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Diamonds shine for Majestic

Majestic Resources NL is set to make a purchasing decision on the rich Messina diamond mine in South Africa.

The Perth-based diamond miner is undergoing due-diligence work on the mine, 140km from Kimberley, with a decision expected by June. Messina, should due diligence return expected results, is regarded as a company-maker for Majestic, which already has the Riet River alluvial diamond mine in operation.

The mine has been in continual operation for almost 50 years and is a producer of a steady 20,000 carats of high quality diamonds a year. As a kimberlite diamond mine, Messina is currently operating to a depth of 630 metres through narrow-stope, labour intensive methods. Majestic is testing the depth extensions of the orebody to ensure that at least a further 200 metres of kimberlite fissure remain. That would sufficient to ensure another 10 years’ mine life. Majestic also has plans to lift the recovery to 30,000 carats a year through expansion of mining operations.

At 20,000 carats a year, the net profit for Majestic would translate to about $4 million a year. By raising output to 30,000 carats the net profit would rise to the levels of about $6 million.

The due diligence is being carried out by world-leaders in the field, Snowden Mining Consultants. Kimberlites, unlike alluvial mines, are renowned for their consistency and continuity of the orebody. Once the drilling proves the kimberlite system extends a further 200 metres, the company will be able to predict with confidence the monthly output of diamonds. Majestic's prime aim is to prove the orebody extends at depth and to ensure that financiers and shareholders are comfortable with the acquisition.

Financing arrangements are in place for the acquisition once Majestic is confident it will proceed. The mine has a highly experienced and well-trained workforce, an extremely low accident rate, stable ground conditions and proven profitability.

Messina is a no frills operation. It plays an important part in the local community, employing 320 people, many of whom work underground in the narrow-stope mine. The stope shrinkage mining method has proved suitable for the ground conditions.

Should the due-diligence work prove Messina to live up to the potential Majestic believes is likely, the company will immediately move to lift productivity and attain higher profitability. This will put Majestic on track to achieve its mission statement of being a mining company with profits in the higher quartile of mid cap diamond miners while reducing costs to the lowest quartile. The company believes Messina should be the springboard for the achievement of those goals while creating substantial wealth for shareholders.

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