff over the next two years through the implementation of a split incremental wage scheme where annual increases are biased toward the lower income groups.
There are major shortages of technical skills in the Northern Cape Province and these have to be attracted from other provinces. Especially is this a challenge in the implementation of regulations requiring the employment of HDSA’s at middle and senior management positions. Currently, experienced senior and middle management and technical skills have been obtained from the gold- mining industry. This is not an entirely satisfactory situation as the management skills required on a medium-scale alluvial diamond mine, often, differ significantly from those obtained on a major gold mine. A secondary challenge lies in the reality that, as an emerging, yet still medium size company with operations in the Northern Province, Rockwell cannot offer the salaries and living/working conditions of the senior mining houses, often located closer to metropolitan areas.
Unskilled labour (and some semi-skilled labour), however, is abundant and can easily be accessed from nearby towns and communities (such as Barkly West, Delportshoop and Warrenton, as well as local informal settlements. Skilled and semi-skilled labour is generally accessible from the nearby major centres of Kimberley and Bloemfontein.
17.6.13 Essential services
All services and facilities, including hospitals, police, and municipal, are available in Kimberley (~200km), including the regional office of the Department of Minerals and Energy (DME). However, most essential services can be obtained at Barkly West, some 25km distant from the mine.
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17.7 Market Studies and Contracts
17.7.1 Market Studies
17.7.1.1 Global diamond production
Total world mine production of diamonds decreased by 3% year-on-year in 2008 in volume terms (some 5 million carats), to 162.91 million carats (Fig. 17.4). The Russian federation contributed most to the production of diamonds, with total share amounting to 23% and production by volume at 36.9 million carats. Botswana slipped down the production rankings to third position behind Russia and the DRC. The DRC’s production of diamonds, by volume, increased by 17% to 33.4 million carats in 2008, compared to 28.4 million carats in 2007. Production in Canada, South Africa and Australia fell by 12.9%, 15.1% and 19.4% respectively.
The world’s largest producer of diamonds by value is Botswana, with 26% of the global share valued at USD3.3-billion, followed by Russia at 20% valued at USD2.5-billion. While the DRC may have overtaken Botswana in terms of the volume of production, the value of diamond sales in the DRC was only USD418-million, which ranks the country as the seventh largest. South Africa is the world’s sixth largest producer by volume at 8% of global production and fourth largest by value at 10% of global.
30%
25%
20%
15%
10% By Volume By Value 5%
0%
Figure 17.4: Global diamond production per country by volume and value, 2008 (Chamber of Mines Annual Report, 2009)
17.7.1.2 The Diamond Pipeline
The Diamond Pipeline can be defined as the route the diamond takes from mine to end consumer. The diamond pipeline, typically, comprises (Fig. 17.5 ):
• Exploration/Prospecting; involves geologists finding diamond deposits in different areas. Prospecting is vital to the future survival of any diamond business as there is a predicted supply- demand gap.
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• Mining and Recovery; once diamonds have been discovered and surveys shown them to be financially viable, they are now recovered from the ground. The manner in which they are mined and recovered depends on their source. • Sorting and valuing; process of sorting and valuing of diamonds, categorizing them according to size, quality, model and colour. • Cutting and polishing; refers to manufacturing of diamonds; the process of turning rough diamonds into polished. • Polished Market; this is referred to as the ‘diamond exchange bourse’, a place where diamonds are traded. These are located in some of the world’s major diamond manufacturing centres, e.g. Belgium. • Retailing; Polished diamonds find their way to Jewellers and Consumers through Wholesalers and Retailers.
CUTTING & POLISHED EXPLORATION MINING SORTING RETAILING POLISHING MARKET
Figure 17.5: The Diamond Pipeline
17.7.1.3 International Diamond Market Trends
In the first half of 2008, global retail sales of diamonds showed steady growth, especially into the markets of China, India and the Middle East. But because the global crisis hit the United States hardest – the world’s largest diamond market –the second half of the year was extremely challenging. The luxury sector of the United States, European and Japanese markets were particularly hard hit, with jewellery retailers in the United States alone reporting double digit sales declines between Thanksgiving and Christmas. The deterioration in the pipeline in the second half of 2008 is demonstrated by the declines in the value of diamonds in retail sales by 8.9% to USS18.4-billion, and the fall in retail sales by 11.3% to USD65billion in 2008.
The downstream fabrication and retail components of the diamond value chain not only faced declining sales, falling prices and rising stocks, but also increasing capital costs and waning credit lines to fund the inventory pipeline. Total debt in the downstream value chain was estimated to be about USD14-billion. Given this large amount of diamonds in the downstream, the reduction in consumer demand had a negative impact on the diamond mining industry. Accordingly, mining companies drastically reduced production in the second half of 2008 and in the first half of 2009.
However, as of the date of this report, there has been considerable improvement in polished prices from the base reached in April 2009. Early in 2010, World Commodity Online predicted that, due to the improved global economic environment and demand outstripping supply for investment diamonds in the medium term, diamond prices would probably rise in 2010 and return to their natural annual growth rate of 12-16% in the medium term. By mid-June 2010, polished diamond prices had vaulted to their highest levels since November 2008 (MiningWeekly.com).
Polished diamond prices have an impact of rough diamond sales and have shown steady improvement in 2010 so far, which is encouraging for Rockwell and the industry overall. According to IDEX Online Research reports, global polished diamond prices have continued to recover in May, extending a trend
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that began in the last quarter of calendar 2009 (Fig. 17.6). The IDEX index for polished sales stood at an average of 116.5 for the month of May 2010, representing a 7.1 percent increase over a year ago, and a 1.6 percent rise over the average price for April 2010.
Figure 17.6: IDEX index for cut-stones for the period Nov 2009 to Oct 2010
One of the concerns facing a sustained recovery in the diamond sector revolved around a constant (or increased) demand for polished diamonds in the jewellery market (Des Kilalea, miningmx.com, 13 May, 2009). In this respect, a significant increase in diamond demand is predicted to emerge from China, India, Hong Kong and Taiwan, where demand may increase to 31% of global demand from 2015 onward (Real Economy Yearbook 2010). Currently these countries account for an estimated 19% of the USD65- 75-billion global diamond jewellery sales. The biggest growth in the sector is expected to come from China (from a current level of 8% of global diamond turnover to an estimated 16%) and India (7% to 11%). Therefore, Asia (excluding Japan), could reach a third of total diamond consumption within the next five-to-ten years. In anticipation of this expansion, India launched (17 October 2010) the Bharat Diamond Bourse (“BDB”) in a major step towards becoming a global trading centre (Miningmx.com). The BDB is touted as the world's largest diamond trading centre and is located in India's financial capital Mumbai. India is the world's largest cut diamond exporter, with annual exports of around USD28bn, but trading volume is negligible. India's diamond industry could grow by an average 10% to 15% each year in the next five years, as the new bourse attracts global traders.
The United States is currently the largest diamond consumer, accounting for 40% of the market, compared to seven percent for India and four percent for China. China is a growing rival to India's dominance of the cut-diamond market, sourcing stones from Zimbabwe, Angola and the Democratic Republic of Congo. Conversely, Japan at 11% and the US at 40%, are expected to drop to 9% and 35% respectively. Notwithstanding, the US market still remains the most important consumer of diamonds
According to various sources (Read and Janse, 2009; Kilalea, 2008), there is the suggestion that the peak world diamond production has, or will soon be, passed and that long-term diamond industry fundamentals suggest that the aggregate level of diamond demand will exceed supply, resulting in sustained price growth over the next decade (Fig. 17.7).
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17.7.2 Rockwell Sales and Contracts
In compliance with government regulations to the local cutting/polishing market, Rockwell offers all of its diamonds to the State Diamond Trader (“SDT”). Each diamond parcel that is sent from the mine to Johannesburg is presented to the SDT to select which stones they would offer to purchase (to an agreed maximum of 10% of the production). The SDT then puts in a purchase offer for the stones, which Rockwell may refuse or accept. If Rockwell refuses the bid, then the Government Evaluator will examine the stones and refine the purchase offer, which Rockwell may accept or refuse. If Rockwell refuses the offer then a third party, independent valuator will value the stones and set a price that both parties must accept. Because of the market supplied by the SDT, the selected stones are generally at the smaller end of the spectrum and do not represent the run-of-mine production.
$ 22 Demand Supply $ 20
$ 18
$ 16
$ 14
$ 12
$ 10 2006 2008 2010 2012 2014 2016 2018
Figure 17.7 Long term rough diamond supply/demand outlook 2000 to 2018, prepared by WWW International Diamond Consultants Ltd using January 2009 values (redrawn from Read and Janse, 2009).
17.7.2.1 Diamond Sales
All Rockwell diamonds not purchased by the SDT are sold through Flawless Diamonds Trading House (“FDTH”). FTDH is a private company where certain directors and officers of the Company, namely, Messrs. J Brenner, J W Bristow, and D M Bristow are shareholders. FDTH was established, and is still run by, experienced and internationally recognized diamantaire, Jeffrey Brenner. FDTH is a registered diamond broker which provides specialist diamond valuation, marketing and tender sales services to the Company for a fixed fee of 1% of turnover which is below the market rate charged by similar tender houses. FDTH was established in the premises of South Africa's internationally recognized high security diamond trading and manufacturing hub known as Jewel City, located on Commissioner Street in Johannesburg. The facility is operated by a small and highly experienced marketing and valuation team which, collectively, has over 100years of rough diamond valuation, marketing and sales experience. FDTH follows rigorous diamond handling, security, and Kimberley Process protocols, and all marketing and sales procedures are monitored and facilitated by a proprietary computer based system. This system provides independent and transparent verification of results for sellers and buyers, and is acknowledged in the industry as a leading standard for transacting diamond sales. Page 127
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FDTH operates an independent, fully transparent “sealed-bid tender system” for the sale of diamonds from a number of public and private diamond producers. Key to the success of the FDTH tender sales is the software system, wherein the administrators and staff have zero knowledge of, and influence over, the prices tendered.
Prior to delivery to FDTH, Rockwell packages the diamonds according to their mine-of-origin. Although they are cleaned in Hydrofluoric Acid (HF) at the mine, no further enhancement techniques are employed. Prior to pre-arranged sales dates, Rockwell delivers the diamonds to FDTH, where they are cleaned again, sorted and divided into categories or parcels according to the different specialities of buyers (for example, Indian, Belgian or New York Buyers). The different category or parcels of diamonds are sorted, parcelled and labelled, with each parcel having a unique reference number. The parcels are added to a manifest of goods for sale and this manifest is made available to buyers. Reserve prices are set by FDTH but are not disclosed to bidders. An invitation is then sent to all buyers to make an appointment for viewing. Tenders, typically, run for six working days, dependant on the size of the parcels. FDTH has eight private viewing and buying offices in Johannesburg in the Diamond Centre. As additional security measures, each office has 36 cameras (with a recording system) as well as three persons surveying the buyers from behind one-way protective glass to ensure no swapping of diamonds. Buyers spend, on average, some four hours viewing the individual parcels and then make their respective bids, directly into the computer. The systems administrator does not discuss and cannot view the prices offered by respective buyers.
Once all sealed bids have been received from buyers at the end of the six-day viewing period, the bids are processed by computer and a printout of the results is obtained. This printout shows the prices bid for each parcel or category of stones by each bidder. The highest bidder per category or parcel is awarded the sale for that category of stones, subject to the bid price being above the reserve price. In the case that the reserve prices are not met, FDTH and the producer have the discretion to either sell or withdraw these parcels from the tender sale. Once the producer has decided to sell or withdraw the parcel, all results are sent to successful buyers using short message services (SMS). Payment to producer is within 48 hours of closure of tender and parcels are then released to the bidders subject to funds having been received and cleared by FDTH, which ensures that all regulatory and VAT requirements are completed for the respective transactions.
In the six month period ended 30 November 2010, Rockwell received revenue of USD19.7 million from these tender sales.
