Interim results out today – 31 March 2008 – show an increased loss over the comparable period for African Diamonds, although the rise is related entirely to the continuing write-down of the value of their investment in West African Diamonds, which had a disproportionate impact on an otherwise unremarkable loss of just £300,000.
Chairman John Teeling reported on the current state of the company, and outlined ongoing activities in Botswana, West Africa and the DRC.
AFD’s wholly owned properties in the Kedia region of Botswana have shown evidence of kimberlite indicator minerals, and the company have conducted preliminary analysis before undertaking fieldwork in the near future.
In the DRC, where AFD have a 35.42% share in Bugeco SA, $10 million has been previously spent by De Beers and some 9 new diamondiferous kimberlite discoveries have been made. De Beers have now withdrawn from their joint venture with Bugeco, leaving them with 100% ownership of the licences in Eastern Kasai province.
In Sierra Leone and Guinea, where AFD own 7.3% of West African Diamonds, progress has been made towards getting the Bomboko alluvial mine on-stream by April, whils drilling and sampling is planned at Droujba.
But Botswana is the main focus of operations, where the AFD/De Beers/Wati joint venture is developing the AK6 kimberlite. Under the terms of the mining licence, AK6 must be producing diamonds by April 2011 – a target date which is presenting difficulties due to the current mining plan, which calls for capital expenditure of $260 million. In his introduction to the results statement, whilst acknowledging the benefit of having De Beers as a partner, Teeling suggests that the objectives of the two companies no longer coincide and offers an alternative mining plan which would require funding of only $40 million initially, to produce 450,000 carats per year from a scalable development. Construction could commence in 2009 leading to diamond production by the end of 2010. Operating costs of $10 per tonne would make this, said Teeling, “viable in the present hostile climate.”
And hostile it is, according to Dr Teeling. Credit restrictions and forced sales have badly affected the price of rough diamonds, resulting in reduced value inventories and a congested pipeline. But, says Teeling, “…diamond fundamentals are sound. The supply gap is not going away. By 2011, according to most commentators, the price of diamonds should begin to rise as fundamental forces once more exert themselves.”