Botswana Diamonds plc (BOD) says Okwa Diamonds Pty Ltd, a joint venture with Vast Resources plc (“VAST”) in which it has an initial 10% carried interest, has conditionally agreed to acquire Gem Diamonds Botswana Pty Ltd (GDB), a wholly owned subsidiary of Gem Diamonds Ltd (Gem Diamonds), for a cash consideration of US$4 million. GDB’s primary asset is the fully permitted Ghaghoo diamond mine in central Botswana which is currently under care and maintenance.
BOD has an initial free carried interest of 10% in Okwa Diamonds Pty Ltd (“Okwa”) for the first US$15 million of expenditure by Okwa, which is being funded by VAST (including the acquisition cash consideration). Thereafter, BOD will not be diluted below 2.5% of Okwa. BOD can also earn up to a further 20% interest in Okwa through funding 20% of expenditure. Under the terms of the joint venture with VAST, BOD will be the operator of the Ghaghoo mine until such time as an agreed management team is in place.
The acquisition of GDB is conditional, inter alia, on relevant regulatory and competition authority approvals in Botswana and is expected to complete during the latter part of 2021. BOD said it expects the conditions to be fulfilled and the transaction to complete during Q4 2021. Under the Share Sale Agreement, the consideration is payable in two instalments. The initial payment of US$2 million is to be paid five days prior to the effective date and the second payment by 23 December 2021, unless the initial payment has not already been made, in which case the full amount of US$4 million will be payable 5 five days prior to the effective date.
James Campbell, Managing Director said they have completed thorough due diligence on Ghaghoo by working with their joint venture partner VAST.
“We believe there are significant opportunities to improve Ghaghoo’s operating and financial performance through both the application of new and optimisation of existing technologies along with a strongly recovering diamond market. Gem Diamonds’ advanced underground mine development and the surface infrastructure already in place, means a return to production is potentially possible with an overall objective to target a return to name plate capacity of 1.25 million tonnes yearly,” Campbell said.
For his part, BOD chairman, John Teeling added their JV enables them to acquire an interest in an advanced mining project at minimal initial cost. “Ghaghoo is one of the largest available diamond resources, and is contiguous with our KX36 project which should potentially create synergies between operations. Ghaghoo and KX36 are both located in the Central Kalahari, which is our core area of focus in Botswana. VAST are funding the acquisition cost and initial development capital, and our initial 10% free carry. BOD is the operator for the project and has marketing rights equivalent to our shareholding in Okwa. This is a very good development for BOD.”
Background on Ghaghoo
Ghaghoo is a 10.8 hectare kimberlite pipe located in the Central Kalahari of Botswana and was discovered in 1982 by Falconbridge Mining (later Xstrata) and evaluated in joint venture with De Beers up to 2007. Gem Diamonds acquired Ghaghoo from De Beers and Xstrata in May 2007. Gem Diamonds continued to evaluate the project and a study was undertaken in 2010 to determine the most viable way in which to exploit the deposit. A Mining License was awarded to GDB in 2010. Further work on the kimberlite was deemed appropriate, and Gem Diamonds embarked on underground development to bulk sample the pipe in 2011/2012 through a decline shaft, and this developed into commercial production in 2015.