17.7.2.2 Sales Contracts
In July 2008, Rockwell entered into a mutually non-binding agreement with the Steinmetz Diamond Group (“SDG”) whereby Rockwell may offer to Steinmetz rough diamonds for beneficiation and onward sale. Under the terms of the agreement, any stones selected by Steinmetz (typically good quality, clean stones +50ct in size), will be paid for at 90% of their rough value. Steinmetz will, at their own cost, cut and polish the stone. If the stone shatters (due to internal flaws), no further payment is made to Rockwell. If the stone cuts/polishes successfully and is sold, Rockwell is paid the outstanding 10% of the rough value, plus 50% of the profit obtained on the cut stone.
During the year to date, the Company has also received approximately USD1.27 million as its portion of profit share from stones that have been beneficiated in terms of Rockwell's agreement with SDG. This profit share has been derived from stones sold into the SDG beneficiation agreement in November 2009 and February 2010. The Company has a large number of +10 carat stones currently undergoing beneficiation and sales with SDG and expects to achieve a regular income flow from this source during fiscal 2011.
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17.8 Environmental studies, Permitting and Social/Community Impact
17.8.1 Environmental
In order to be socially and environmentally responsible, Rockwell has determined, for as far as it is reasonably practicable, to rehabilitate the environment affected by the proposed mining operation to its natural or a predetermined state or to a land a use which conforms to the generally accepted principle of sustainable development. The management of environmental impacts will form an integral part of the proposed mining operation. Negative impacts on the environmental rights will, for as far as is practicable, be anticipated and prevented, and where they cannot be altogether prevented, be both minimised and remedied.
Details of the environmental programme and expected management actions are contained in the EMPR and only a summary is presented here for convenience.
• Air quality o To control the incidence of unacceptable levels of dust pollution on site • Surface water: o To conserve water; and o To eliminate the contamination of run-off and sources of surface water. • Ground water: o To minimise the contamination of ground water. • Natural flora: o To re-establish self-sustaining vegetation units in rehabilitated areas; and o To control invasion by exotic and invasive plant species. • Fauna: o To re-establish vegetation in cleared areas, and therefore a habitat for wildlife; and o To eliminate poaching and the extermination of animal species within the boundaries of the study area, as well as in the surrounding areas. • Noise: o To control the incidence of unacceptable noise levels on site. • Aesthetics: o To minimise aesthetic disturbance; and o To reduce the visual impact of the proposed mining operation through a process of ongoing rehabilitation and reclamation. • Topography: o To reduce the potential of surface erosion caused by runoff in excavated and backfilled areas; and o To ensure the stability and safety of all backfilled excavations. • Soils: o To prevent soil pollution; o To limit soil compaction; o To curb soil erosion; and o To reinstate a growth medium able to sustain plant life. • Land capability: o To minimise the reduction of land capability. • Waste management: o To ensure that the discarding of any waste material produced as a result of the proposed mining operation, including rubble, litter, garbage, rubbish or discards of any description, whether solid of liquid, takes place only at a site or sites demarcated for such purposes. o To Reduce, Reuse and Recycle as far as practically possible Page 129
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o To prevent waste material from being dumped within the borders or the vicinity of the mining area. • Sensitive landscapes: o To protect sensitive landscapes from potential negative impacts.
In compliance with Section 55 of the Mineral and Petroleum Resources Development Act, 2002 (Act No. 28 of 2002), the applicant will, in order to ensure the continued appropriateness and adequacy of this environmental Management Programme, conduct monitoring and performance assessment thereof an a continuance basis. Performance assessment reports will be submitted to the Minister in this regard. Such performance assessments will be conducted every two years as is prescribed by the Mineral and Petroleum Resources Development Act, 2002 (Act No. 28 of 2002).
17.8.2 Mine Closure
If it is determined that the mine, having regard to its known reserves, is likely to cease mining operations within a period of five years, Management will promptly notify the Minister of Environmental Affairs and Tourism in writing of (a) the likely cessation of the mining operation and (b) of the plans that are in place or in contemplation for (i) the rehabilitation of the area where the mining operations were conducted after mining operations have stopped; and (ii) the prevention of pollution of the atmosphere by dust after the operations have stopped, as is required by Section 33 of the National Environment Management: Air Quality Act, 2004 (Act No. 39 of 2004).
One of the main objectives of the Social and Labour Plan (see 19.5 below) is to deal with the potential problems that may arise in the future when the mine naturally closes or if downscaling occurs due to whatever reason. The Future Forum will provide structures to facilitate the consultation processes so that HCVWD16 management and worker representatives and recognized trade union representatives can meet on a regular basis to discuss workplace issues. The intention is to provide a formal vehicle where all affected parties can consult and discuss challenges and possible solutions to problems facing the workplace that may have the potential to lead to large scale retrenchment in the future.
The most direct and appropriate intervention is for HCVWD to assist employees who could be retrenched in securing alternative employment. HCVWD has put a number of mechanisms in place to mitigate the impact of job losses in the event of a downscaling or closure of the mine. Some of the measures that will be used are: • Reduce benefits and bonuses • Reduce hours of work • Redeployment • Retraining and multi-skilling
The management of HCVWD will endeavour to avoid retrenchment wherever possible, through effective planning. Where there is no other alternative, retrenchments will be carried out as fairly as possible and in compliance with section 189 and 196 of the Labour Relations Act of 1995. The HCVWD retrenchment policy will apply to all employees other than casual and temporary employees. Retrenched employees may receive compensation in accordance with HCVWD’s policy on payment of severance benefits.
The mine closure plan is subject to a range of legislation outside of the MPRDA. Care has been taken in this closure plan to ensure that the plan not only subscribes to the spirit and intent of the MPRDA and
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the Charter, but is consistent with other applicable statutory requirements. Mine closure will be as per Closure Plan in the approved EMPR.
The closure objectives will be to leave the land in a rehabilitated state. Some areas would still be fenced off and would require monitoring and control of alien plants until closure. All mining structures and infrastructure, unless agreed otherwise with the landowner in this regard will be removed. All temporary buildings, containers, salvage materials and supplies will be removed. This will include the removal of foundations and debris and rehabilitation of the surface. All equipment and machinery, workshops and parts and stores will be removed and the area rehabilitated. Water storage facilities, disposal facilities and pipelines will all be removed unless agreed otherwise with the landowner. Roads will be ripped and rehabilitated unless otherwise agreed with the landowner. The closing or leaving of any boreholes will be discussed with the landowner. The mine floor will be profiled and will be rehabilitated for the purpose of end use. Adequate drainage will be ensured and mine side will be profiled to a minimum of 1 : 3 slope.
Monitoring of the rehabilitation, prevention of erosion, re-vegetation and control of alien vegetation will be required until the time that closure is approved. Based on the expected lifetime of the mine (currently estimate at nine years) and the estimated date of commencement of the conducting of the operation according to the amended EMPR, the completion of the entire mining operation is anticipated to take place on 1 January 2019. As prescribed a closure application will be submitted at least 180 days after the mine has ceased activities. A further period of at least one wet and one dry season will then be required for the final decommissioning and closure of the mine
17.8.3 Social Responsibility
Along with focused business objectives, Rockwell's social responsibility values and commitments form an integral part of the mining operations. Rockwell is committed to providing increased returns to shareholders while sharing the value created from the operations with a wider set of stakeholders through the alignment and linkage of business and social responsibilities.
17.8.3.1 Social and Labour Plan (SLP)
According to the MRPDA a Social and Labour Plan (SLP) is required to be submitted to the DMR along with the other requirements for a mining right. The objectives of the SLP (according to the MPRDA) is to promote employment and advance the social and economic welfare of all South Africans; to contribute to the transformation of the mining industry; and to ensure that holders of mining rights contribute toward the socio-economic development of the areas in which they are operating, as well as the areas from which the majority of the workforce is sourced. In harmony with these objectives, the SLP requires that the company address literacy levels and life skills within the workforce as well as implement career progression paths, mentorships, internships and bursary plans for its employees. In addition, the company is required to contribute to the upliftment and development of the local communities through procurement, establishment of a Future Forum and the creation of Small, Micro and Medium Enterprises (SMME’s).
During the tenure of their mining operations Rockwell has made considerable financial and technical commitments to developing alluvial diamond mining operations in the Northern Cape Province of South Africa. The performance and development of human resources are critical to the long term development of successful mining operations and, consequently, Rockwell is highly cognizant of the need to develop a comprehensive, innovative, and sustainable SLP to achieve:
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• Creation of sustainable communities within the environment that the Company operates • Infrastructure that will develop both mining operations and communities • Lasting economic stability in the mining environment which will outlast mining operations • Development of the human resources employed within the Company via training and skills transfer • Development of the human resources within the adjacent communities • Empowerment of employees to achieve ownership in the Company and other businesses.
In terms of the approved 2007 SLP submitted by Rockwell (HCVWD), the company produced a programme that would be implemented across all the mines currently in the Rockwell stable as well as any that are acquired in the future, and which is to be managed by the Human Resources Manager, ensuring that programme receives required specialised attention. The company, further, implemented career progression planning, mentorship and coaching programmes as well as internal and external bursary schemes. In addition, employment equity in management, operational staff and participation of women are given highest priority. This SLP was developed in conjunction with Stakeholders from all the areas and municipalities in which Rockwell operates including Regional and Local Government, the Departments of Housing, Education and Health, The Department of Mineral Resources, other exploration and mining companies, communities and individuals, as well as company employees. The SLP is premised on the integration of the following: • Human Resource Development (HRD) including: . Education, Training and Skills Transfer to ensure Portability of Skills . Employment equity development to reflect the demographics of South Africa in respect of management and operational positions . Development of women • Sustainable local economic development (LED) requirements with the emphasis on addressing the Integrated Development Programmes (IDP’s) of local Municipalities and meeting the needs of those Communities most directly impacted by mining operations including: . Infrastructure development projects such as roads, schools and clinics . Community housing projects . Creation of Small and Medium Enterprises (SMME) . The alleviation of poverty • Planning for Closure including creation of a Future Forum.
The programmes and projects that would be implemented as part of this SLP and the financial commitments which would be made to these projects in 2009/2010 are summarized below (Table 17.2). Note that these costs (ZAR) refer to the total cost incurred by all of the mines in the Rockwell stable – each Mine will need to carry only a pro-rata percentage of this total. This percentage is determined annually in arrears and varies according to the number of mines in operation at the end of each year. The total SLP cost is then spread equally across the operations.
Table 17.2: Total expected expenditures budgeted for the Social and Labour Plan in 2009-2011 – Klipdam and Holpan Mines will only pay a pro-rata percentage of these amounts
Expenditure Centre 2010/2011 2011/2012
Integrated Development Programme (IDP) 300,000 280,000 Local Economic Development (LED) 1,275,000 1,275,000 Small and Medium Enterprises (SMME) 180,000 150,000
Human Resource Development (HRD) 1,155,000 1,130,000
TOTAL (Rands) 2,910,000 2,835,000
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Projects already completed as per the Social and Labour Plan: • Sponsored a series of interpretative displays which forms part of a self-guided tour through the old digging remains at Canteen Kopje, Barkly West. Canteen Kopje was the first diamond digging site in Barkly West and is a proclaimed national monument and open air archaeological museum; • Sponsored school bus for transporting learners within the district to Prieska Primary School as part of the school development program. The school bus will enable learners to participate in various school excursions and sporting events in the district; • Developed a play-park for the Windsorton community in collaboration with the local municipality and the South African Police Service, Windsorton branch. This project forms part of the anti-crime project currently implemented in Windsorton. This current play-park is the only dedicated recreational facility available for the 1,200 primary school learners in the community. • The company assisted with a South African Police Services (SAPS) project during October 2008 in Niekerkshoop. • The company also assisted with a small-scale diamond project for the people of Windsorton that was initiated by DMR. • Sponsoring the appointment of a Sports Coordinator by the local High school to promote sports development within the local Barkly West community • Sponsoring a local High school’s soccer team • Repairing a local High school’s infrastructure • Upgrading a local High school’s sports equipment • Help with the supplying of food to a local high school’s hostel for under-privileged children. • Supplying two computers to a local primary school • Help with the supplying of food to a local primary school’s feeding scheme • Repair and maintain the vehicles for the local orphanage. The establishment of a play-therapy room at the orphanage. Repair and upgrade the children’s rooms. Repair and upgrade the outside of the main building of the orphanage. Upgrading of the play park at the orphanage. Help with the supplying of food to the orphanage. Supply two computers for study purposes.
