Botswana Diamonds (BOD), the BSE/AIM listed diamond exploration company, is looking to tie-up a deal with Alrosa, the Russian mining outfit, to form a partnership that will change the landscape of diamond exploration in the country and as part of the move to team up with experienced companies to maximise value addition for its shareholders.
The envisaged 50/50 deal will see the diamond major teaming up with BOD to scour for diamonds beginning with the Letlhakane area and then parts of Botswana using the latest computer technology.
“They (Alrosa) believe they have the right technology to find kimberlites,”John Teeling, Executive Chairman of Botswana Diamonds, said this week after the Resources Conference. BOD has been working on the Orapa Cluster and has supplied the required data to Alrosa for analysis.
“The focus is on the JV and to get Alrosa in. They are a bigger company,” he added. The anticipated partnership with the Russian state-owned company will allow BOD to use technology ‘never used before in the region’”, according to Teeling, who describes Botswana as the Switzerland of Africa.
“We approached them and the timing was right. They have not been outside the world a lot; they were only in Angola.”
The new BOD partner, the company said, has the technology that allows the identification of kimberlites under 80/100 metres of sand, salt and or basalt. The partners, as part of the Technical Cooperation Agreement (TCA), have identified initial areas of interest in the Orapa area. Thirteen targets have been identified and twelve licenses applied for.
Alrosa has developed and refined exploration techniques, which they have successfully used to discover buried kimberlitic pipes. Applying these techniques and using a geological data base compiled by Botswana Diamonds’ geologists has identified 13 sites in the area northeast of the Orapa diamond cluster.
The Technical Agreement involves the use of exploration approaches developed by Alrosa to identify kimberlite bodies lying below the Kgalagadi sand and basalt cover. BOD said 13 specific sites have been identified in the northeast area of Botswana, which Botswana Diamonds and the company’s partner believe are highly prospective for diamondiferous kimberlites.
The targets range from a 3sq km to a 50sq km area. Once permission to explore in these areas has been obtained, a US$1 million exploration programme will commence, which may involve all or some of the following: gravity, magnetic, electromagnetic surveys, systematic soil sampling and eventually drilling. Botswana Diamonds said it has budgeted to drill 40 holes.
“Work is expected to begin on the ground in Q3 2013. The original 2012 TCA has been extended to cover the Gope and Jwaneng areas and will last until 30th June 2014,” BOD said in a note to shareholders.
If the agreement is signed, it will change the landscape of diamond exploration and mining in the country where De Beers has been a dominant player for a long time. De Beers, which has a 50/50 partnership with Botswana government, has over the years been losing its title as a major rough diamond producer. De Beers’ carats output trails that of Alrosa as it produced 27 million carats in 2012, compared to 34 million carats produced by the Russian company. Its production accounted for 27 percent of global rough diamond production by volume.
The better quality diamonds are still found in Botswana which, based on value, came out on top with US $ 2.59 billion compared to US $ 2.38 billion from Russia in 2010.
Alrosa’s aggregate diamond sales in 2012 reached US$4.61 billion, or 3.5 percent above the 2011 sales volume, while rough diamond sales amounted to US$4.45 billion.
De Beers has also lost market share of the 1990s when it controlled 90 percent of the diamond market, but since the coming of new players and mining destinations, including Alrosa, Zimbabwe and Canada, the company controls 38 percent of the market.
All together Alrosa has 17 hard rock mines.
Teeling, whose team is credited with discovering AK6, now Karowe Mine owned by Lucara Diamond, said he is bullish the Russians will sign the agreement because Botswana is incredible and rare country to find diamonds.
He described Karowe as a good edition to Botswana, which is still a dominant player in the global diamond market. “That is what we want to be. We aspire to be the next AK6”.
“The directors of BOD believe that there are more diamond mines to be discovered in Botswana.”
BOD is also doing some work in Cameroon and Mozambique. The company said a new diamond field is emerging in Mobilong on the eastern part of Cameroon. “The geology is not yet fully understood, but it is a paleo-conglomerate hosted deposit, similar to Marange in Zimbabwe,” BOD said.
Already, a South Korean company, CNK Mining, is developing a mine near to the place where Botswana Diamonds has a license. The company’s early exploration, Libongo, is adjacent to Mobilong.
In Mozambique, BOD has 6 months exclusive option with holders of three blocks on the Save River in Mozambique near the Zimbabwe border. Botswana Diamonds has entered into an option agreement with a Mozambican company, Morminas, a subsidiary of EIP Group of Portugal, to evaluate two licence blocks on the Save River in Mozambique, close to the Zimbabwean border. Morminas holds a 100 per cent interest in both blocks. The Save River runs south-eastwards and drains an area of Zimbabwe which contains the Marange diamond fields. The Marange diamond fields are expected to produce 16.9 million carats in 2013.
The Save River drains the Marange area of Zimbabwe where several mines are producing collectively up to 12 million carats a year.
“The objective is to identify alluvial and eluvial deposits washed down from Marange. The initial work is now complete and it is believed to have identified paleoplacer channels,” BOD said.
Botswana Diamonds (BOD) was the biggest mover on the Botswana Stock Exchange as its stock was up 5.7 percent.