QUARTERLY REPORT FOR PERIOD ENDED 30 NOVEMBER 2008
Lonrho (AIM: LONR), the conglomerate with a structured portfolio of African investments, is pleased tonote the following announcement to the Australian Securities Exchange this morning by Lonrho Mining Ltd (formerly known as Nare Diamonds), which is owned 24.16% by Lonrho:
HIGHLIGHTS
LULO PROJECT, ANGOLA
The first kimberlite pipe (K72) was identified within the Lulo Concession.
Six priority aeromagnetic anomalies were inspected and sampled. Heavy mineral micro-probe analyses results are expected in January 2009.
The L6 target on the west bank of the Cacuilo River was visited. Field evidence suggests this location may represent a buried kimberlite pipe.
OPERATIONS
LULO DIAMOND CONCESSION - ANGOLA
Kimberlite Exploration
The 1,000 km2 aeromagnetic survey flown in January 2008, revealed a cluster of some200 magnetic anomalies suggestive of kimberlite pipe intrusives. This interpretation wassupported by the presence of historically reported kimberlite pipes within theaeromagnetic target area. The view that diamond rich kimberlite pipes are locatedwithin this province is reinforced by the extensive illicit diamond digger (garimpeiro)activity within the Cacuilo River catchment area, which hosts the aeromagnetic anomalycluster as well as the reported kimberlite pipes.
The aim is to fast track the discovery of any diamond bearing kimberlites. The largestpipe within a kimberlite province is invariably also the most diamondiferous member.Based on that empirical fact, it was decided to inspect the apparent largest eightaccessible targets based on both aeromagnetic modelling and aerial-photointerpretation. The targets are listed in Table 1.
TABLE 1 - KIMBERLITE TARGET ANOMALIES
Anomaly No. Basis for selection
K6 aeromagnetic anomaly only
K14 aeromagnetic anomaly/digger activity
K29 aeromagneticanomaly/photo feature/hill
K30 as above - adjoining targets/1 source?
K50 aeromagnetic anomaly only
K71 aeromagnetic/photo anomaly
K72 aeromagnetic/photo anomaly
K212 aeromagnetic anomaly only
L6 historical kimberlite/digger activity
The field inspection included the surface soil sampling of the selected targets as well asthe mapping of any rock outcrops. Targets K212 and the twin targets K29 and K30 werenot sampled as the former is a large swamp adjacent to the Cacuilo River and access tothe latter was restricted.
On the other six sites, a single -2mm screened sample was collected at the pointmodelled as the centre of the aeromagnetic anomaly. This material was thenconcentrated using a gold pan. The concentrates were dried and delivered to the MSAGroup laboratories in Johannesburg, South Africa. The final micro-probed mineralresults are expected towards the end of January 2009.
K72 represents a hill with outcrops of lateritised breccia and a heavy concentrate ofilmenites which have now been positively identified by MSA as being picro-ilmenitestypical of Group 1 kimberlites.
K71 is located about 1.5 km due west of K72. It lies beneath a large grassed area(visible on aerial-photo images) on the summit of a hill. No lateritised outcrops wereseen.
L6 is located on the west bank of the Cacuilo River where a historical map has indicateda kimberlite pipe location. Due to security consideration relating to the garimpeirosactive there in January 2008, this section was not flown by the low level (25 metres)helicopter borne aeromagnetic survey. However, an area of about 15 hectares has beenextensively mined to the water table by the garimpeiros to an average estimated depthof 10 metres. The rim of this disturbed area has a very high concentration of ilmenites.The material excavated consists of white sand, gravels and yellow clay, suggestive of thesurface in-filled overburden of a buried pipe. A drilling programme is planned hereduring the dry season 2009.
K14. This magnetic anomaly is located within a swampy area within the Cacuilo Riverfloodplain. Abandoned garimpeiro diggings are present on the edge of the swamp.
L6. This magnetic anomaly shows no obvious topographic features.
K50. This is the largest of the aeromagnetic anomalies. It lies on an interfluve areawith no obvious topographic features.
K212. This magnetic anomaly lies beneath a swampy area within the floodplain of theCacuilo River. The presence of garimpeiros prevented access onto this site.
K29 and K30 are two magnetic anomalies within 400m of each other and may representfeeders of one pipe. Access was not possible due to the rugged terrain and prevailingweather conditions.
Alluvial Exploration
The exploration of the west bank Cacuilo River terrace gravels will commence early inthe dry season as access into these wet areas present difficulties during the current wetseason. A 4 km river frontage has been selected for the first phase of exploration.Access tracks along the bank of the river will be constructed along which control pointscan be established for the surveyed base lines cut at right angles to the river. Theseparallel base lines will be spaced at 500 metre intervals along which exploration pits at100 metre intervals will be sited. This will allow for accurate sub-surface geologicalmapping on which the bulk sampling and trial mining programmes will be based.
The planning for the rotary pan construction and transportation to site is well advanced.This diamond recovery plant is scheduled to commence operations within the secondquarter of 2009.
Most of the garimpeiros have departed following an Angolan army operation in August2008. However, it was obvious from this recent visit that many diggers have driftedback into the Cacuilo River valley. This issue is being addressed with Endiama, theAngolan government diamond mining department. The current camp is located some 5km from the river.
A contingent of 21 Manbodji security guards armed with AK47 rifles were despatched tothe Lulo Concession in September 2008 and are now deployed in a defensive role toprotect the exploration activities.
SCHMIDTSDRIFT - SOUTH AFRICA
Production and Sales for the Quarter
Production for the quarter was 910 carats from 219,088 ROM tonnes at an averagegrade of 0.42 carats per hundred tonnes. The production included 15 stones in excess of5 carats in size. This included 5 stones between 10 and 30 carats in size.
