After it fought wars with giant De Beers that unsettled shareholders, this week African Diamonds provided an update that shows the mine will be one of the few in the world that provides rare Type II diamonds.
John Teeling, Executive Chairman of the Botswana Stock Exchange (BSE)-listed diamond explorer and developer, told local shareholders that this time around he was bringing them good news.
“AK6, no matter what happens, is going to be a good mine for government and shareholders,” the upbeat Irishman said.
The AK6 hard rock kimberlite has been found to be a miracle because it has been discovered that the chances are 1 out 2500 to find diamonds.
The news comes at a time when the diamond market is peaking following the worst global economic recession and anticipated supply deficit.
“Fundamentals are amazing,” he added, saying there is demand in China as ladies feel if boyfriends love them they have to give them a diamond.
There is also demand in India where parents pay dowry by decorating gold rings with a sparkle of a diamond with rich Brazilians and Australians adding to a diamond demand.
Rough prices began to recover in April 2009 and Teeling said this is good news for everyone, including government although it has no stake on AK6.
“This is good for Botswana, good news for Debswana and good news for African Diamonds,” added Teeling.
African Diamonds was awarded a mining license in 2008 for AK6 that will initially be an open cast mine with a life span of 12 to 15 years.
Government will get 10 percent from the gross sales of the diamonds in royalties as per the Botswana Mines and Minerals Act. The diamonds will be sold outside Diamond Trading Company (DTC).
Initially, under the 28/72 percent joint venture with De Beers, diamonds were to be marketed by the giant mining company through DTC, which was to be paid a 10 percent commission.
The project will now be developed by African Diamonds (40 percent) and their partner Lucara (60 percent) and it is expected to come on stream by 2011.
“De Beers was a good partner, but it got into trouble with financing and it did not want to mine AK6. We had to take them on and we had to fight,” said Teeling.
Teeling revealed that the mine that will produce 400, 000 carats of diamonds annually with a projected revenue of US$ 200 million or about P1 billion, will be a contract mining, where everything at the mine will be outsourced.
The Phase 1 production of the mine is expected to start by 2011 with the expansion project following by 2015.
Teeling and Ribson Gabonewe, Chief Executive Officer of Kukama, agreed that skills will be a challenge to kickstart the project.
Gabonewe said that if they do not get skills locally they will be forced to import them.