AfDiamonds plans to raise its stake in AK6

Brian Benza
Staff Writer | Friday April 9, 2010 00:00

The company announced to shareholders on Tuesday that it had undertaken a conditional placing of about 24 million shares at £0,40 a share. The junior diamond miner is planning to increase its stake in the mine to 40 percent, up from its current 29 percent, with Canada's Lucara Diamond Corp. holding the remainder of the shares in the project.

African Diamonds directors will invest $1.5 million (GBP 1 million) for the share placement. The new shares are scheduled to be admitted to London's Alternative Investment Market (AIM) on April 8, 2010.

African Diamonds currently owns 28.3 percent of AK6, with Lucara Diamond owning 70.3 percent and Wati Ventures the remaining 1.4 percent. African Diamonds also has full ownership of the AK8, AK9 and BK5 kimberlite projects in the area.

Lucara Diamond, which recently acquired a majority stake in the AK6 project from Boteti Exploration, last week announced an update on the project's feasibility study.

In a statement, the company said it estimated the project had an indicated resource of just over 51 million tons at an average grade of 22 carats per hundred tons (cpht) and an average modelled diamond value of $194 per carat.

The update also reported an inferred resource of approximately 20 million tons at an average grade of 19 cpht and an average modelled diamond value of $183 per carat.

Lucara's diamond value estimates were based on the recent valuation carried out by Mercury Diamond and reported by Lucara in February 2010. The company is in the process of upgrading a conceptual mining study to a full feasibility study of the project, work which is expected to be completed in May 2010.

Said William Lamb, Lucara's president: 'The completion of the resource update for Boteti is an important step in finalising the feasibility study for AK6.

'The resource tonnage and grade is consistent with our initial assessment of this acquisition opportunity and the improved diamond valuation enhances the robust economics of this project.

'On completion of the feasibility study, Lucara will focus on a rapid transition into project development and production.'

 African Diamonds said development of its AK6 diamond mine is scheduled to start in September after completion of feasibility studies in the next two months. In an interim results statement recently released, Executive Chairman John Teeling said the company was at an advanced stage of completing financing to cover expenditure in 2010 and 2011.

'The pace of development at AK6 is accelerating,' said Teeling.

'The mine will come on stream in 2011 within the cost parameters that we have previously set. Our new partner, Lucara, has the same objectives to bring the mine on stream as quickly and efficiently as possible.

'The mine will come on stream at the perfect time; prices and demand are high and the recent valuation report has also vindicated our view that AK6 will produce high quality, beautiful stones.'

Teeling added that they were particularly mindful of equity dilution, given their low share price. African Diamonds, which is also listed on the London Stock Exchange's AIM, has the right to market its percentage of AK6 output up to 400,  000 carats of diamonds at full production.