During the quarter, 720 carats were sold at an average price of US$472 for a total ofUS$340,003. A total of 694 carats were sold to Representation Investments (Pty) Ltd(previously Unitrade 1266 CC) for US$330,467 and 26 carats were sold to the StateDiamond Trader for US$9,536.
Sale of the Schmidtsdrift operation
In August 2008, the Company entered into an option agreement to sell the Schmidtsdriftoperation to New African Mining AG (NAM).
Under the Option Agreement, NAM paid a non-refundable option fee of US$500,000 foran exclusive option to conclude an agreement for the sale of the Company's interests inthe Schmidtsdrift operation.
On 6 October 2008 the Company signed formal agreements (the agreement) for thesale of the Schmidtsdrift operation. In terms of the agreement, NAM was to acquire allthe Schmidtsdrift assets from Lonrho. This included all plant and equipment on theSchmidtsdrift site, the prospecting right for the Schmidtsdrift property, all rehabilitationdeposits for the Schmidtsdrift property and the 80% shareholding in SchmidtsdriftMining Enterprises (Pty) Ltd (collectively hereafter referred to asthe Schmidtsdriftasset).
The total purchase consideration for the Schmidtsdrift asset was US$11.8 million payablein cash. In addition, NAM was to assume rehabilitation liabilities of US$1.4 million.
On 31 October 2008 NAM paid the required US$500,000 into trust with their lawyers interms of the agreement. The US$500,000 was to be released to the Company on theEffective Date - refer to the Company's 31 August 2008 half year report.
On 14 November 2008 the South African Competition Commission granted theunconditional approval for the sale of the Schmidtsdrift asset. The Effective Date of theSale, in terms of the agreement, is the date of approval by the Competition Commission,namely 14 November 2008.
NAM has instructed their lawyers not to release the US$500,000 held in trust and hasfailed to make any further payments in terms of the agreement. The Company hasserved NAM with notice to remedy their breaches and the agreement will now becancelled. The South African companies are likely to be placed into liquidation and thisprocess has commenced.
KAMFERSDAM - SOUTH AFRICA
In November 2007, the Company agreed to sell certain tailings dumps near Kimberley inSouth Africa and its Kamfersdam new order prospecting rights to Meepo InvestmentConsortium (Pty) Ltd for A$3.7 million (see announcements dated 15 and 28 November2007). De Beers has approved the sale of the tailings dumps which was a condition ofthe transaction. Completion of the sale of the new order prospecting rights will also nowoccur subject to receiving final approval of that transaction from the Department ofMinerals and Energy.
No exploration costs have been incurred by the Company on this asset during thequarter.
GROEN RIVIER - SOUTH AFRICA
The Groen River prospect is an exploration alluvial diamond prospect located inNamaqualand adjacent to an exploration programme conducted by Firestone Diamondsand De Beers.
No exploration costs have been incurred by the Company on this asset during thequarter.
KLIPSPRINGER JOINT VENTURE - SOUTH AFRICA
Background
The Company owns a 20 percent interest in the Mwana Africa Plc (Mwana) operatedKlipspringer mine.
During 2007 a trial mining and bulk sampling exercise was undertaken by Mwana to trya new mining method and test market conditions. The mining method was changed to amore conventional underhand stoping method as opposed to the long hole open stopingmethod used in the initial mine design. The mine was re-engineered with the newmining method resulting in reduced tonnage along with a significant reduction inmanpower and costs but designed to operate in a strong Rand environment. The trialmining programme was operated successfully and in December 2007 a decision wasmade by Mwana to commence commercial production.
Production and Sales for the Quarter
Production for the quarter was 7,579 carats from 15,487 ROM tonnes at an averagegrade of 48.94 carats per hundred tonnes.
During the quarter, 8,681 carats were sold at an average price of US$97 per caratraising a total of US$838,257.
The mine currently employs 210 people including contractors. This is under review giventhe current market conditions.
No costs were incurred by the Company during the quarter.
MILES KENNEDY
DIRECTOR
19 December 2008
Competent Persons Disclosure
The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves has beenprepared by Consulting Geologist Manfred Marx and Consulting Consulting Geophysicist, E.O. Kostlin (inrelation to Angola) and Gerhard du Plessis (in relation to South Africa). Mr Marx and Mr Kostlin are consultantsto the Company and have sufficient experience with the relevant style of mineralisation and type of depositunder consideration and to the activity which they are undertaking to be qualified as a Competent Person asdefined in the 2004 Edition of the 'Australian Code for Reporting of Exploration Results, Mineral Resources andOre Reserves'. Dr du Plessis is a full time employee of the Company and has sufficient experience with therelevant style of mineralisation and type of deposit under consideration and to the activity which he isundertaking to be qualified as a Competent Person as defined in the 2004 Edition of the 'Australian Code forReporting of Exploration Results, Mineral Resources and Ore Reserves'. Each of Mr Marx, Mr Kostlin and Dr duPlessis consents to the inclusion in the report of the matters based on his information in the form and contextin which it appears.
LONRHO ENQUIRIES
LonrhoPlc +44(0)2070165105
DavidLenigas,Executive Chairman +44(0)7881825378
Geoffrey White, Chief Executive Officer +44 (0)7717 307 308
Emmade Borchgrave,ExecutiveDirector +44(0)7867785177
Pelham PR
CharlesVivian +44(0)2077436672, +44(0)7977297903
James MacFarlane +44(0)2077436375, +44(0)7841 672831
Collins Stewart Europe : NOMAD to Lonrho
Hugh Field +44(0)2075238350
