Diavik Plan Allows for Flexible Production to Adapt to Changing Diamond Market

The owners of the Diavik diamond mine have developed a plan incorporating various production options that will enable mining operations to adapt to changes in demand in the diamond market. The plan allows for changes to carat production by varying the mix of ore that comes from the A-418 kimberlite pipe and the higher grade A-154 South pit.

The announced plan follows a decision by Harry Winston Diamond Corporation and Rio Tinto plc to revise their budgets for calendar 2009. The two firms own the diamond mine, which Rio Tinto operates through its subsidiary Diavik Diamond Mine Inc (DDMI).

The plan calls for a production of 5.4 million carats processed from 1.3 million tons of ore, and includes two possible six-week shutdown periods in mid-summer and at year-end. A new mining technique is under consideration for the potential mining of the A-21 resource and exploration work has identified extensions at depth to the A-418 and A-154 North kimberlite pipes.

The majority of the ore will come from the A-418 kimberlite pipe, with the remaining production coming from the A-154 South open pit. However, if market conditions improve, additional carats can be produced by shifting the mix of ore from A-418 to the higher grade A-154 South. Total carat production is expected to be between 5 and 6 million carats on a 100 percent basis.

In calendar 2010, the A-418 kimberlite open pit is expected to be the primary ore source, supplemented by A-154 South, where open pit mining is planned to be complete by the second quarter. Total open pit ore mined is expected to be 1.5 million tons.

With regards to the now delayed underground mining, according to the revised plan, it is scheduled to commence on a limited scale with approximately 0.5 million tons of ore during 2010, sourced mainly from the A-154 North pipe.

In calendar 2011, underground mining is expected to ramp up to 0.9 million tons a year, principally from the A-154 North and South pipes.

During the production shutdowns, scheduled for July 14-August 24 and December 1, 2009-January 11, 2010, the mine will be placed on a care and maintenance schedule.

The summer shutdown would reduce goods available for sale in the third quarter of fiscal 2010, according to Harry Winston. The winter shutdown can be reversed at short notice should market conditions improve. If this shutdown were to go ahead, it would reduce availability of goods in the first quarter of fiscal 2011.

Harry Winston said its share of the planned cost of the planned capital expenditure is expected at $130 million.