Projects currently in progress as per the Social and Labour Plan: • Development of an HIV/AIDS consultation office for the Holpan community. The unit caters for two consultation rooms and a store room and will be staffed and managed by the Department of Health; • Providing usage of earth-moving equipment for the Dikgatlong municipality in the preparation of the Holpan community development which is earmarked for a local housing project. • A number of road upgrade and health care facility projects are underway in the Holpan, Riverton, and Douglas districts. • Various levels of assistance in local clinics, schools and orphanages. • Repairing a local High school’s infrastructure - Barkly West • Sponsoring the appointment of a Sports Coordinator by the local High school to promote sports development within the local Barkly West community • Help with the supplying of food to the local high school’s hostel for under privileged children in Barkly West • Sponsoring a local soccer tournament in Barkly West • Upgrading of infrastructure with regards to water supply at a local primary school in Barkly West • Sponsoring four local school soccer teams in Barkly West • Upgrading infrastructure at the high school in Prieska • Ongoing assistance and maintenance at the local orphanage in Barkly West
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17.8.3.2 Special projects
In addition to the broader initiatives contained within the Social and Labour Plan, Rockwell has also undertaken a number of special projects in the Barkly West district, where the company has its main operations centre. These include: • Rockwell sources all of its brick requirements from Bokomoso, the company that Rockwell helped develop by supplying brick and tile making equipment (Plate 17.4).
Plate 17.4: Brick/tile making project at Holpan mine (Photo courtesy of Rockwell)
• Sponsoring the purchase of sporting equipment for Department of Social Services (Barkly West branch) Youth day program (16 June 2008); • Regularly availing earth-moving equipment for ad hoc projects (e.g. clearing of roads, preparing of sport fields) taking place within the Holpan community; • Presenting an HIV/AIDS awareness programme at the local school in Longlands. This project (Project Thusanang) was initiated by the South African Police services branch in Delportshoop and forms part of an anti-crime initiative at the local schools. • Rockwell has also supported a children’s home, a primary school and a high school in the Barkly West district with financial aid, physical maintenance, establishing/upgrading media centres and contributions to feeding schemes and sports facilities.
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17.9 Trial Mining Results
Results indicate that, at the current mining/processing rate of 160,000m3/month (at 85% of the plant design capacity), trial-mining of these gravels (indicated resources, as defined in Section 16.s) of this document) might continue for a further 3.2years. It is important to note that only mineral resources are included in these results and that they have not been converted to a mineral reserve through the application of a Pre-Feasibility Study (“PFS”).
On-going exploration to convert inferred resources to indicated resources on the mine properties and the identification of additional resources on Erfs 1 and 2004 will also affect the downstream life of the mine, as would the acquisition of additional mineral holdings adjacent to the mine. Due to the speculative nature of these exploration targets, they are not considered in the life-of-mine planning.
Due to the issues surrounding dilution and the associated questions regarding conversion of resources to reserves, Rockwell has proposed looking at life-of-mine only on a one year period. Each year, the life- of-mine will be re-evaluated in terms of the on-going trial-mining programme (especially those studies related to gravel dilution and process efficiencies) to extend the mine life for an additional year.
17.9.1 The annual production of diamonds
Production throughputs of 160,000m3 gravels per month are targeted for the project (combined Klipdam and Holpan properties. The average diamond grades used in the study (1.00ct/100m3) are the actual recovered values, based on the recovery of +6,200,000m3 of gravel during the period 2007-2010. Consequently, no additional modifying factors are added to discount in-situ diamond grades.
During portions of 2009 and 2010 the processing plant did not meet the budgeted gravel volume throughput. This impacted negatively on the number of diamonds actually recovered, resulting in negative cash-flows for certain months (ref. Table 17.4). During the 2011 trial-mining period, Rockwell will address this issue by: • improving the schedule of maintenance on the plant to reduce the amount of “down-time”; • Employing better qualified/trained staff on the processing plant; and • Employing the services of specialist processing professionals to indicate potential problematic areas of the plant. To this end, Rockwell has already instituted various sampling routines to test the plant tailings to highlight critical areas.
The gravel volumes are run of mine (“ROM”). Where appropriate, volumes have been converted to tonnes by an average SG of 1.85g/cm3, an industry acceptable average for the type of gravel under consideration.
17.9.2 The annual revenue from the sale of diamonds
Sales of diamonds from the project during the period 2010 indicates that expected values are in the range of USD1,129/ct. During the first month of 2011, diamond prices have been particularly strong, certain categories increasing in price by more than 25%. However, this rate of increase is not seen as sustainable. Rather, average annual increases in gem quality diamond prices are expected to continue to be in the 10-15% range (different categories will command different rates of increase depending upon the disparities of supply and demand, especially in the emerging Chinese markets (Pers. Comm. E Blom (Vice-President of the World Diamond Council), 2011).
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17.9.3 The annual cash cost of production
Based on two years of trial-mining on Klipdam/Holpan mine, as well as Rockwell's experience at their other mines, preliminary estimates of operational expenses are expected to average at R45/m3 for Klipdam and R60/m3 for Holpan. Budgeted expenditures include: • Direct mining costs. These costs include excavation, processing and rehabilitation. • Marketing costs: A 1.5% commission of the final diamond sales value is paid to the tender house. • General & Administration costs of R0.5/m3. These costs include expenses that are not directly chargeable to the plant or mining areas as well as overheads comprising administrative personnel, consultants, general office supplies, IT, safety and training, employee transportation, contractors, insurance, permits, security, legal, and accounting. • Power & water costs of R450,000-500,000 monthly are included in the mining costs. • Further Exploration: estimated at some 3% of annual income • Corporate overheads: includes a management fee of some R2M (covering the Johannesburg and Barkly West office costs as well as a contribution to the Canadian office) that is split pro-rata amongst all of the operating entities annually in arrears. • Social and Labour Plan costs include R500 000 towards the core skills training and HRD budget for 2006/7 and 2007/8 financial years (this amount includes the 1% of payroll annual skills development levy, which includes core skills development and training programmes, but which excludes other, more specialized training programmes such as ABET (Adult Basic Education and Training), internships and bursaries). • A total staff complement of 223 persons (140 permanent employees inclusive of shared services on Holpan and an additional 83 permanent employees on Klipdam) with a total monthly labour cost of R 1,501,057 (R1,074,377 for Holpan and R426,680 for Klipdam). • Contingency cost variable of 10% might be added onto estimates, since they are based on current quotations from suppliers to Rockwell. • The environmental liability at end of cash-flow period is a combined R6,500,000. However, the insurance/savings accounts revert to the owner on obtaining a clearance certificate from the Department of Mines and Minerals. • The salvage value of assets is estimated at 2% of its initial cost, based on the practical experience of independent earthmoving contractors.
17.9.4 The annual cash liability for royalties
In terms of the proposed formulae, the applicable royalty rates will vary according to the profitability of the mining company, subject to a minimum rate of 0.5% and maximum rate 7.0% for diamonds. The profitability parameter in the formulae is EBIT and it also allows for 100% capital expensing which is an acknowledgement of the high capital costs associated with mining.
The general formula (see section 18.2.3.4 for details) is Y(u) = 0.5 + { EBIT / (Gross sales x 9) } Where: Y(u) = Royalty percentage rate; EBIT = Earnings before interest and taxes (EBIT can never go below zero).
Although the 2008 Royalty Bill was effective from 1 May 2009, in cognisance of the international economic crisis, the South African Treasury had deferred payment of State royalties until March 2010.
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17.9.5 The annual level of cash capital expenditure
No major capital expenses have been budgeted for the Klipdam/Holpan mine during 2011. Minor changes to existing processing plant will be made within the existing budget. Any earthmoving equipment requirements will be sourced from within the available Rockwell pool.
17.9.6 Project (trial-mining) Cash Flow
In the alluvial diamond mining industry, it is standard operating practice to proceed to trial mining on the basis of Indicated Resources. Such trial mining may, or may not, be part of a formal pre- feasibility or feasibility study, leading to the declaration of a recognized mineral reserve statement. On Klipdam, the project cash flows (Table 17.3) over the period of the trial-mining programme (from 2009) indicate that the diamonds have been extracted economically however, the results for Holpan are not as encouraging.
Table 17.3: Simplified on-mine revenue vs. cash costs for the period 2009/2010
HOLPAN KLIPDAM Revenue Total Cash Contribution Revenue Total Cash Contribution Costs Costs 03 2009 2,045,948 3,203,868 -1,157,920 5,629,945 3,541,987 2,087,958 04 2009 121,634 2,729,553 -2,607,919 0 3,034,427 -3,034,427 05 2009 1,094,853 2,673,324 -1,578,471 4,806,887 2,998,260 1,808,628 6 2009 918,988 3,150,968 -2,231,980 2,906,172 3,165,296 -259,124 7 2009 8,771,105 3,745,913 5,025,192 6,092,910 3,828,361 2,264,549 8 2009 397,040 3,695,100 -3,298,060 174,923 3,902,890 -3,727,967 9 2010 2,104,964 2,906,688 -801,724 10,840,915 3,413,299 7,427,616 10 2009 0 3,827,757 -3,827,757 95,362 4,207,018 -4,111,656 11 2009 3,160,698 2,595,600 565,098 9,933,273 3,467,215 6,466,058 12 2009 0 955,357 -955,357 13,861 1,036,902 -1,023,041 01 2010 5,139,030 4,096,556 1,042,475 1,389,549 2,740,359 -1,350,810 02 2010 3,568,058 3,757,567 -189,509 3,966,008 3,641,686 324,322 Sub-Total 27,322,318 37,338,251 -10,015,933 45,849,805 38,977,699 6,872,107
03 2010 11,163 6,014,037 -6,002,874 0 3,694,311 -3,694,311 04 2010 3,298,384 6,624,323 -3,325,939 611,171 4,573,953 -3,962,782 05 2010 13,668,969 6,566,746 7,102,223 6,232,736 4,725,229 1,507,507 6 2010 4,243,972 5,937,336 -1,693,364 3,527,122 1,829,921 1,697,201 7 2010 4,328,697 7,007,856 -2,679,159 960,939 3,889,949 -2,929,010 8 2010 20,680,995 6,995,053 13,685,942 9,950,562 3,545,279 6,405,283 9 2010 1,220,204 6,469,706 -5,249,502 1,295,558 5,144,488 -3,848,930
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10 2010 7,372,852 7,006,186 366,666 19,131,756 4,273,033 14,858,723 11 2010 2,311,516 6,478,838 -4,167,322 15,632,541 6,615,881 9,016,660 12 2010 8,079,798 5,379,867 2,699,931 13,090,577 3,903,520 9,187,057 01 2011 2,345,495 5,221,632 -2,876,137 1,116,155 4,338,041 -3,221,886 02 2011 9,442,876 5,963,016 3,479,860 12,050,941 3,291,210 8,759,731 Sub-Total 77,004,921 75,664,595 1,340,326 83,600,058 49,824,816 33,775,242
The operational budget for the year ending 28 February, 2012 is shown in Table 17.4. Problems identified in the past two years of trial-mining (described in Section 17.7.1) are being addressed in 2011, resulting in lower expected on-mine cash operating costs for the year ending February 2012.
