African Diamonds was established to develop diamond mines in Botswana and West Africa. The target is to have a producing mine within three years. Having a balanced portfolio of projects will help reach the objective. The current portfolio of the Company consists of:
JV in Botswana with Lucara to fast track the development of our licences to our goal of large gem stone quality diamond mine;
late stage exploration projects which are known to contain diamonds or diamond indicator minerals; and
early stage high potential concessions, both alluvial and hardrock.
At today’s AGM, African Diamonds (AIM: AFD) chairman John Teeling said the company’s position has greatly improved in recent months. Lucara Diamond Corp’s (TSX-V: LUC) acquisition of De Beers' 70% stake in the AK6 diamond discovery in Orapa, Botswana, has removed the project’s previous uncertainty, Teeling said. Additionally the chairman believes the diamond market has improved substantially in recent months and he anticipates a higher-than-expected price for AK6 diamonds, which are currently being valued in Geneva.
The joint venture partners are set to begin mine development early this year, with full production due to come on stream in the second half of next year. According to African Diamonds its new joint venture partner Lucara, an associate of the US$10 billion Lundin Group, shares its belief in the rapid development of the Orapa discovery. At full production, the mine is expected to produce one million carats of high quality diamonds, including the rare Type II diamonds. The capital cost of phase one is estimated at US$63 million, with operating costs of US$14.50 a tonne.
Under the new Lucara venture, African Diamonds has the right to market its own percentage of the AK6 diamonds. At the AGM, Teeling said that he expects the valuation to be in excess of the US$139 a carat used in the 2009 studies. The world market for diamonds has greatly improved in recent months, with substantial price increases recorded as shortages appeared this augurs well for the pending valuation, Teeling said.
Another benefit of the new Lucara partnership discussed at the AGM, was the company’s newly acquired option to increase its stake in AK6. African Diamonds intends to exercise its option for £5 million and increase its interest from 29% to 40%. John Teeling said the board are examining its options, other than equity-based, to finance the transaction and meet the expected equity contribution to the mine's phase one development.