DIAMONDS – OENA

DIAMONDS – OENA

LOCATION

The Oena Project (the “Property”) consists of one New Order Mining Lease located in the Northern Cape Province, Republic of South Africa. Oena is 8,800 hectares in size and covers a 4.8 kilometre (“km”) wide strip along a 15 km length of the lower Orange River.

OWNERSHIP

Southstone Minerals Ltd owns 43% of African Star Minerals (Pty) Limited (“ASM”) which owns 100% of the Property.

Southstone Minerals Ltd subsidiary, ASM received confirmation from the Department of Mineral Resources that the mining right for the Property was renewed for a further period of nine (9) years to 15 March 2027. The renewal was granted in terms of the applicable sections of the Mineral and Petroleum Resources Development Act (Act 28, 2002).

Diamond-Oena

GEOLOGY AND DEPOSIT TYPE

Oena, a producing alluvial diamond property, is located within a well established alluvial diamond mining province 50 km upstream of Namdeb’s Auchas and Daberas alluvial diamond mines, located on the Namibian or north bank of the Orange River, and 15 km and 60 km upstream of Trans Hex’s Reuning and Baken alluvial diamond mines, respectively, located on the South African or south bank of the Orange River.

Two separate and distinctly different aged diamondiferous bearing paleochannel gravels are present on the Property and have been named as follows:

  1. Proto‐terraces (dated as Miocene and 17 – 19 mybp in age) are higher‐level and are located greater than 40 metres (“m”) above the current Orange River level.
  2. Meso‐terraces (dated as Pliocece and Pleistocene and are 2 – 5 mybp in age) which are lower‐level and are located between 10 m to 12 m above the current Orange River level.There are five meso‐terraces on the Property including the Oena, Sandberg, Blokwerf, Fishriver and Kabies Sections. Most of the historical exploration has been concentrated on the Oena and Sandberg Sections and none has been completed at the Fishriver and Kabies Sections.

SOUTHSTONE MINERALS LTD RESOURCE REPORT

A National Instrument (“NI”) 43-101 report, dated and effective 31 October 2014, by Peter W.A. Walker B.Sc. (Hons.) MBA Pr.Sci.Nat. F.S.E.G. of VP3 GeoServices (Pty) Ltd has been prepared for Oena. The report records a historically estimated Inferred Resource within the six remaining blocks in the Oena Section.

Table 1: Oena Inferred Resource

Volume cubic meters (m3)
Grad
Oena Section blocks 1,075,000
( ~2,795,000 tonnes)
0.295 carats/100m3 (~0,12 cpht)

In addition to this historical Inferred Resource, systematic Reverse Circulation drilling of the Sandberg terrace was completed and has shown an estimated 4.5 to 5.75 million cubic metres (~14 million tons) of basal and suspended gravel is present and was shown by two bulk samples to be diamondiferous, however, these sample volumes are too small to estimate diamond grades at a sufficiently predictable level of accuracy; please note that although the Sandberg gravels are expected to yield similar grades to the Oena section gravels, further bulk sampling may not result in the target being defined as a Mineral Resource. The potential quantity and grade are conceptual in nature. There has been insufficient exploration to define a mineral resource.

It is uncertain if further exploration will result in the target being delineated as a mineral resource. The Blokwerf, Visrivier and Kabies terraces require systematic drilling to estimate the total volume of gravels on the Property although historical small-scale sampling has shown them to be diamondiferous; again, further bulk sampling may not result in these targets being defined as Mineral Resources.

CURRENT OPERATIONS

CONTRACT MINING

Appointed mining contractor, Bluedust 7 Proprietary Limited (“Bluedust”) mobilized and commissioned mining and processing equipment commencing 16 November 2017. The Agreement requires Bluedust, at its own cost and expense, to provide and maintain all the plant and equipment as required.

The diamonds recovered from processing ROM and Tailings by Bluedust at Oena are sold via a designated Tender Facility in South Africa. A total of 25% of the gross income of net diamond sales from ROM and 40% of gross income of net diamond sales from Tailings, less commission, are paid to ASM for the duration of the 60-month contract. For any individual stones recovered from ROM, with a gross selling price, less commission, of greater that US500,000 ASM will be paid 30% of the gross income.

Bluedust successfully recommenced production and recovered a total of 941 carats since January 2018 and have recently focused their production on ROM material. Mining has primarily focused on what is known as the Oena Site and will shortly commence on the Blokwerf Site where Bluedust is currently mobilizing equipment. Bluedust currently has 36 employees on site.

SOUTHSTONE MINERALS LTD – AFRICAN STAR MINERALS MINING

During the course of the year, Southstone Minerals Limited through its local subsidiary, ASM, acquired an additional pan plant (the “Plant”) with a 120 tonne per hour (“tph”) capacity to be used to process Tailings left on site from previous mining operations. The Plant began commissioning in June 2018 and is ready to begin processing material.

Start of production has been delayed due to the 260 KVA diesel generators that was purchased and has had to be replaced, delaying commissioning of the operation. New piping and water pipe were also purchased and are onsite and ready to be installed. A mobile screening unit and earth moving equipment will be mobilized to site to support the Plant operations and this is anticipated to occur prior to the end of 2018. ASM currently has 8 employees on site.

DIAMOND PRODUCTION

Diamond production from Oena, since acquisition by Southstone Minerals Ltd in November 2014, including production from both run of mine (“ROM”) material as well as pan tailings and bantam material (“Tailings”), totals 2,327 carats that have been sold at an average price of US$1,298 per carat.

This includes a 42.26 carat diamond recovered from ROM in the Oena Central Area that was sold on tender for US$11,267 per carat and a diamond of 36.340 carats was recovered from Tailings and sold for US$6,054 per carat.