Table 17.4: Operational budgets for Klipdam and Holpan mines for the year ending 28 February, 2012
Holpan (2012) Klipdam (2012) Volume (m3) 955,874 1,005,665 Carats Produced 8,507.28 12,168.54 Exchange rate R 7.00 R 7.00 Grade (ct/100m3) 0.95 1.21 Income R 73,188,139 R 89,353,625 Commission on sales -R 731,881 -R 893,536 Revenue R 72,456,257 R 88,460,089 Cash operating costs R 52,615,133 R 58,547,141 Drilling & Blasting R 0 R 0 Fuel & oil - loading R 4,206,675 R 10,911,089 - hauling R 5,532,648 R 7,489,152 - ancillary R 840,143 R 888,297 - other fleet R 1,395,577 R 45,626 Plant Maintenance R 7,646,995 R 5,028,324 Maintenance - loading R 2,330,683 R 5,176,391 - hauling R 5,560,732 R 7,527,168 - ancillary R 536,726 R 578,952 - other fleet R 600,000 R 201,133 Maintenance - other R 477,937 R 255,476 Medical & Safety R 132,000 R 121,424 Power R 5,324,220 R 2,316,078 Protective clothing R 95,587 R 125,759 Rations R 28,676 R 29,310 Rent (SUA & WR) R 0 R 166,779 Security R 2,040,336 R 1,468,212 Salaries & Wages R 3,903,031 R 5,616,669 Salaries & wages O/T R 0 R 0 12 Shift Hour Allowance R 0 R 0 Manager Budget R 30,000 R 30,000 Survey fees R 540,000 R 540,000 Training R 384,000 R 384,000 Transport R 162,499 R 17,949 Water R 267,645 R 12,210 Diesel Rebate -R 2,300,840 -R 4,063,321 Shared services technical R 4,743,847 R 4,853,872
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Shared services - regional R 8,136,015 R 8,826,593 Other cash costs R 365,941 R 446,768 Exploration R 0 R 0 Royalties R 365,941 R 446,768 Care and maintenance R 0 R 0 Other production costs R 0 R 0 Depreciation R 0 R 0 Depletion of mineral rights R 0 R 0 Reclamation and mine closure costs R 0 R 0 Research and development R 0 R 0 PROFIT/(LOSS) FROM MINING ACTIVITIES R 19,475,184 R 29,466,180 Depreciation - non-production related R 0 Corporate shared services R 3,192,826 R 3,192,826 EBIT R 16,282,358 R 26,273,354 Impairments R 0 R 0 Interest & dividends received R 0 R 0 Finance charges R 0 R 0 PROFIT/(LOSS) BEFORE CAPEX/TAXATION R 16,282,358 R 26,273,354
17.9.6.1 Sensitivity Analysis
As a consequence of uncertainties in key input parameters, a Sensitivity Analysis to these parameters is performed as a tool to accommodate these uncertainties. The determined critical value drivers, typically being commodity prices, production rates, working costs and capital expenditure forecasts, are altered through a step-wise approach. The resultant values are then considered and the overall value of the asset is weighted according to the perception of applicable risk associated with each parameter.
However, a Sensitivity Analysis does not take cognizance of the knock-on effect that changing one or more input parameters has on the value of a mineral asset. That is, a Sensitivity Analysis ignores the fact that any change in the economics of a project will impact on the pay value curve of that project. Therefore, Sensitivity Analyses that demonstrate meaningful (over 5%) adjustments to any operating parameter should not be contemplated unless the mining profile can be convincingly amended. Such variations are, however, likely to occur in practice and hence the robustness of the project still needs to be checked.
• The cash flow is particularly sensitive to changes in grade, diamond price, exchange rate and volume of gravel (Fig.17.8): o If the average recovered grades drops then the project values are impacted negatively. However, even minor increases in grade result in significant increases. Consequently, it is vital that mining and processing methods are optimised to ensure maximum diamond recovery. o Decreasing the mining and processing rate decreases the profitability of the operation, although the life of mine may be increased. Increasing the mining rate, conversely, increases the profitability. o The cash flow is, further, very sensitive to changes in diamond price. o The cash flow is, furthermore, extremely sensitive to inflation rates. Inflation rates of 3-6% are targeted by the South African Reserve Bank for the medium term. The higher rates of inflation envisaged for mining costs (especially increases in power costs) severely impact on the economics of the project. • An increase of even 5% in working costs drastically decreases the profitability of the Klipdam/Holpan operation (Fig. 17.9). Consequently, as with all commercial alluvial diamond operations, operating costs have to be watched carefully, avoiding all unnecessary expenditure. Page 139
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15,000,000
10,000,000
5,000,000
- (15%) (10%) (5%) 0% 5% 10% 15% -5,000,000
-10,000,000
-15,000,000 Erf 2004 Klipdam Holpan
Figure 17.8: Revenue sensitivities to changes in key variables
10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 - -2,000,000 (15%) (10%) (5%) 0% 5% 10% 15% -4,000,000 -6,000,000 -8,000,000 -10,000,000 Erf 2004 Klipdam Holpan
Figure 17.9: Cash operating cost sensitivities
17.10 Country Profile
17.10.1 South African Economy
South Africa has a two-tiered economy – one which rivals other developed countries and the other with only the most basic infrastructure. It is a productive and industrialized economy that exhibits many characteristics associated with developing countries, including a division of labour between formal and informal sectors and an uneven distribution of wealth and income. The primary sector, based on
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manufacturing, services, mining, and agriculture, is well developed. The South African Gross Domestic Product (GPD) is worth USD277 billion or 0.45% of the world economy (World Bank, 2010). With a GDP equal to four times that of its immediate neighbours combined, South Africa has the most developed economy in the southern African region. Over one quarter of the trade of countries (other than South Africa) in the southern African region is conducted with South Africa.
The main economic indicators of the South African economy are shown below (Table 17.5), as at October 2010, (www.tradingeconomics.com):
Table 17.5: Economic indicators for South Africa (October 2010)
Interest Rate Growth Rate Inflation Rate Jobless Rate Exchange Rate
6.5% 3.2% 3.7% 25.30% 6.9811
Growth has been robust since 2004, as South Africa has reaped the benefits of macroeconomic stability and a global commodities boom (South Africa's economy grew by 5% in 2006 and by 4.7% in 2007). At the end of 2007, however, South Africa began to experience an electricity crisis because state power supplier Eskom suffered supply problems with aged plants, necessitating "load-shedding" cuts to residents and businesses in the major cities. South Africa’s real GDP rebounded in the second quarter of 2008. This improvement in growth reflected strong increases in the real value added by the primary and secondary sectors, which comfortably offset a further moderation in real output growth of the tertiary sector over the period. Real output of the mining sector, in particular, recovered in the second quarter of 2008, following a sharp contraction in the preceding quarter. At the investment level, mining accounted for 9% of total fixed investment in the economy and 13.3% of total private sector fixed investment. The mining sector continued to be a key component of the Johannesburg Securities Exchange and accounted for 35% or R1.5-trillion of the value of the exchange as at the end of 2008.
During 2009, the world experienced the worst economic crisis since the 1930s. South Africa, as a small open trading economy, was not immune from the crisis. Initially, the country weathered the storm better than many other emerging economies. However, by the fourth quarter of 2008 the local economy was already experiencing negative growth, caused by the retraction in demand for manufactured and mining exports, combined with a consumer economy that was weakening prior to the global crisis (Fig. 17.10).
Real GDP growth, after declining by 1.8% in 2009, has rebound to 2.8% in 2010, helped by the recovery in external demand and looser fiscal policy, and is expected to accelerate to 3.7% in 2011, in line with faster global growth (COM, 2009 annual report).
While ranked in the top 20 economies by size, the South African economy is relatively small and accounts for less than 1% of global GDP. Because South Africa’s economy is dependent on foreign trade and attracting foreign savings to prop up domestic investment, it was not immune to the 2008/2009 economic slowdown.
The effect on the South African economy was severe. The global credit freeze further reduced the amount of finance available to fund capital investment and trade. The local mining industry was already declining before the global crisis occurred. Despite large increases in fixed investment in mining in 2006/07, mining output declined by 1.6% in 2006, 0.8% in 2007, 7% in 2008 and by 9.1% in the first six months of 2009. A combination of domestic factors, including the electricity crisis, regulatory red tape,
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infrastructure constraints, safety-related closure of mines, rapidly rising costs and volatility in the rand/US dollar exchange rate, all affected the ability of the sector to increase output in that period. To survive the global economic crisis, companies had to review all expenditure, cut back on capital plans, pressurise suppliers to reduce costs and focus on restructuring.
Figure 17.10: South African GDP growth rate Jan 2006 to Oct 2010 (www.tradingeconomics.com)
The mining sector experienced a sharp 32.4% drop in GDP in the first quarter of 2009 and manufacturing shrank by 22.1%. Commodity markets, however, are cyclical. By the middle of 2009, it appeared that the world recession had bottomed and the possibility of a recovery appeared positive. Since February 2009, mineral prices have experienced some recovery as restocking of minerals in China – and more recently, in advanced economies – has contributed to a recovery in demand for most minerals. The rate of recovery in demand varies, depending on the degree of stocks prior to the global crisis. For example, copper prices have recovered fairly quickly in response to continued growth in demand in China, while diamond demand has remained somewhat depressed owing to the destocking of inventory in the diamond pipeline (and especially in the fabrication and retail sides of the diamond business). South Africa’s total mining output increased by 5.8% year-on-year in February 2010, following on from the 9.7% year-on-year increase recorded in January (miningweekly.com, 9 April 2010). Statistics South Africa (Stats SA) also reported that diamond output rose 149.2% year-on-year in February, while chromium ore production increased by 123.4% year-on-year, manganese ore by 64.6% year-on-year and nickel production by 58.4% year-on-year. Gold output was down by 9.2% year-on- year on February, while platinum-group metal (PGM) production fell 12.5%.
17.10.2 The Mining Industry
South Africa boasts an abundance of mineral resources, producing and owning a significant proportion of the world's minerals. South Africa's wealth has been built on the country's vast resources - nearly 90% of the platinum metals on Earth, 80% of the manganese, 73% of the chrome, 45% of the vanadium and 41% of the gold. Only crude oil and bauxite are not found here. The country is a leading producer of precious metals such as gold and platinum, as well as of base metals and coal. It is the world's fourth- largest producer of diamonds.
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Two of the world's biggest mining companies originated in South Africa. BHP Billiton, the world's largest mining company, came after a merger between South African company Billiton and Australian firm BHP. Anglo American Plc, which has its primary listing in London and its secondary listing in Johannesburg, owns many major subsidiaries, such as Anglo Platinum, Anglo Coal, Impala Platinum and Kumba Iron Ore. Diamond miner De Beers, also a South African company, is owned by Anglo American and a consortium led by the Botswana government. The world's top diamond producer churned out about 51.1-million carats in 2007.
In 2008, the total income of the South African mining sector was R404-billion (Fig. 17.11), up by 30% on 2007 (StatsSA). Most of the benefits of the income received by the mining companies was reinvested or spent in South Africa. In 2008, the mining sector’s total expenditure was R409-billion, comprising R199- billion spent on the procurement of goods and services, R61-billion on salaries and wages, R51-billion went into capital investment in the sector, R33-billion was paid in the form of direct taxes to government, R24-billion was paid as reward to the providers of capital (shareholders), R30-billion was used for depreciation purposes and impairments and R10-billion was paid as interest by the sector to the financial sector for loans to mining. Only a small portion of the expenditure – in the form of capital equipment and dividends – was acquired from offshore, which means most of the benefit accrues locally.
Figure 17.11: Expenditure of the South African Mining Industry, 2008 (Chamber of Mines, 2009 Annual Report)
Over the past 130-years, the mining sector in South Africa has provided the critical mass for the development of a number of industries that either supply the mining sector or use its products. This cluster of industries includes energy, financial services, water services, engineering services, specialist seismic services, geological and metallurgical services, all of which are world class. This cluster of industries has gone on to service other parts of the economy and has provided a significant export base to service the global mining industry. The JSE was originally established on the basis of funding the mining sector in the late 19th century. The mining sector continues to act as a magnet for foreign investment to the country.
Nevertheless, having been operating for over 100 years, the South African mining industry is faced with the challenges of old ore bodies, lower grades, and increasing costs and hence this mature mining
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industry is effectively in its old age and natural decline. This will add to the loss of jobs and foreign exchange earnings, and impact allied service industries and peripheral businesses. Many towns that previously relied on mining as their economic drivers (e.g. Welkom and Kimberley) have already experienced this.
During 2008 the State-owned African Exploration Mining & Finance Corporation (AEMFC) – the vehicle for the development of the State mining company – was formed to compete with private and public companies, focussing, initially on commodities with a national strategic interest such as coal and uranium and uranium and would pool existing state assets, notably those held directly by the government’s diamond company, Alexkor, or indirectly by the Development Finance Agency and the Public Investment Corporation (The Financial Times Limited, 31 March 2010)
17.10.2.1 South African diamond production
In 2008, South African diamond production fell by 15.4% year-on-year to 12.9 million carats (valued at USD1.2-billion) from 15.2 million carats (valued at USD1.4-billion) in 2007. The impacts of the domestic electricity supply crisis, coupled with the global calamity later in the year were the key drivers of this decline in production. Diamond exports fell from 13.8 million carats (valued atUSD1.8-billion) in 2007 to 10 million carats (valued at USD1.4-billion) in 2008. Similarly, imports of diamonds into South Africa fell by 52.5% from 1.2 million carats in 2007 to 588 320 carats in 2008. In 2008, employment fell by 5.3% to 18 609 workers.
