Isabel’s other half works in the film industry designing and decorating sets for blockbusters. Now every industry has its own particular ‘lingo’. Isabel has learnt that if a film ‘looks good’ this doesn’t mean that it just has the right ambience. It also means there have been no mistakes. Any designer worth an Oscar will know that you simply can’t have an art deco light fitting in an Elizabethan drama. Most people won’t notice but if somebody does, the film loses credibility.
This is where the Hollywood blockbuster Blood Diamond falls a little short. The film, of course, is set in Sierra Leone, in the 1990s. It portrays how the international trade in ‘conflict’ diamonds fuelled one of Africa’s bloodiest wars. Leonardo DiCaprio, as lead, manages to pull off the South African accent. But frankly he looks a little too twentieth-century-trendy for a diamond smuggling mercenary! And Isabel should know. She has crossed paths with a few!
Still, it is a reasonable thriller. If nothing else it highlights the importance of knowing where your diamond comes from. Well at least that was the Hollywood marketing line.
Conflict diamonds out — Kimberley Process in
The Sierra Leone government, however, is not convinced. It says the film has put people off buying diamonds from Sierra Leone. A major source of foreign exchange since the war officially ended in 2002.
Still while one should not believe everything Hollywood says, governments are not to be trusted either. Sierra Leone may have gone some way to cleaning up its image. But smuggling is still widespread. Some 90% of production still comes from alluvial deposits worked by both legal and illicit artisanal diggers.
Don’t despair. There’s more good news than bad. The West African nation is now actively involved in the Kimberley Process. This is an international certification scheme established in 2003 to end the trade in ‘conflict diamonds’. Effectively the process creates a paper trail to prove the origin of rough diamonds. Better still, diamond production in compliance with the Kimberley scheme is growing and with it the number of junior mining and exploration companies.
Hardly a surprise! Blood may have been spilt on this land but beneath lies diamondiferous Kimberlite pipes and dykes which have yielded some of the world’s most impressive sparklers. Kimberlite rock is best known for sometimes containing diamonds. Indeed, the ‘Star of Sierra Leone’ a staggering 970 carats before it was cut, was found here! So with new found political stability in Sierra Leone, the World Bank has started lending again and investors keen for a frontier flutter have their eyes peeled.
Target can produce 1000 carats a month
One company that might be of interest is Target Resources. They are an AIM-listed junior which listed in July last year. Now like most miners the share price hasn’t exactly hit the target, losing half its value since it listed. But recent news that the prestigious jeweller Tiffany would throw some $5 million into its coffers bounced it up around 13%.
What makes Target interesting is that, unlike many other junior diamond explorers, it is actually producing diamonds. And it is producing them ethically. Very important in places like Sierra Leone.
Target currently has 17.25 square kilometres under mining leases in Kono, which is believed to be the richest diamond and gold mining region in the country. Better still, because it is an alluvial miner, diamonds can be produced at relatively low cost and minimal capital expenditure. What’s more, alluvial diamond deposits are said to have a gem content of 80% or more!
In the Kono district Target has three operations, Sandoh, Nimiyama and Nimikoro. At the Sandoh 200 acre site, large stones of five to ten carats are regularly discovered. In fact in the May and June of 2005 production exceeded 1000 carats a month. In the next two years Target has plans to start mining an area covered by its second 1800 acre licence which it acquired recently.
At the other two sites, Nimiyama and Nimikoro, Target has also recently acquired licences for over 1000 acres. Another highlight was the sale of a parcel of 460.10 carats through the Antwerp diamond exchange for $350,030 back in February. Average price was $761 per carat.
Tiffany impressed by social responsibility
Music to Tiffany’s ears! And it has certainly had its ears to the ground. "We’ve followed Target for some time and are impressed by its evident commitment to high corporate social responsibility and environmental standards," crooned Tiffany’s CFO James Fernandez. "And production looks encouraging too!"
Why else would Tiffany get involved? Clearly the relationship is a mutually beneficial one. Tiffany invests the dosh and for that privilege Target offers the jeweller right of first refusal on its output at the market price. It will then sell on the stones that it does not wish to keep for its own use. There will be more on the rationale behind Tiffany’s move later in the month.
So what do we think of all of this? Well we think junior miners and explorers in Africa are an interesting bet. Yes they are risky, yes they are volatile but African countries are becoming more stable and the run up in commodities prices is showing no sign of abating. Sierra Leone is one of those countries and its resources, if the myth is to be believed, are the stuff of legends. That’s got to be good news for investors with a penchant for blazing the wild frontier and Target Resources may just be ripe for the picking.
Happy digging...
Erin and Isabel
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