Gem Diamonds has announced the termination of talks with Lucara Diamonds over a possible merger that could have culminated in the two Southern Africa-focused companies creating a billion dollar mining house.
In a statement released this week, Gem Diamonds - which was recently licensed to mine in the CKGR - confirmed the termination of the negotiations but did not elaborate.
"Further to the announcement on 21 March 2011, no agreement has been reached ... with Lucara Diamond Corp and these discussions are no longer ongoing," said the company. Lucara, like Gem, has operations in Lesotho and Botswana.
If the deal had gone through, it would have seen AK6 Mine in Boteti and the soon-to-be-constructed Gope Mine in the CKGR come under the same ownership. "As stated in the company's full year results announcement on 15 March 2011, Gem Diamonds continues to monitor potential value-enhancing opportunities outside of its current asset portfolio," added Gem.Apart from Gope, Gem operates Letseng Mine in Lesotho and the Ellendale project in Australia while Lucara has a diamond project adjacent to Letseng called Mothae as well as operations in Botswana and Namibia.
According to earlier reports, Gem and Lucara - which are valued at about $606 million and $412 million respectively - have been in negotiations since February and had signed a confidentiality accord. Lucara, which took over AK6 Mine from African Diamonds, is currently constructing the mine with production set for early 2012. AK6 is expected to have a throughput of up to three million tonnes a year in the first phase of development, instead of the previously anticipated
Lucara, which has also said it had raised P400 million ($60 million) for the financing of AK6 Mine in Boteti and Mothae Mine in Lesotho, says the Botswana diamond mine is expected to yield 400,000 carats of high-quality rough diamonds in its first year.
On the other hand, Gem Diamonds has unveiled a P550 million ($85m) cash chest for the construction of the first phase of its Gope underground mining project in the CKGR, which will add fresh production to the London Stock Exchange-listed outfit by 2013.
Gem has $130m of cash and expects more to be coming in because of the strong recovery in rough diamond prices and demand. After putting the Gope project on the backburner in 2009 as a cost-cutting measure and to stay afloat in the face of the global economic crisis, the company was awarded a 25-year mining licence by the government two months ago.
Gem Diamonds envisages a phased approach to the construction of the mine, with an underground mine planned to improve the company's knowledge of the ore body, diamond valuation and metallurgical characteristics.
The lifespan of Gope Mine is currently estimated to be in excess of 30 years. The deposit is estimated to possess 20 million carats of diamonds worth more than $3 billion and is expected to produce up to one million carats a year when fully operational.