17.10.3 South Africa’s Mineral Legislative Environment
17.10.3.1 Mineral Policy
South Africa has endorsed the principles of private enterprise within a free-market system, offering equal opportunities for all the people. The state's influence within the mineral industry has, thus far, been confined to the goal of orderly regulation and the promotion of equal opportunity for all citizens. The Minerals and Petroleum Resources Development Act (MPRDA Act 28 of 2002) was introduced to legislate the official policy concerning the exploitation of the country's minerals. Previously, South African mineral rights were owned by either the State or the private sector. This dual ownership system represented an entry barrier to potential new investors. The new MPRDA was introduced with the objective for all mineral rights to be vested in the State, with due regard to constitutional ownership rights and security of tenure.
In an attempt to assist junior exploration/mining companies, in July 2009 the National Treasury introduced a tax incentive for investors through the introduction of venture capital company (VCC) funds. This is an attempt to assist bottom-end juniors (engaged in mineral exploration, mining and/or refining) in accessing equity funding, in a similar manner to that which the Canadian flow-through share system. The subsequent tax-break allows for both individual and listed company to invest in the junior; the individual is eligible for a 100% tax deduction of the amount invested, which is limited to R750,000/year with a maximum of R2.25M and listed companies (and their group subsidiaries) are eligible for a 100% deduction with no monetary limit. However, these corporate entities do not receive any deductions for share investments that push their holdings above a 10% equity share interest in a VCC. The VCC must be a South African resident company that is unlisted or a junior mining company that may be listed on the Alt-X and must not be a controlled group subsidiary. The VCC is, further, required to invest 80% of their funds in mining juniors with book assets of not more than R100M after capital raising, and small non-mining companies with assets of not more than R10M after capital raising.
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The junior would also be required to use all the money received for purposes of its trade within 18 months of receipt and would be required to be producing revenue within 36 months.
The Nationalisation Debate
In the wake of the international economic crisis, Julius Malema, President of the ANC Youth League (ANCYL) and COSATU (SA’s largest union movement) have consistently called for the nationalisation of South Africa’s mines. However, in reply, a Department of Mineral Resources spokesman stated that it is highly unlikely that any policy changes on nationalising South Africa’s mines would be considered in the next two years, but the issue might be raised at the ruling party’s next policy conference in 2012. He, further, added that all legal processes, practices and guidelines would first have to be passed if such a decision were to be implemented (Mining Weekly, January 29 – February 4, 2010).
All the above re-assurance notwithstanding, the nationalisation debate is likely to muddy the waters further in South Africa's mining sector, where investors are grappling with the uncertainty of a recession, job cuts and impending high power tariff increases.
During their national conference on Friday 24 September 2010, the ANC decided that the National Executive Committee would study international experience with regard to the nationalisation of mining industries and report back at the next policy conference in 2012 (MiningMx, Sun, 26 Sep 2010). This announcement to the international community was made as though nationalisation was merely one of many economic options being considered but, when President Jacob Zuma closed the national general council meeting with a speech two hours later, the implications became obvious. Zuma said that the Youth League had proposed the issue of nationalisation and the possible establishment of a state mining company. It had been instructed to do so within ANC structures and to follow procedures. Now that it had been correctly proposed, it had become an issue to be processed by the entire organisation. It was no longer a Youth League issue, said Zuma. Whereas eight months ago at the Mining Indaba in Cape Town, the Minister of Mines, Susan Shabangu, had informed mining investors worldwide that nationalisation of mines "will not happen in South Africa in my lifetime,” it is now officially on the ANC's agenda. The debate continues with various ministers, including Deputy President, Kgalema Motlanthe, Finance Minister, Pravin Gordhan, and Trevor Manuel, head of the National Planning Commission in the presidency, playing down the issues.
17.10.3.2 Mineral and Petroleum Resource Development Act 28 of 2002 (“MPRDA”)
This Act (which came into effect in May 2004) entrenched a "use it and keep it" principle that is applied to companies or individuals who hold any rights to prospect and mine. All privately held mineral rights were to be transferred under the provisions of the Act into licenses to prospect and mine. A further objective of the Act is the pursuance of the government’s policy of furthering Broad Based Black Economic Empowerment ('BBBEE”) within South Africa’s minerals industry. The Act also makes provision for the implementation of social responsibility procedures and programmes by mineral resource companies through the compulsory Social and Labour Plan.
Ownership, access and opportunity in regards to the country's mineral resources are regulated by the Minerals and Petroleum Resources Development Act of 2002, which recognises the state's custodianship over the country's mineral resources. Transformation is a key issue facing South Africa's mining sector. Equitable access to mineral resources and opportunities has been legislated, with meaningful participation of historically disadvantaged individuals the subject of the industry's black
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Applicants for permits and licenses will be required to provide details of these criteria before such are granted. Although the Act envisages that the Minister’s approval will not be 'unreasonably” withheld, the Minister can, and has, turned down applications where 'the application does not meet all the requirements specified by the Act; or if the granting of such right will result in an exclusionary act, prevent fair competition, or result in the concentration of the mineral resources in question under the control of the applicant.”
Under the terms of the MPRDA, all old order prospecting rights should have been converted in new order rights by 30th April 2006, and old order mining rights should have been converted by 30th April 2009. At, or before, expiry of the old order right a conversion to a new order right would need to be applied for. These new order rights may not be ceded, transferred, let, sub-let, assigned, alienated or otherwise disposed of, without the written consent of the Minister. Furthermore, new order mining licenses would only be granted for a maximum of 30 years.
DMR has proposed to make one sweeping set of amendments to the MPRDA and other pieces of legislation like the Mines Health and Safety Act to clarify exactly what is expected of mining groups operating in South Africa and give potential investors a clear idea what is expected of them, removing uncertainty coming from piecemeal changes. These amendments are likely to be made in early 2011 and are planned to give the mining sector a stable platform from which it can work over the next three or four years, (MiningMx, 31 March 2010). The finalised set of proposals for changes to the updated MPRDA was expected to be completed by mid 2010. As of the date of this report, the review has not yet been received, but is now expected at the end of February 2011.
A secondary consideration was the introduction of the Minerals and Energy Legislations Amendment Bill in June 2005. The main objective of this Bill is to correct both the Mining Titles Registration Amendment Act and the Mineral and Petroleum Development Act to ensure that all mining-related rights are registered in the Mining Titles Registration office of the Department of Minerals and Energy and that all rights pertaining to land registration are dealt with by the Deeds Registration Office of the Department of Land Affairs.
As a direct result of weaknesses in the current administration of the MPRDA legislation, a review of the system has been undertaken by DMR and the proposed amendments are to be presented to the Cabinet and, subsequently, to Parliament. The process is expected to take most of 2011. In addition, the Minister of Mineral Resources has also announced that a new Electronic Mineral Management System (EMMS) will be implemented shortly to allow for the on-line registration of prospecting and mining right applications and the on-line monitoring of the approvals process. The workflow would follow prescribed and standardised processes, and all applications would have to comply with prescribed and standardised formats, with all supporting documentation also having to be uploaded in a prescribed and standardised manner. The new approach was based on a Geographic Information System, which included data on, for example, environmentally sensitive areas, to prevent the granting of licences covering such regions. Each company using the EMMS would have its own log-in details and password and the system would have "four tiers" of security
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17.10.3.3 Broad Based Black Economic Empowerment (BBBEE) and the Mining Charter
Black Economic Empowerment practices were introduced in 2003 as a vehicle to mitigate against discriminatory practices present prior to 1994. The strategy is broad-based, as shown in the name of the legislation: the Broad Based Black Economic Empowerment Act of 2003. This reflects the government's approach, which is to "situate black economic empowerment within the context of a broader national empowerment strategy … focused on historically disadvantaged people, and particularly black people, women, youth, the disabled, and rural communities".
Black economic empowerment is driven by legislation and regulation. An integral part of the BEE Act of 2003 is a sector-wide generic scorecard, which measures companies' empowerment progress in four areas: • Direct empowerment through ownership and control of enterprises and assets. • Management at senior level. • Human resource development and employment equity. • Indirect empowerment through: o preferential procurement, o enterprise development, and o corporate social investment (a residual and open-ended category).
This scorecard, for both local and multinational companies, is defined and elaborated in the BEE codes of good practice (2003 and updated in 2006). The codes of good practice were introduced to govern how companies do business in South Africa. The codes are binding on all state bodies and public companies, and the government is required to apply them when making economic decisions on procurement, licensing and concessions, public-private partnerships, and the sale of state-owned assets or businesses.
Private companies must also apply the codes if they want to do business with any government enterprise or organ of state - that is, to tender for business, apply for licences and concessions, enter into public-private partnerships, or buy state-owned assets. Companies are also encouraged to apply the codes in their interactions with one another, since preferential procurement will affect most private companies throughout the supply chain. Different industries are required to draw up their own charters on BEE, so that all sectors can adopt a uniform approach to empowerment and how it is measured. The Mining Charter, initially released in 2003 to define BEE and social upliftment goals for the mining industry, is an agreement between the South African government, the collective bargaining agent of the National Union of Mineworkers (NUM), and the mining industry (represented by the Chamber of Mines and small-scale miners). The Charter is the instrument by which the Minister of Mines and Industry has to give effect to BEE.
The stated goal of this charter was to create an industry that will reflect the promise of a non-racial South Africa. As a result, mining companies are obliged to promote BBBEE when applying for, or when converting existing mineral rights to the new order rights. The objectives of the charter are to: • Promote equitable access to the nation's mineral resources to all the people of South Africa; • Substantially and meaningfully expand opportunities for historically disadvantaged South Africans (HDSA's) including women, to enter the mining and minerals industry and to benefit from the exploitation of the nation's mineral resources; • Utilise the existing skills base for the empowerment of HDSA's; • Expand the skills base of HDSA's in order to serve the community; • Promote employment and advance the social and economic welfare of mining communities and the major labour sending areas; and
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• Promote beneficiation of South Africa's mineral commodities.
In an attempt to assist companies meet the charters objectives, a “Score Card” has been developed. However, there are still numerous issues that need to be resolved concerning the quantitative assessment of the said “scores” and their application across the mineral industry. Mining companies were required to have put in place a 15% BBBEE shareholding by 2006 and, subsequently, to increase this to 26% by 2014. In the particular case of (previously) State owned right, a 51% BBBEE share was required by 2009. If the BEE component is ruled as insufficient this would prevent a new mining license being awarded.
The Mining Charter was review in September 2010, during which time the objectives and implementation of BBBEE initiatives was also be examined. Progress is now to be reported every year on elements relating to: • the 26% historically disadvantaged South African (HDSA) ownership of mining companies by 2014; • the abolition of the mine hostel system by 2014; • the 40% capital goods procurement from black economically empowered (BEE) entities; • the 0.5% of procurement value of multinational suppliers into a fund for the socioeconomic development of near-mine communities;. the 70% procurement of services from BEEs; • the 50% procurement of consumables from BEEs; • the 40% employment equity in top management; • a 25% weighting for skills development - the highest single weighting; • a 15% weighting for the development of near-mine communities; • a 12% weighting for sustainable development and growth; and, • the contribution towards value addition to metals and minerals through beneficiation, which is defined as the transformation of a mineral into a higher-value product. Mining companies may, however, offset the value of the level of beneficiation achieved by the company against a portion of its HDSA ownership requirements not exceeding 11%.
BEE entities must be made up of entrepreneurs, workers and communities. Moreover, "a percentage" of the cash flow to service funding obligations must now go to the BEE entity throughout the term of investment. Also, the BEE entities that embody the HDSA ownership of mining companies have full shareholder rights, regardless of the form of legal instruments used. Every mining company must report its level of compliance with the Mining Charter annually, as provided for by Section 28(2) (c) of the MPRDA. The Department shall monitor and evaluate, taking into account the impact of material constraints which may result in not achieving set targets. Non-compliance with the provisions of the revised Mining Charter will render mining companies in breach of the MPRDA, with errant companies running the risk of being stripped of their mining license. Further, the Mineral Resources Minister may amend the Mining Charter “s and when the need arises”.
