Diamond Mining Companies - A Sparkling New Year For DiamonEx
The Christmas jaunt to South Africa is looming large on the horizon. As I was telling Erin, the prospect fills me with both trepidation and excitement. In spite of my brother’s attack earlier this year and news of another friend hijacked this weekend, South Africa will always be home. My great uncle used to say, "If you grew up in Africa it is in your blood. There is nothing romantic about this. It’s a fact."
One Brisbane-based diamond exploration company, DiamonEx, certainly has reason to feel the excitement of Africa. This Aussie explorer is expecting to produce 330,000 carats next year, and for the next ten years, from its Lerala project in Eastern Botswana. The Tswapong area which is adjacent to South Africa border and where Lerala is found has a confirmed resource of 3.7 million carats!
Not bad going!
Diamond mining companies: Botswana
muscles in on the action
There are worse places in the world to mine diamonds! Botswana happens to be the world’s biggest diamond producer by value ( 30% of the world's diamonds by at over US$4.5 billion!). Most of this has been done through Debswana, a 50/50 joint venture with De Beers and Botswana’s government. But other explorers have been keen to muscle in on the action.
DiamonEx is one of them. It says that construction of the Lerala project is nearing completion (before this year is out!) and that plant commissioning will start early next year. So far advanced is construction that initial mining for diamondiferous ore is already underway.
Full production is expected by the end of 2008 and that will be helped by highly advanced special equipment in the form of a High Pressure Grinding Roller (HPGR) Crusher. Come February, this highly specialised and advanced equipment will be helping to increase recoveries at a lower cost.
Since we are talking costs, the other good thing about Lerala is low capex — which should come in at around US$22m reckons MD Dan O’Neill. Infrastructure is good with a tarred main road nearby. A pipeline from the Limpopo is under construction and power will come from generators — no need to rely on the state power provider. Probably not a bad thing in this neck of the woods! Then there is a village close by to provide the workforce so there won’t be the need to provide accommodation!
Diamond mining companies: did
DeBeers get it wrong?
True to gung-ho Aussie form, DiamonEx is edging in on what has traditionally been De Beers territory. The Lerala kimberlites were first discovered by De Beers in 1991 and 1992. But De Beers found them to be uneconomical.
So what’s different now, you might well ask! It seems that there were several flaws in the De Beers mining trial which took place between 1997 and 2001. According to DiamonEx these were "sustained plant inefficiencies", "unquantified theft" and "inaccurate assumptions about the kimberlites being mined".
So, this time it would seem that De Beers got it wrong. Further DiamonEx trials have revealed that Lerala is a great resource. As the saying goes - one man’s bad news is another’s good news. There’s that 330,000 carats of glittering production expected for the next decade and the first parcel of diamonds expected for sale in March 2008. So for DiamonEx the Christmas angels seem to be onside. After that, Mr O’Neill reckons, they’ll be able to extend the life of the mine by digging deeper.
With all this in mind there is little wonder that DiamonEx has secured the backing of WWW International Diamond Consultants. That should bring some glittering magic to the company’s marketing campaign.
Initially funded by company reserves, management has also clearly felt the need to up the ante somewhat in a bid to raise its profile and funds for growth. So now DiamonEx is quoted in three countries. In Botswana and Australia, and most recently on the London Alternative Investment Market (AIM)!
MD Dan O’Neill believes that rough diamonds prices are set for growth. It is the same old story... demand from China, India and the Middle East, helped along by a shortfall as stockpiles are eroded and mine output declines.
If the diamond bugs are to be believed, rough diamonds could rise in price by 50% over the next decade. Good news for Lerala!
Also good news is the vote of confidence from directors. Three of them, Mr O’Neill, Paul Crawford and Gregory King, are among the biggest shareholders. Jointly they own 13.95% in the business. Other big shareholders are JP Morgan (over 9%), Babcock & Brown Infrastructure, Barclays Botswana and HSBC Australia.
Diamond mining companies: more stars
twinkling in the New Year sky
Lerala may be the key focus of DiamonEx at the moment, but it has clear plans for expansion. The most recent announcement is its foray into the US where it has taken an option to acquire mining rights for a kimberlite resource in Northern Colorado. Potentially a bigger project than Lerala and one that reflects the move to expand globally, says Mr O’Neill!
But that is not all. It remains an active explorer in Botswana and neighbouring countries (though Mr O’Neill remains a bit tight lipped)! Several targets have been identified in the area which surrounds the Lerala project. The Tuli belt which extends north and east, and the Jwaneng mine in the south east. In 2005 this mine produced a whopping 15.6 million carats!
This much we know: if you are going to mine diamonds, Botswana is the best place in the world to be. John Teeling, the chief of another diamond explorer, African Diamond, summed it up recently. "Botswana", he says, "is the best address for diamond exploration in the world".
Keep digging,
Erin and Isabel
First published on December 7th, 2007
Get the day’s big financial news in one easy hit! Fleet Street Daily gives you the financial stories that matter. If you’re an investor, you’ll know the importance of staying on top of the news. Every day brings new events, and those events are what move the markets. With Fleet Street Daily you’re one step ahead of the crowd. Because we don’t just tell you what’s happened — we tell you what it means and what you should do about it. Fleet Street Daily is a lively, relevant and entertaining resource designed to help you make smarter investment decisions. Best of all, it’s 100% FREE! So sign up today!