African Diamonds Plc, the Botswana-London listed company, assured investors this week about prospects of its mining finds in Orapa area, adding that they are now in constructive negotiations with the world diamond giant, DeBeers.
In a statement issued out on Tuesday, the company said plans for being granted the mining licence have been shifted by another two weeks but indications are that it would be granted.
“Most of the differences have been chiefly resolved and what is left is for us to re-engage so that we commence production by March 2011,” African Diamonds’ Managing Director, James Campbell, told Sunday Standard.
“We have shifted the production date to March 2011 obviously because De Beers still needs to re-engage its staff and the project engineer,” Campbell said.
African Diamonds, which holds 28.38 percent in AK6 otherwise known as Boteti ÔÇö is a joint venture which is made up of De Beers and Wati.
“The Director of Mines of Botswana has informed the parties that retention licence applied for by De Beers was not considered and in his view was not formerly lodged, as mining licence application was still pending.
“This was the advice given by African Diamonds to De Beers prior to the submission of the retention licence,” African Diamonds said.
The latest developments are said to have changed the mood within the joint venture as both parties are now working towards the time table given by the Ministry of Mines, which has said it expects the negations to be completed by Tuesday.
As part of the deal, the parties have agreed that the diamonds from the proposed AK6 will be sold through Diamond Trading Company Botswana (DTC), which is a 50/50 joint venture between Botswana government and De Beers.
“Of great significance is the strong encouragement by the Botswana government to the three parties involved in AK6 discovery to complete the mining licence negotiations by September 30, 2008, so that a mining licence can be awarded,” it said in a statement.
John Teeling, chairman of African Diamonds, said “significant progress has been made towards agreement on the terms of the mining licence for AK6 diamond discovery in Orapa.
“Earlier attempts by De Beers to defer the project were rejected by the Botswana government. Difficulties with the marketing of the diamonds have been ironed out,” Teeling said.
However, De Beers Managing Director, Gareth Penny, said the discussions are now focused on mitigating the impact of the power shortage which has hit the southern African region.
“The discussions have principally focused on mitigating the impact of regional power shortage, which presents a challenge, particularly with regard to the development timelines for AK6 project.
“The talks have been constructive and have aimed to find a way to provide the project with a secure and cost effective supply, while avoiding undue delay,” De Beers said.
De Beers had wanted to defer the development of the project and cited among other things the crippling power shortage within the southern African region. That prompted African Diamonds to take the matter to court with a view of forcing De Beers to commit itself to the development or exit the joint partnership. However, African Diamonds lost the urgent application at the Lobatse High but as a result of the latest developments African Diamonds said it has put the case “on hold”.
“Government has acknowledged the gravity of the power supply issue and is investigating solutions to address the challenge and ensure that the project has a sustainable supply of power. We are appreciative of the positive and meaningful engagement that government has shown throughout this process,” Penny added.
The proposed mine is 15 kilometers south-east of the Letlhakane Village and is expected to produce its first gem diamonds by 2009.
The mine is expected to produce one of the best diamonds in the country similar to that of Letlhakane Mine both in terms of production per carat and the quality.
The mine is expected to produce 600, 000 (gem quality) carats in the first year, and thereafter production will pickup to the range of 1.2 millionÔÇôto-1.5 million carats per annum.
AK 6 is a joint project between African Diamonds and De Beers, the South African-based diamond giant, which owns 51 percent of the project and can acquire up to 70 percent equity by funding the exploration work and bankable study.
The exploration exercise was carried out by De Beers following the joint venture. Through the use of its new technology, it was 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.
According to current estimates, the mine is expected to produce very good quality diamonds of about US $ 150 per carat.
The mine will initially be an openÔÇôcast with a life-span of between 12 and 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.