17.10.3.4 The Minerals and Petroleum Resources Royalty Bill
The effective date for the royalty bill was May 1, 2009 (in cognisance of the recent international economic crisis, the South African Treasury deferred payment of State royalties until March 2010). However, the royalty will still be applied after that date even if the company has still not applied for conversion of mining rights.
According to the National Treasury, the current formula used to calculate the royalty rate helps overcome the problem of various specific rates being perceived as discriminatory, as it is often difficult to justify why certain minerals (specifically diamonds) were being taxed at a higher rate.
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Further the formula automatically accommodates marginal mines, takes account of “affordability” and is, therefore, more equitable and ensures that government shares in the gains during times of booming commodity prices. However, the Treasury has not relented on the double royalty to be paid by mining companies who pay one royalty to a traditional community and will have to pay a second royalty to the state under the Minerals and Petroleum Resources Royalty bill. The Treasury will, also, insist on royalties even if the minerals in question have been lost, stolen or destroyed – a deemed sales price applies at the proper condition, so a royalty is always charged even if no proceeds are obtained.
In terms of the currently applicable formulae, the applicable royalty rates will vary according to the profitability of the mining company, subject to a minimum rate of 0.5% and maximum rate 7.0% for diamonds (unrefined minerals). The profitability parameter in the formulae is EBIT and it also allows for 100% capital expensing which is an acknowledgement of the high capital costs associated with mining.
Y (u) = 0.5 + { EBIT / (Gross sales x 9) }
Where: Y (u) = Royalty percentage rate; EBIT = Earnings before interest and taxes (but EBIT can never go below zero).
The formula contains four parameters: (1) an intercept term, 0.5, (2) EBIT, earnings before interest and taxes, (3) gross sales and (4) 9 as a constant: • The 0.5 essentially acts as a minimum royalty percentage rate (0.5%) in order to ensure that Government (as custodian) always receives some level of royalty payments for the permanent loss of non-renewable resources. • EBIT essentially measures an extractor’s net operating mining profits in relation to recovered mineral resources to be eventually transferred. Taxes and other Government charges, such as the royalty, are excluded because EBIT is part of the royalty determination. The exclusion of interest effectively neutralises how key methods of financing (i.e. debt or equity) mineral operations are undertaken. EBIT for mineral resources transferred is conceptually viewed as the aggregate amount of:
(1) Gross sales for all transferred mineral resources;
PLUS
(2) Recoupment in respect of the disposal of assets used to develop mineral resources to the extent the depreciation on those assets offset EBIT;
LESS
(3) Operating expenditure incurred (and depreciation allowances applicable to capital expenditure) relating to the extraction and development of mineral resources to the extent those expenditures are both: (i) deductible under the Income Tax Act, and (ii) bring those minerals to a Schedule 1 or Schedule 2 condition (as applicable).
In a presentation to the mining industry in February 2010, Pricewaterhouse Coopers (PWC) indicated that:
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• The EBIT calculation does not take into account any deduction in respect of a financial instrument although costs arising from a mineral resource hedge are deductable because these hedges act as an economic offset against mineral resource gross sales. • The royalty liability is not deductible from EBIT; • Transport, insurance and handling are not deductible after the mineral has attained the applicable condition (refined vs. non-refined). These costs are limited to the costs of reaching the specified condition – costs beyond the specified condition are not deductible. • The EBIT calculation does not take into account the balance of assessed losses stipulated in section 20(1) (a) of the ITA. This rule has no effect in terms of unredeemed capital expenditure. The net effect of this is to prevent carry-over of excess operating losses while allowing for a carry-over of mining capital expenditure. • EBIT does not allow for currency deductions.
17.10.3.5 The Diamond Amendment Bill
The 2005 amendments to the Diamonds Act, viz., Diamonds Amendment Act, 2005 and the Diamonds Second Amendment Act, 2005 as well as the 2007 amendment to Regulations under the Diamonds Act took effect on 1 July 2007. These Regulations were also, subsequently, amended on 4 April 2008. The object of the Regulator (SADPMR) in terms of the Diamonds Act, 1986 (as amended) is to ensure equitable and regular supply of rough diamonds to local beneficiators. It makes provision for the establishment of the State Diamond Trader who will facilitate the supply of rough diamonds equitably and a Precious Metals and Diamonds Regulator to promote equitable access to rough diamonds to licensees. The objects of the amendments are to: • Promote a culture of value addition of minerals by maximising the value of economic benefit of South Africa's mineral wealth; • Recognise the fact that beneficiating our minerals locally contributes to South Africa's economy; • Prevent and abolish restrictive and unfair practices with regard to accessibility and availability of minerals and access to markets; and • Create an internationally competitive and efficient administrative and regulatory regime by means of national licensing system.
In this regard the regulators functions include the implementing, administering and controlling all matters relating to the purchase, sale, beneficiation, import and export of diamonds; and establishing diamond exchange and export centres, which shall facilitate the buying, selling, export and import of diamonds and matters connected therewith.
Whilst the former SA Diamond Board had an essentially regulatory role, the SADPMR has a promotional role as well. Through administering licenses and export approvals, the SADPMR will strive to ensure that local demand for diamonds and precious metals is catered for, and that there is growth in local beneficiation of diamonds and precious metals. The State Diamond Trader (SDT) was set up by government in 2007 with major support from De Beers and the Industrial Development Corporation (IDC). It aimed to increase the supply of rough diamonds to local polishers and cutters. De Beers seconded a number of key technical staff to the SDT and the IDC agreed to provide funding through a R60m rollover loan. Crucially, at the same time as the SDT came into operation, De Beers shut down its Diamdel subsidiary (Diamdel’s function was to provide rough diamonds to smaller SA cutting and polishing firms which were not part of the group’s main rough diamond sales system).
The end result has not lived up to expectations because the SDT has not fulfilled its function of providing the diamonds. This has resulted in extensive job losses in the local cutting and polishing industry (MiningMx, March02, 2010). Although the SDT was chartered to purchase up to 10% of local producers'
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run of mine goods, at “market-related” prices, for supply to local diamond manufacturers, it has not fully met its buying objectives. As a result of the short supply of rough diamonds, the South African diamond cutting industry is suffering. The industry was also no longer receiving rough diamond supply from Diamdel. The SDT was buying about 3% of De Beers' diamond production for supply to local beneficiators, while it was set up to buy 10% of the country's rough production for supply to local cutters and polishers. The result was that the local beneficiation industry shrunk from about 3,000 cutters and polishers to about 1,500. Solutions are being sought to the bureaucracy within the SDT. The current emphasis in the SDT sits on legal compliance issues and issues around the operations of the government diamond valuator, whereas emphasis must be placed on efficient access to diamonds – getting the rough diamonds to the buyers.
17.10.3.6 Diamond Export Levy Bill 2007
The Diamond Export Levy Bill was required to give effect to certain provisions of the Diamonds Act, 1986, as amended. The Diamond Export Levy Bill’s main objective is to support the local beneficiation of rough diamonds. The beneficiation of rough diamonds is seen as important to encourage the development of the local economy, skills and employment creation. The Bill proposes a 5% export levy on rough diamonds that should contribute towards local beneficiation, but is low enough so as not to unduly encourage smuggling. The 5% levy applies to all rough (natural unpolished) diamonds that are exported, while synthetic diamonds are exempted. The levy amount will be equal to 5% of the value of a rough diamond exported, as specified on a return described in Section 61 of the Diamonds Act, 1986 or of the value as assessed by the Diamond and Precious Metals Regulator described in section 65 of the Diamonds Act, 1986. The Bill contains relief measures that may offset the 5% levy in full or in part. A producer is entitled to receive a credit for imported rough diamonds. This credit will offset (in full or in part) a producer’s export duty liabilities. The Minister of Minerals and Energy may also exempt a producer from the 5% export levy if a producer’s activities are supportive of local diamond beneficiation, or the producer has a annual turnover of less than R10 million, and such a producer has offered his or her rough diamonds for sale at the Diamond Exchange and Export Centre but there were no local buyers. However, the diamonds must subsequently be sold for an amount at least equal to the reserve price at which such diamonds were offered at the centre. These conditions preserve South African’s “right of first refusal” with respect to bidding on any rough diamond intended for export.
17.10.3.7 Precious Metals Bill and the Beneficiation Strategy
The Precious Metals Bill amends Chapter XVI of the Mining Rights Act, No 20 of 1967, so as to eliminate the barriers to local beneficiation of precious metals and to rationalise the regulation of matters pertaining to the downstream development of precious metals. The objects of the Bill include: • To allow for the acquisition and possession of precious metals for the local beneficiation; • To regulate the precious metal industry; • To repeal the legislations that create barriers to beneficiation; and • To amend the over-regulation of the industry by centralising the issuing of jewellers' permits within the Department of Minerals and Energy.
The Beneficiation Strategy, which has been under discussion for some 16 years, is a product of an interdepartmental task team consisting of representatives from the DMMR, DTI (Department of Trade & Industry), the Department of Science & Technology, the Department of Public Enterprises, the National Treasury and the Presidency. A draft (Green Paper) document was released for public comment in early 2009, and this is expected to be followed by a White Paper from the department in due course.
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In the strategy, the South African government has highlighted the need for a national minerals beneficiation strategy, in contrast to legislation forcing mining companies to carry out beneficiation. For South Africa to succeed in beneficiation, it needs to create the necessary skilled labour force and to establish the necessary industrial development zones with attractive tax advantages and low tariff regimes. Customs systems would also have to be streamlined and harbours decongested to facilitate efficient trading conditions.
17.10.3.8 Kimberley Process
The Kimberley Process is a joint governments, industry and civil society initiative to stem the flow of conflict diamonds – rough diamonds used by rebel movements to finance wars against legitimate governments. The trade in these illicit stones has fuelled decades of devastating conflicts in countries such as Angola, Cote d'Ivoire, the Democratic Republic of the Congo and Sierra Leone. The Kimberley Process Certification Scheme (“KPCS”) imposes extensive requirements on its members to enable them to certify shipments of rough diamonds as ‘conflict-free’. The core mandate of the KPSC is to guarantee consumers that the organisation is aware of the origin of the diamonds that the consumers buy.
As of December 2009, the KP has 49 members, representing 75 countries, with the European Community and its Member States counting as an individual participant. During 2009/2010, Venezuela voluntarily suspended exports and imports of rough diamonds until further notice and Cote d' Ivoire is currently under UN sanctions and is not trading in rough diamonds. The Kimberley Process has also expressed concern at the illicit trade of diamonds from the Marange area in Zimbabwe and decided to step up international efforts to prevent the illicit trafficking of those diamonds, notably by calling on KP Participants to take appropriate ‘enhanced vigilance measures’.
In essence, the participants in the KPSC have agreed that they will only allow for the import and export of rough diamonds if those rough diamonds come from or are being exported to another Kimberley Process participant. The KPSC requires that each shipment of rough diamonds being exported and crossing an international border be transported in a tamper-resistant container and accompanied by a government-validated Kimberley Process Certificate. Each certificate should be resistant to forgery, uniquely numbered and include data describing the shipment’s content. The shipment can only be exported to a co-participant country in the Kimberley Process. No uncertified shipments of rough diamonds will be permitted to enter a participant’s country. Once a certified shipment has entered its country of destination it may be traded – in whole or part – and mixed with other parcels of rough diamonds as long as all subsequent transactions are accompanied by the necessary warranties. Failure to adhere to these procedures can lead to confiscation or rejection of parcels and/or criminal sanctions. Any rough diamonds being re-exported will also require Kimberley Process Certificates, which will be issued in the exporting country. These re-exports can comprise any combination of rough diamonds that have been previously imported through the Kimberley Process Certification Scheme.
