African Diamonds and Botswana government are expected to resume crucial talks this week aimed at the later having to explore the possibility of taking an equity stake and the marketing role of diamonds to be produced at its AK6 proposed mine.
“In terms of our mining applicationÔÇö- especially when it involves the mining of diamonds. After that, the minister will issue the mining licence,” Kgomotso Abi, a senior official at the Department of Mines stated on Friday. “Government must negotiate an equity stake and the marketing of the diamonds.”
Last September, African Diamonds together with the world largest diamond producer, De Beers, filed for a mining licence of the AK6, which was expected to be processed within six months.
And on Thursday last week, African Diamonds posted a note on its website saying that it “has received a letter from the Ministry of Minerals, Energy and Water Resources of the government of the Republic of Botswana stating that the Mining Licence Application for AK6 meets the requirements of section 51 of the Mines and Minerals Act to proceed with negotiations regarding the issue of the mining licence”.
The Department of Mines told The Sunday Standard on Friday that all information that they were supplied with by the company, including environmental impact assessment and the mining plan, were of the highest quality but they wanted to find out as to whether the promoters are prepared to give the government an equity stake.
“We are delighted with this important step in the process of the issuing of the AK6 Mining Licence. We believe that we have the full backing of De Beers and government of Botswana to move this world class project towards production and look forward to concluding negotiations as soon as possible,” John Teeling, chairman of African Diamonds said.
“I do not think that the negotiations will take long. It is just a question of equity stake and the marketing,” Abi said.
The proposed mine lies 15 kilometers south-east of the Letlhakane village and is expected to produce its first gem diamonds by end of 2009.
“We are looking at something as big as Letlhakane mine both in terms of production per carat and the quality,” said Teeling. “And what we are going to do is not complicated; it is a question of building a quarry,” Chairman of African Diamonds,” Teeling has said.
African Diamonds has said it is hoping that the mine will be operational by end of 2009 – thus taking into account the 14-month period needed for mine construction.
“We are looking at producing 600, 000 (gem quality) carats in the first year, and thereafter production will pickup to the range of 1.2 million ÔÇôto- 1.5 million carats per annum,” Teeling said.
AK 6 is a joint project between African Diamonds and De Beers, with the giant diamond producing company owning 51 percent of the project and can acquire up to 70 percent equity by funding the exploration work and bankable study.
The resource discovered was initially in the hands of De Beers but was not mined because then it was thought to be on lower grade until it eventually fell into the hands of African Diamonds.
The exploration exercise carried out by De Beers following the joint venture through the use of its new technology found out that the kimberliteÔÇöthe volcanic rock deposit containing diamonds ÔÇô was much larger than originally thought.
It also contained the rare nitrogen free gemstone deposits found in 45- carat Hope diamond in the Smithsonian in New York and Cullinan diamonds which are part of the Crown Jewels.
“These will be very good quality diamonds and, according to our valuation, we are talking of diamonds of US $ 150 per carat,” he added.
The mine will initially be an open cast with a life-span of between 12 ÔÇôand- 15 years at the depth of about 200 meters. It also has a provision for an underground which will stretch its life-span to possibly 30 years.
“This is a huge resource and we expected it to last at least a generation,” Teeling added.
Further, he said AK8 ÔÇô a five hectares pipe ÔÇô is on the right track but needs to be supported by satellites mine but he is pinning his hope on PL 36 which has some confirmed resource.
“At AK8 we are looking at a mine which will be supported by satellite operations,” he said, adding that “we have drilled at Serowe and found nothing.”
“We are only pinning our hopes on PL 36, which is 22 hectares squared in Orapa and it has ten confirmed carats at the time of De Beers’ exploration,” Teeling said.
As part of the moves to develop potential resources which are still under exploration such as BK6, BK3 and BK7 which have the same geological make-up as AK6 and AK 8 the Botswana Stock Exchange and London Stock Exchange listed company said it is looking up to raise money from Botswana.
“African Diamond is looking up to raise loans in Botswana which will have to be converted into shares. This is not because I am nice to Botswana; it makes a lot of commercial sense.
“All over the world, Botswana is known for diamonds and they understand diamond mining much better. I would expect a lot of finance would be raised in Botswana and I would prefer to have locals,” Teeling added.