Kimberley Diamonds Limited (KDL) says it has executed a binding Heads of Agreement to acquire 100% of the equity in Mantle Diamonds Limited, including Mantle’s wholly-owned Lerala Diamond Mine in Botswana.
Under the terms of the agreement, the company will issue a total of 13,566,317 new ordinary KDL shares to Mantle shareholders with the agreement being conditional upon KDL undertaking final due diligence and Mantle undertaking a capital restructuring.
The transaction could be concluded by the end of October 2013 and Kimberley Chairman, Alex Alexander said the acquisition provides a strong foundation for the company’s growth ambitions, including its objective to become a world class diamond producer –with multiple operating mines, supported by longer term life extension opportunities.
“We aim to consistently acquire projects with promising prospects at attractive valuations, with significant upside potential that can be realised quickly and cost-effectively. Lerala has all of these qualities and represents an important incremental step in the company’s growth,” revealed Alexander.
Lerala is situated 50km west of the Martin’s Drift Border Post with South Africa in east Botswana and the mine comprises a cluster of five diamondiferous kimberlite pipes (K2-K6) totaling 6.66 hectares in size, together with a 230 tonnes per hour processing and recovery facility currently on care and maintenance.
The kimberlites were discovered by De Beers in the early 1990s and subjected to limited mining by DiamonEx Ltd in 2008. Most recently, Mantle operated the mine between February and July 2012, producing 73,403 carats from 0.26Mt at 28.2 carats per hundred tonnes (cpht).
An independent valuation performed by WWW International Diamond Consultant Ltd in 2005 returned an average diamond price of US$ 57/ct for K3, K5 & K6 and US$ 45/ct for K2 –using a cut-off of +1mm. Lerala has a 15-year fully-permitted mining license covering an area of 21.86 km².
The estimated remaining total Indicated Resource at Lerala is12.18Mt at 25.52 cpht (Table 1) including Probable Reserves of 8.38Mt at 29.68 cpht. “The KDL experienced diamond team view the Lerala operation and its well-established plant and resource as a unique opportunity in this well-known diamond mining jurisdiction,” KDL Managing Director, Lee-Anne de Bruin added.
Prior to mining, Mantle undertook a substantial refurbishment of the plant and equipment, focusing on critical engineering modifications to optimise processing and security. To date, DiamonEx and Mantle have together invested in excess of US$25 million in establishing the plant, mine and infrastructure at Lerala.
Lerala stands ready to be re-commissioned following the execution of engineering improvements designed to further enhance recovery and reduce operating costs. Upgrades that will receive priority subsequent to the completion of the transaction include purchase of a new diamond sorter to replace out-dated technology and improve recovery, purchase of an optical waste sorter to improve the throughput capacity of the plant and replacement of the diesel power generators with a link to Botswana’s national power grid.
The improvements, along with required working capital to restart mining, are estimated to be US$10 million. Management is currently reviewing options to fund the restarting costs. KDL aims to restart mining at Lerala in 2014 and is targeting a production rate of >400,000 carats per year.
Upon completion of the transaction, KDL will additionally acquire Mantle’s portfolio of diamond exploration projects in Finland and Canada.
In Finland, Mantle holds 34% of the diamondiferous Lahtojoki kimberlite through a joint-venture (JV) agreement with Firestone Diamonds plc. The JV provides Mantle with the ability to earn 70% in the project through further exploration and/or the completion of a feasibility study.
In Canada, Mantle, through its wholly owned subsidiary Mantle Diamonds Canada Inc, holds interests in a range of brownfields exploration projects covering a total of 136,000 ha across the known diamond producing Slave and Superior Cratons. The projects lie in close proximity (< 30km) to the world- class Ekati (Dominion), Diavik (Rio Tinto) and Victor (De Beers) diamond mines.
KDL’s recently acquired subsidiary, eDiamond Belgium BVBA provides an effective marketing and sales distribution channel for the company’s diamond goods. Additional carats from Lerala’s production will further supplement Ellendale’s existing production to provide the Company with improved pricing control and volume through thisfacility.
The company currently markets an average 85,000 carats per annum of Ellendale’s production through the eDiamond platform. Lerala’s production will increase the annual throughput through the marketing platform to approximately 500,000 carats per year, generating significant synergies.