In order to strengthen the credibility of the Kimberley Process agreement, as well as to provide the means by which consumers might more effectively be assured of the origin of their diamonds, the World Diamond Council proposed that the industry create and implement a System of Warranties for diamonds. Under this system, which has been endorsed by all Kimberley Process participants, all buyers and sellers of both rough and polished diamonds must warrant that, for each parcel of diamonds “The diamonds herein invoiced have been purchased from legitimate sources not involved in funding conflict and in compliance with United Nations resolutions. The seller hereby guarantees that these diamonds are conflict free, based on personal knowledge and/or written guarantees provided by the supplier of these diamonds.” In addition, each company trading in rough and polished diamonds is obliged to keep
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18 INTERPRETATION AND CONCLUSIONS
During February 2009 to November 2010, trial-mining operations were conducted on the Klipdam/Holpan mine. The information recovered from this trial-mining operation forms the basis for a preliminary economic assessment for the properties. During this period, some 3,177,851m3 was processed for an average recovered grade of 0.99ct/100m3. The sale of some 7,547.72 ct from Klipdam and 5,937.46ct from Holpan through 2010 resulted in a weighted average of USD1,049/ct for Klipdam and USD1,229/ct for Holpan.
Rockwell has estimated the following Indicated and Inferred resources for the project as at 30 November 2010. They were estimated by Rockwell’s Manager, Resources, G. Norton, (Pr. Sci. Nat.), a qualified person who is not independent of the Company and reviewed by T.R. Marshall, PhD, (Pr. Sci. Nat.), a qualified person who is independent of the Company and is responsible for the estimate.
Description of Volume* of Gravel Volume* of Gravel Grade# Value Gravel Resource (m3) at Indicated (m3) at Inferred (ct/100m3) (USD/ct) Classification Classification Holpan Fluvial- alluvial Gravel 517,800 527,000 0.95 1,229 Holpan Rooikoppie gravel Klipdam Fluvial- 989,100 alluvial Gravel 1.21 1,049 Klipdam 1,102,100 949,000 Rooikoppie gravel Erf 2004, 404,700 127,000 0.63 986 Windsorton TOTAL 3,013,700 1,603,000 ∗ Volumes fully diluted of sampling and mining for the period 2008-Nov 2010 (Totals rounded off to reflect the fact that it is an approximation.) # Grade estimated with bottom cut-off stone size at 2mm
Rockwell continually reconciles recovered grades with estimated resource grades on all of their deposits and mines. The increasing recovered mine grade in 2010 is a reflection of the fact that, in addition to fluvial-alluvial gravels, only non-sandy colluvial (Rooikoppie) gravels are currently being mined. Further, in comparison with 2009 data, the 2010 resource inventory reflects a significant decrease in resources. As a result of the trial-mining, Rockwell considers that the very sandy gravel (which requires significant modifications to the plant) may never, in fact, be mined. Consequently, this volume (5-6Mm3, with grades ranges of 0.5-0.9ct/100m3) of gravel has been removed from the resource classification and re- categorised as an Exploration Target. It is important to note that these statements of potential quantity and grade are conceptual in nature, that there has been insufficient exploration in these areas to define a mineral resource and that it is uncertain if further exploration will results in the targets being delineated as a mineral resource.
During 2009/2010 trial-mining was initiated on both Klipdam and Holpan to determine what portion of the gravel resource could be mined economically. Due to the fact that the trial-mining operation was on-going for some 22 months, it was deemed appropriate to use in-house staff for these assessments. Capital costs of plant and equipment was determined through formal quotations acquired from Page 154
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suppliers. Operational parameters and operating costs were determined both during the bulk-sampling and, subsequent, trial-mining phases on Klipdam/Holpan and from Rockwell's experience on their other operational alluvial diamond mine (Saxendrift).
The excavation of the gravel samples as well as the method of processing and the final recovery of diamonds are, essentially, similar, to the bulk-sampling operations, except for the volumes processed). The mining of the gravels at Holpan-Klipdam was undertaken using mechanised, shallow opencast earthmoving techniques: • The topsoil (which is generally minimal to non-existent) is removed and stored separately for use in later rehabilitation activities. • The top layer of Rooikoppie gravel is then loaded into Articulated Dump Trucks (ADT’s) by either excavator or front-end loader for transport to the plant. • The calcretised overburden to the fluvial-alluvial gravel is removed so that the gravels are exposed and can be mined by bulldozers and excavators. Care is taken to ensure the sterile excavation of the gravels such that no contamination by the footwall lithologies occurs. Excavation continues to the base of the gravels where higher basal grades are expected to occur. The shales and tillites forming the bedrock in the project area are friable and are a distinctive greyish-green colour, while the lavas tend to present as large blocky units. Where the bedrock is soft, approximately 20cm of bedrock is excavated with the gravels, so that any diamonds in the weathered rock will be recovered.
During early 2008, SRK Consulting completed an assessment of the Klipdam mine bench for current and future mining and to report on remedial measures to reduce risk. This study indicated that bench heights are stable to 5m, with berms also 5m wide. It was, further, recommended that the company nominate and train personnel to serve as spotters when deeper benches are used, however short the duration. However, due to the shallowness of the deposit, the mining pits seldom exceed 20m in depth. Consequently, sidewall stability is not a significant factor in mining on Klipdam or Holpan. Where the gravels exceed 5m the pit is benched to allow safe access.
The fluvial alluvial gravels are transported by ADT’s to the diamond recovery plants. Surveying of the box cuts is undertaken on a monthly basis by the mine surveyor in order to obtain precise volumes for the fluvial-alluvial gravel, the calcrete and the Rooikoppie gravels, against which diamond production could be reconciled and grade determined.
A double-18 ft rotary pan-plant system used to process gravels on Klipdam and a Dense Media Separation (DMS) plant is used on Holpan. Processing volumes (ROM) on the two plants are approximately 360 tph each. Concentrates are processed through FLOWSORT X-Ray recovery and grease-belt systems, before final hand-sort in secure glove-boxes. QA/QC is maintained through the use of tracers – both bort diamonds (supplied by Steinmetz) and ceramic balls. These tracers are introduced into different parts of the plant to ensure optimum diamond recovery. Fluorescent slingshot tracers and bort diamonds are used to continuously test for maximum equipment performance. Daily, 20 tracers are inserted into each FlowSort machine. Recoveries are monitored and problems with tracer recoveries are reported immediately to the plant superintendent who deals with the matter directly.
Trial-mining of the main deposit on the Klipdam-Holpan mine, is set to continue during the rest of 2011. A number of processing issues are still the subject on on-going technical studies: • A decision must be reached regarding whether the sandy colluvial gravels can be processed commercially. • The dilution features of the fluvial-alluvial gravels need to be quantified to determine whether they materially affect the processed grade.
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• Various processing issues need to be addressed to ensure that budgeted plant throughput volumes are maintained
Specific budgets for these studies is not required since they are conducted as part of the trial-mining (2011 trial-mining costs are budgeted at R53.5M for Klipdam and R52.2M for Holpan). In addition, bulk sampling will continue on Erf 2004 so that diamond grade and value can be estimated with reasonable confidence, so as to allow for the estimation of a resource by end 2011. Furthermore, 1,100 pits will be excavated on Erf 1 to increase the confidence in the resource volume estimate. ZAR60,000 has been budgeted for this exercise (a significant portion of the costs will be absorbed by the current mining budget on Klipdam/Holpan mine.
Due to the lack of encouraging trial-mining results on Holpan, the results are being reviewed carefully, with a view to halting these operations at the end of February 2012 – dependent on the results of the bulk-sampling of Erfs 1 and 2004 as well as Klipdam trial-mining, these operations may continue.
The author has examined both the proposed programme and budget and is of the opinion that they are relevant to the stage of the project.
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19 RECOMMENDATIONS
Trial-mining of the main deposit on the Klipdam-Holpan mine, is set to continue during the rest of 2011 (Fig. 19.1). On-going technical studies are being concluded so that a decision may be reached regarding whether the sandy colluvial gravels can be processed commercially. Specific budgets for these studies are not required since they are conducted as part of the trial-mining. Trial-mining costs for 2011 have been budgeted at R53.5M for Klipdam and R52.2M for Holpan.
Figure 19.1: Location of planned trial-mining during 2011
In addition, bulk sampling will continue on Erf 2004 so that diamond grade and value can be estimated with reasonable confidence, so as to allow for the estimation of a resource by end 2011.
Furthermore, 1,100 pits (Fig. 19.2) will be excavated on Erf 2004 to increase the confidence in the resource volume estimate. ZAR60,000 has been budgeted for this exercise (a significant portion of the costs will be absorbed by the current mining budget on Klipdam/Holpan mine.
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Figure 19.2: Planned pitting programme on Erf 2004, for 2011
The author has examined both the proposed programme and budget and is of the opinion that they are relevant to the stage of the project.
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20 REFERENCES
Beet, G. (1931): The Grand Old Days of the diamond Fields. Maskew Miller, Cape Town.
Beaumont, P. and Morris, D. (1990): Guide to Archaeological sites in the Northern Cape. McGregor Museum, Kimberley
Butzer K W, Helgren D M, Fock G J and Struckenrath R (1973): Alluvial terraces of the lower Vaal River, South Africa: A reappraisal and re-investigation. Journal of Geology, 81, 341-362.
Colliston, W.P. and Saner, M. G. (2000). Exploration results on the new discovery palaeo-fluvial system gravel resource and Plateau gravel (Rooikoppie) Reserve on the farm Klipdam 157. Unpublished report compiled for Klipdam Diamond Mining Company Limited. July 2000.
Cooke, H.B.S. (1949): Fossil Mammals of the Vaal River Deposits. Geological Survey of Union of South Africa, Memoire 35 (part 3), 117 pp.
Cooke, R. (1995). Geological report on the alluvial diamond deposits occurring on Klipdam and a portion of Holpan 161. Unpublished report compiled for Klipdam Diamond Mining Company Limited. April, 1995.
Gerryts, E. (1996). Geological report on the alluvial diamond deposits occurring on the farms Klipdam 157 and Holpan 161. Unpublished report compiled for Klipdam Mining Company Limited. January, 1996.
Cooke, R. (1997). Report on the Terrace Gravels occurring on the farms Klipdam 157 and Holpan 161. Unpublished report compiled for Klipdam Mining Company Limited. July, 1996.
De Wit, M C J (1996): The distribution and stratigraphy of inland alluvial diamond deposits in South Africa. Africa Geoscience Review, 3(2), 175-190
De Wit, M C J (2004): The diamondiferous sediments on the farm Nooitgedacht (66), Kimberley, South Africa. S.Afr. J Geol., 107, 477-488
De Wit, M. C.J., Ward J.D., Jacob, J.R., Spaggiari, R. and van der Westhuizen, A. (1997): Diamond-bearing deposits of the Vaal and Orange River systems. 6th International Fluvial Sedimentological Conference. Pre-Conference Field Excursion, University of Cape Town.
De Wit, M.C.J, Marshall T.R. & Partridge, T.C (2000): Fluvial deposits and drainage systems, p55-72. In, T C Partridge and RR Maud, The Cenozoic of Southern Africa. Oxford Monographs on Geology and Geophysics No 40. Oxford University Press, New York, 406pp.
Esterhuise C, (2010): A Preliminary Geohydrological Assessment of the Groundwater Resources of the Holpan/Klipdam Area. District Barkley West, Northern Cape Province. Prepared for Rockwell diamonds Inc by SRK Consulting (Pty) Ltd, May 2010, 41pp
Gurney, J.J, Moore, R.O, Otter, M.L, Kirkley, M.B, Hops, J.J and McCandless, T.E (1991): Southern African kimberlites and their xenoliths., p495-536 In: AB Kampunzu and RT Lubala (Eds),
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Magmatism in Extensional Structural Settings. The Palaeozoic African Plate. Springer-Verlag, Berlin, 619pp. Helgren, D.M. (1979). River of Diamonds – An Alluvial History of the Lower Vaal Basin, South Africa. The University of Chicago, Department of Geography, Research paper No. 185, 1979.
Jacob, R. J (2005): The erosional and Cainozoic depositional history of the lower Orange River, southwestern Africa. PhD Thesis, University of Glasgow, 167pp.
JORC (1999): Australian Code for Reporting of Identified Mineral Resources and Ore Reserves, issued by the Joint Ore Reserve Committee (JORC), comprising Australasian Institute of Mining and Metallurgy (AusIMM), Australian Institute of Geoscientists (AIM) and Minerals Council of Australia (MCA), September 1999.
