Newfield Resources

Developing a generational diamond asset in Sierra Leone

 


 

Australian exploration firm Newfield Resources gained ownership of the Tongo Mine Development in Eastern Sierra Leone through the acquisition of AIM-listed Stellar Diamonds in April 2018. Stellar had been active in West Africa for several years but was struggling to raise the capital required to get the diamond mining project off the ground, in a difficult market for junior resources companies. These conditions compelled CEO Karl Smithson to approach Newfield, who were active in Sierra Leone with another project, with a merger proposition. A merger between Newfield and Stellar was subsequently accepted via a UK Court sanctioned scheme of arrangement and with it Newfield shareholders invested approximately US$25 million to fund development at Tongo.  The majority of the Stellar technical team also migrated across to Newfield to provide continuity to the project on the ground 

 

The transaction was a win-win for both Stellar and Newfield shareholders and the funding Newfield brought to the project has enabled Tongo to advance rapidly to the mine development phase,” says Smithson – now an executive director of Newfield. 

 

During the last 16 months or so since the acquisition of Stellar, Newfield has completed an independent Front End Engineering Design (FEED) study for Tongo, which included the design of a detailed underground mine, and increased the mine resource by 64% through further drilling and exploration work. 

 

Newfield also looked into the process design for the project, initially deciding on the relocation and refurbishment of a 50 tonnes per hour (tph) DMS processing plant. However, based on the future production profile of the mine, the company recently made the decision to install a plant capacity of 100tph and is working closely with South Africabased engineering consultants METC in terms of the final design of the plant.   

 

We got through all of that in the last 12 months, which brings us to now. In July, the board of Newfield ratified the project and made an investment decision to bring the funding in to construct the mine. 

 

Growing the resource 

 

While the arrival at an investment decision resembles a major milestone for Newfield, Smithson believes the most pleasing development of the last year has been the expansion of the Tongo resource from 4.5 million carats (Mcts) to 7.4 Mcts. 

 

Based on the other deposits in the licence area [only four of 11 kimberlites have been drilled to resource level] and the possibility of going deeper on the existing deposits within the mine life, we believe that there is potential to double the current resource,” reveals Smithson.  

 

“But we need to prove that through further drilling, geological work and evaluation. That will be a programme we will tackle some time in the future. 

 

For now, the Tongo project has 7.4 Mcts in resource, of which 1.1 Mcts has been declared as reserve for an eight year life of mine (LOM). However, Newfield intends to convert much of this resource into reserve as it progresses the project and therefore sees a much longer LOM than currently stated in official ASX documentation. 

 

Notwithstanding that, there is additional potential from the rest of the concession, where we have orebodies not yet in resourceWe know they are diamondiferous and we know they hold good grade too 

 

Bringing those into the future mine plan will be part of our strategy. If we are able to achieve this, we are potentially looking at around 20 to 30 years LOM at Tongo,” Smithson projects. In fact, Newfield has already started drilling on a fifth kimberlite and should bring that into resource within the next six to nine months. 

 

Long-term stakeholders 

 

Smithson and his team have been active in Sierra Leone for approximately 17 years now, and in that time they have witnessed the rise and fall of different governments and presidents against a backdrop of challenging conditions – from the country’s emergence out of civil war in 2002 to the Ebola crisis of 2014/15. 

 

However, this team of geologists remained in the Sierra Leone throughout the bouts of turmoil and continued to spend money on exploration, while building strong relationships with the government and the Ministry of Mines & Mineral Resources. 

 

“We get a lot of credibility for having been there as long as we have and done exploration for so long. You have to do the hard miles and if you pay your dues in terms of taxes and community support you get the respect and support that you deserve, and we certainly have.” 

 

Sierra Leone remains fairly strapped for cash and is still reliant on donor aid in the form of loans from the IMF and other international banks, but the situation is presently stable and the country is one of the better investment jurisdictions on the continent according to Smithson. 

 

Sierra Leone is a former UK colony and follows British law and language with a parliamentary political system. So, there are certain similarities in terms of constitutional structures that you would find in the UK. 

 

The Mining Code was passed by Parliament in 2009 and is currently being updated with sponsorship from the World Bank. “Soon, we’ll have a robust mining and fiscal regime that we can understand and operate under easily 

 

“Also, the Tongo concession area is safe and we don’t have a need for armed security on-site. We largely look after ourselves and have around 20 expats there now with about 150 locals that we’re employing. 

 

Socially responsible mine development 

 

Local employment is a key part of Newfield’s corporate social responsibility (CSR) strategy and is hugely welcomed by national citizens in a country where unemployment is rife, particularly in the communities surrounding the Tongo mine. 

 

“We have already created 150 jobs and will be creating between 700 and 800 further jobs during the next phases of the mine development. We will provide lots of opportunities, particularly in the local communities, to get proper contracted employment with all the right insurances in place,” says Smithson. 

 

“We are going to provide a significant uplift when considering the statistics, which reveal that every one person employed supports 10 more in their extended family. It’s going to have a massive impact. 

 

Beyond this, there is also a legal requirement – stipulated in the Mining Charter – for Newfield to have a community development agreement (CDA) in place at the Tongo project. This legal document binds the company to make certain expenditures in the local communities throughout the development of the mine and during the LOM. 

 

Through the CDA, the local communities form a committee of around 20 people and they decide what programmes need to be prioritised to bring most benefit to the communities. Whether this is the construction of water wells or even schools, Newfield helps facilitate these vital improvements. 

 

“The CDA programmes help locals feel engaged with the company and the development of their own community. That’s a very good thing, and through that forum we maintain harmonious relationships.” 

 

Coming full circle 

 

Speaking on behalf of the entire Newfield team, Smithson reveals that everyone is thrilled about the progress made at the Tongo Mine Development over the past year and a half since the acquisition of Stellar.  

 

“As a geologist, it’s not very often one can make a discovery, evaluate that discovery and bring it into production. We’ve seen the whole cycle and that’s extremely rewarding for ourselves.

 

“This time next year Newfield will be a company that is in production. Everyone’s very happy and shareholders are extremely supportive, which is shown by the recent bond raises of $30 million equivalent for the construction funds.” 

 

However, the current mine plan is just the tip of the iceberg for the company, given the significant opportunities to grow the resource at Tongo, which has been labelled a ‘generational asset’ by Newfield – being that is could sustain diamond production for up to 30 years.