strategic analysis

The following is a summary of results to date from information that has been released by Lom and from private industry sources. The aim is to provide an basic business model to provide a greater understanding for investors to understand Lulo. All work and especially business analysis has been conducted by myself. For brevity I wont provide sources but if required I will publish them on HC.

The most significant announcement to date is that Lom has is now conducting 'trial mining' at Lulo,(Lom, 26/10/10) this indicates that Lom has found
a significant quantity of diamonds which may lead to a commercial deposit.

In theory Lom should have to apply for a mining licence from Endiama before it could begin trial mining. Trial mining usually only occurs after only occurs after a series of exploration activities have taken place starts with small sample sized testing progressing to larger scale exploration activities after successful results from each round has occurred.

We know from public announcements by Lom that the Angolan authorities have been showing an increasing interst in Lom's activities at Lulo. The initial Angolan interest was the arrival of Endiama staff at Lulo after the commencement
of Lom's exploration activity at Lulo. Heightened Angolan interest was demonstrated by the by the arrival of the Diamond Police (a branch of the Presidential Guard),
unkown but could indicate that Endiama were reviewoing the progress of Lom's exploration program and were happy enough
to allow Lom to proceed to the next round of the exploration program.

Friends working in the diamond industry have indicated that it would normally take about 6 weeks for Lom to complete the initial phase of exploration per their published reports for a 5000 tonne sample. Based on these results,Lom could be expected to have a 'feasability study' by December or early in the new calendar year.

Friends feel that an initial budget of about $4m would be appropriate for the construction of the necessary
infrastrcture to support exploration at Lulo. The time frame required to establish a small plant is in the vicinity of 1 year and the time required to build a full scale plant is about 2 years. An interesting point is that because of the weathered nature of the kimberlites, any ore from a kimberlite e.g. could in the ealry time periods, be processed using the alluvials processing plant. This would provide significant savings in terms of inital capital costs.

A likely tool for the extraction of the diamond ore (alluvial and weathered kimberlite) is the Gekko Pressure Jig (http://www.gekkos.com/pages.php?page=70&lang=3)
This device is produced in Ballarat and has been successfully used at Ellendale and Williamson diamond mines with great success,providng a simple and low cost for extracting the diamond bearing ores.

Endiama has apparently requested that Lom install an X-Ray Flow sorter, apparently thesetrade for about $150k for a second hand one in South Africa. If this was installed at Lulo, it would greatly improve the throughput of the diamond sorting operations and increase the recovery rate of the diamonds, by eliminating the hand sorting of diamonds.