Kilalea, D., (2008). Diamonds: Losing Lustre or Still Sparkling? http://www.seekingalpha. com.
Lock, N (2003): Comparing carats to kilograms. Mining Mirror, October 2003, 36-38
Mac Vicar C.N (1986): Land types of the maps 2720 Witdraai, 2722 Kuruman, 2724 Christiana, 2820 Upington, 2822 Postmasburg and 2824 Kimberley. Mem. Dept. Agriculture and natural Res. S. Afr. 3, 269pp
Marshall, T.R. (1987): Alluvial diamond occurrences of the Western and south- Western Transvaal - a compilation of production data. Inf. Circ. No 194, Econ. Geol. Res. Unit, Jhb. 200 pp.
Marshall, T R (2004): Rooikoppie Deposits of South Africa. Rough Diamond Review (September), p21- 25.
Matheyss, F.G. (1990): The alluvial diamond deposits of the lower Vaal River between Barkly West and the Vaal Harts confluence in the northern Cape Province, South Africa. (Unpubl.) M.Sc. Thesis. Rhodes University, Grahamstown.
Norman, N.G. & Cooke, R. (2001). Report on the exploration of the diamondiferous gravels on the farm Holpan 161. Unpublished report for H.C. van Wyk Diamonds (Pty) Limited. September, 2001.
Partridge T C and Brink, A B A (1967): Gravels and terraces of the lower Vaal basin. SAGJ, 49, 21-38.
Partridge, T. C. and Maud, R.R (1987): Geomorphic evolution of southern Africa since the Mesozoic. S. Afr. J. Geol., 90(2), 179-208.
Oosterveld, M.M. (2008): Wouterspan, Holpan and Klipdam, Saxendrift – size frequency and large stones for 2005-2008 period. Internal report for Rockwell Ventures Inc (November, 2008).
Oosterveld, M M (2010): Holpan and Klipdam 2007 – 2009, Large Stone Recovery and Modelling. Internal report for Rockwell Ventures Inc (February 2010).
Picton, J (2006): Mining Research. Diamond Update #5. W H Ireland Stockbrokers, May, 2006
Read, G.H., Janse, A.J.A.(2009): Diamonds: Exploration, mines and marketing, Lithos (in Press), Page 160
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Rombouts, L (1987): Evaluation of Low Grade/High Value Diamond Deposits. Mining Magazine (September, 1987), 217-220.
SACS (1980): Stratigraphy of South Africa Part 1 (Comp L E Kent). Lithostratigraphy of the Republic of South Africa, South West Africa/Namibia, and the Republics of Bophuthatswana, Transkei and Venda: Handb. Geol. Surv. S. Afr., 8, 690pp.
SAMREC (2000): South African Code for Reporting of Mineral Resources and Mineral Reserves. Prepared by the South African Mineral Resources Committee (SAMREC), under the auspices of the South African Institute of Mining and Metallurgy (SAIMM). Effective March 2000.
SAMREC (2006): South African Code for Reporting of Mineral Resources and Mineral Reserves. Prepared by the South African Mineral Resources Committee (SAMREC), under the auspices of the South African Institute of Mining and Metallurgy (SAIMM). Exposure Draft June 2006.
Spaggiari, R. (1993): Reconstruction of the palaeodrainage from the gravels on the farm Droogeveldt 292, Barkly West, Northern Cape Province. M.Sc. Thesis (unpubl.) Rhodes University, Grahamstown.
Steyn, T. And Terbrugge, P. T. (2008): Klipdam Bench Stability Assessment. SRK Project Number 388468, for Rockwell Diamonds Inc (January 2008), 56pp.
Van der Merwe, F.J. (2005). Report on Holpan-Klipdam gravels mined and calculated gravel resources as at 6 July 2005. Unpublished reports compiled for H.C. van Wyk Diamonds (Pty) Limited. July 2000. Van Rooyen, T.H. and Burger, R. du T (1974): Plant ecological significance of the soils of the central Orange River basin. S Afr Geogr J, 56, 60-66.
Sundry Documents
Rockwell production data Sundry hardcopy and electronic technical and production plans and data.
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DATE AND SIGNATURE PAGE
Respectfully Submitted,
Signed and Sealed
Tania R Marshall (Dr) Glenn A Norton, B.Sc. Hons,
Geological Consultant (Pr. Sci. Nat) Mineral Resource Manager (Pr. Sci. Nat.) SACNASP registration number 400112/96 SACNASP registration number 400042/06
P O Box 6578 Level 1, “Wilds View”, Isle of Houghton Homestead, 1412 Cnr: Boundary & Carse O’Gowrie Road Republic of South Africa Houghton Estate, Johannesburg Tel/Fax: +2711 828-2989 South Africa, 2198 E-mail: [email protected] [email protected]
Date of Signature: 30 May 2011
Date of Revision: 30 June 2011
Effective Date : 30 November 2010
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21 CERTIFICATE OF AUTHORS
21.1 Tania Ruth Marshall
I, Tania Ruth Marshall (Pr. Sci. Nat.) do hereby certify that:
1. I am a Geological Consultant with: a. Explorations Unlimited b. P O Box 6578 c. Homestead, d. 1412 e. South Africa 2. I graduated with a degree in Bachelor of Science from the University of Witwatersrand in 1982. In addition, I have obtained a Bachelor of Science (Honours) in Geology in 1984, a Master of Science in Geology in 1987 and a Doctor of Philosophy (Geology) in 1990. 3. I am a member, in good standing, of the Geological Society of South Africa (#38829) and am registered with the South African Council for Natural Scientific Professions (Pr. Sci. Nat.) as a Geological Scientist since 1996 (SACNASP registration number 400112/96). 4. I have worked as a geologist since my graduation from university in 1987. During this period I have been involved in the exploration and exploitation of alluvial diamond deposits throughout Africa, including the evaluation and valuation of a number of such deposits for both private and public companies. Such operations involving mining and financial analysis (together with mine planning and costing) include the Cangandala alluvial diamond mine in Angola, the Cayco alluvial diamond project in Akwatia, Ghana, the Aredor alluvial diamond mine in Guinea, the Lorelei alluvial diamond mine in Namibia, the Krugersdal/Morgenzon and Roodepan alluvial diamond mines in the Ventersdorp district of South Africa, the Schmidtsdrift and Sydney-on- Vaal alluvial diamond mines along the lower Vaal River in South Africa, the London alluvial diamond mine in the Schweizer Reneke district of South Africa, the Kameelfontein alluvial diamond project in the Cullinan district of South Africa, as well as various small-scale alluvial diamond projects in South Africa and Namibia. 5. My experience on alluvial diamond deposits is both as operator and as consultant, during which I have prepared costing estimates for mining and processing operations. In addition, as consultant, I have seen and reviewed operations and their various cost centres. 6. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43- 101”) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfil the requirements to be an independent “qualified person” for the purposes of NI 43-101. 7. I am responsible for the preparation of this technical report entitled “Technical Report on the Klipdam/Holpan Alluvial Diamond Mine, Barkly West District, The Republic of South Africa”, for Rockwell Diamonds Inc.(effective date 30 November 2010). 8. I have visited the Klipdam/Holpan properties during the period 30 August – 2 September 2010. 9. My previous involvements with the Klipdam/Holpan property is as author (or co-author with G A Norton) of the technical reports entitled: i. “Technical Report on The Klipdam and Holpan Alluvial Diamond Properties, Barkly West District, The Republic Of South Africa” dated 30 March 2007 ii. “Technical Report on The Klipdam and Holpan Alluvial Diamond Properties, Barkly West District, The Republic Of South Africa” updated on 31 October 2007 iii. “Technical Report on The Klipdam and Holpan Alluvial Diamond Properties, Barkly
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West District, The Republic Of South Africa” updated on 31 March 2008 (in conjunction with G Norton) iv. “Technical Report on the Klipdam/Holpan Alluvial Diamond Properties, Barkly West District, The Republic of South Africa”, for Rockwell Diamonds Inc., effective date 28 February 2009 (in conjunction with G Norton) v. “Technical Report on the Klipdam/Holpan Alluvial Diamond Properties, Barkly West District, The Republic of South Africa”, for Rockwell Diamonds Inc., updated 22 December 2009 (in conjunction with G Norton)
10. I am independent of the issuer applying all of the tests of both National Instrument 43-101 11. I have read National Instrument 43-101 and Form 43-101F1, and the Technical Report has been prepared in compliance with that instrument and form. 12. At the date of signature, to the best of my knowledge, information and belief the technical report contains all the scientific and technical information that is required to be disclosed so as to make the technical report not misleading. 13. I consent to the filing of the Technical Report with any stock exchange and other regulatory authority and any publication by them for regulatory purposes, including electronic publication in the public company files on their websites accessible by the public, of the Technical Report.
Dated this 30 June2011
Signed and sealed
Tania Ruth Marshall (Dr)
Geological Consultant (Pr. Sci. Nat.) SACNASP registration number 400112/96
P O Box 6578 Homestead, 1412 Republic of South Africa Tel/Fax: +2711 828-2989 E-mail: [email protected]
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21.2 Glenn Alan Norton
I, Glenn Alan Norton (Pr. Sci. Nat.) do hereby certify that:
1. I am the Mineral Resources Manager of Rockwell Diamonds Inc. of: Level 0, “Wilds View”, Isle of Houghton Cnr: Boundary & Carse O’Gowrie Road Houghton Estate, Johannesburg South Africa, 2198
2. I graduated with a degree in Bachelor of Science from Rand Afrikaans University in 1998. In addition, I have obtained a Bachelor of Science (Honours) in Geology in 1999.
3. I am a member, in good standing, of the Geological Society of South Africa (# 965050) and am registered with the South African Council for Natural Scientific Professions as a Geological Scientist since 2006 (SACNASP registration number 400042/06).
4. I have worked as a geologist continuously since my graduation from university in 1999. During this period I have been involved, inter alia, in the exploration and exploitation of alluvial diamond deposits throughout Africa.
5. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43- 101”) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfil the requirements to be an internal “qualified person” for the purposes of NI 43-101.
6. As the Mineral Resources Manager of Rockwell, I am not independent of the issuer in terms of NI43-101.
7. I am the co-author of this technical report entitled “Technical Report on the Klipdam/Holpan Alluvial Diamond Mine, Barkly West District, The Republic of South Africa”, for Rockwell Diamonds Inc. (effective date 30 November2010).
8. My previous involvements with the Klipdam/Holpan property is as co-author of the technical reports entitled: i. “Technical Report on the Klipdam/Holpan Alluvial Diamond Properties, Barkly West District, The Republic of South Africa”, for Rockwell Diamonds Inc., effective date 28 February 2009 (in conjunction with G Norton) ii. “Technical Report on the Klipdam/Holpan Alluvial Diamond Properties, Barkly West District, The Republic of South Africa”, for Rockwell Diamonds Inc., updated 22 December 2009 (in conjunction with G Norton)
9. As the Mineral Resource Manager of Rockwell Diamonds Inc, I oversee the corporate strategy with regards to the exploitation of the company’s resources. This includes the day to day mining and long term mine planning. Incorporated in to these duties is also the acquisition of new resources either through exploration or through the purchase of existing resources and operations. It is also my duties to ensure that all the company’s resources and rights are
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maintained in compliance with the exchanges as well as the various governing bodies in South Africa.
10. I visit the Klipdam/Holpan Mine for a minimum of one day each week.
11. At the date of signature, to the best of my knowledge, information and belief the information asked for in 43-101 section 81 (2) (ii) is accurate and not misleading.
12. I consent to the filing of the Technical Report with any stock exchange and other regulatory authority and any publication by them for regulatory purposes, including electronic publication in the public company files on their websites accessible by the public, of the Technical Report.
Dated this 30 June 2011
Signed and sealed
Glenn A Norton, B.Sc.Hons,
Mineral Resource Manager (Pr. Sci. Nat.) SACNASP registration number 400042/06
Level 1, “Wilds View”, Isle of Houghton Cnr: Boundary & Carse O’Gowrie Road Houghton Estate, Johannesburg South Africa, 2198 [email protected]
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