DiamonEx, the mid tier diamond miner, is set to begin mine construction in the first week of next month at its Lerala project which will spur economic growth in the northern parts of the country, a top official said.
“The civil construction has started already. And everything from civil construction, mine up to commissioning should be completed by February 2008,” DiamonEx Mine Manager, Mark Cotzee, said from Johannesburg on Friday.
The move come after last month’s announcement by the company that it had secured A $ 20 million (about P 98 million) funding from Babcock & Brown.
Dan O’Neill, managing director of DiamonEx, has hailed the agreement.
“We are delighted that Babcock & Brown has decided to provide the principal funding for DiamonEx’s founding project at Lerala,” O’Neill said.
“Under the agreement Babcock &Brown will invest A$ 2.5 million in a placement of DiamonEx shares at 24 cents per share, and subject to due diligence, other conditions precedent and DiamonEx shareholders approval, up to A$ 13 million in four-year convertible loan facility currently being fanalised.”
The funding package will enable DiamonEx to fully finance development of Lerala mineÔÇöwhich is 15 kilometers outside Lerala Village ÔÇö while limiting up dilution to existing shareholders.
The completion of the funding package will enable commercial production of diamonds to commence at Lerala in late 2007 and is also expected to be sold through DTC Botswana which will come operational by 2008.
Lerala mine lies about 120 kilometres from Palapye ÔÇô a place earmarked for the development of the country’s second university ÔÇô and it is expected to create close to 300 new jobs directly.
At full production, the mine is to produce 330,000 carats per annum over its life span of 10 years.
“The mine is going to be highly profitable because the production costs are low. And the most interesting thing about the project is K2 which is the richest resource,” an analyst at Capital Securities, Leutlwetse Tumelo, said.
The mine is projected to have a net operating cash flow of US $100 million on revenue of US $ 230 million over a period of 10 years.
The mine will be an open pit operation and there is a provision for underground mining after 10 years.
Further, the mine will be boasted by the envisaged diamond shortage in the market and the price spikes that are being driven by Chinese and Indian markets.
In the next 10 years, diamond prices are expected to rise by 50 percent.