Mining News

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Petra Diamonds to Buy De Beers Mine for $10 Million
Petra Diamonds has agreed to buy a majority stake in De Beers Tanzania-based Williamson diamond mine for $10 million.

The cash deal, which is expected to close this month, will see Petra acquire the entire share equity of Willcroft Company Limited from De Beers subsidiary Cheviot Holdings Limited.

Willcroft owns 75 percent of Williamson Diamonds Limited, which owns and operates the Williamson mine, with the Tanzanian government holding the remaining shares. The Williamson mine has approximately 40 million carats, plus the 20 million that have been recovered in its 70 years of operation.

De Beers managing director Gareth Penny said the Williamson sale was part of De Beers long-term strategy to review its portfolio of mining assets and focus only on those with the best strategic fit. Petra closed its acquisition of the Cullinan mine from De Beers in July, having previously purchased the mining giant’s Koffiefontein and Kimberley Underground assets.

Petra spokespersons explained that Williamson is renowned for producing large, high-value diamonds, with regular recoveries of special stones larger than 10.8 carats. The mine was the source of the Williamson Pink, a 54.6-carat rough diamond recovered in 1947.

Petra was recently notified that Saad Investments Co. Ltd. now holds about 65.3 million shares of Petra Diamonds, representing almost 36 percent of the miner’s ordinary issued share capital. Petra, as a Bermuda-registered company, is not subject to the Takeover Code, which means there is no obligation for any shareholder to make a mandatory offer in order to increase its holding above the 30-percent mark.

Stornoway Discovers New Kimberlite at Qilalugaq

Stornoway Diamond Corporation announced the discovery of a new kimberlite body at its Qilalugaq project in the proximity of the project’s Q1-4 complex, which comprises the largest known kimberlite site in the eastern Arctic. Based on an agreement with BHP Billiton, Stornoway can earn a 50 percent interest in the project from BHP by spending $9 million prior to December 31, 2012.

Rio Tinto Survey Reveals Concerns

Diamond professionals consider the shortage of rough supply the most important challenge facing the diamond industry, according to a survey conducted by Rio Tinto Diamonds.

In response to the “2008 Survey of Rio Tinto’s Diamond Business Stakeholders,” conducted between January 22 and March 7, 2008, 31 of 159 participants cited the supply shortage as their chief concern for the coming years. The second-biggest challenges were pricing and lower profit margins, as noted by 20 stakeholders, while synthetic diamonds were the most prevalent issue for 19 participants. Only eight respondents said economic conditions comprised the most pressing industry challenge.

Rio Tinto said that the survey revealed a favorable perception of the mining industry among diamond stakeholders, with criticism coming mainly from nongovernmental organizations (NGOs) and multilateral organizations (MLOs), 37 percent of which said they hold an unfavorable view of the diamond industry.

Canada’s Production Rises

Canada’s diamond production rose 28 percent to 17 million carats in 2007, according to a report issued by the Mining Association of Canada.

The document, titled “Facts & Figures 2008 – A Report on the State of the Canadian Mining Industry,” showed that production value fell 9.6 percent to $1.4 billion during the year, making diamonds the country’s tenth-most valuable commodity. The decrease in value, despite the rise in production volumes, came as a result of global price declines seen in 2006 and 2007, according to the report.

Further increases in Canada’s diamond production will likely occur now that De Beers has opened its Snap Lake and Victor mines. According to Kimberley Process (KP) figures, Canada was the third- largest producer of rough diamonds in 2007 when measured by value, behind Botswana and the Russian Federation.

Harry Winston Sales Up

Harry Winston Diamond Corporation’s consolidated sales for its second quarter of fiscal 2009 rose 7 percent to $186.1 million. Net earnings more than doubled to $50 million, or 81 cents per share, from $20.1 million, or 34 cents per share, in the same quarter of fiscal 2008. Mining sales were flat at $105 million, though higher prices offset lower carat volume.

Gem Diamonds’ Production Spikes

Gem Diamonds reported that diamond recovery across its operating mines rose more than eight-fold in the first half of 2008 compared to the same period in 2007, as its Australia operation came on stream. The company mined 283,840 carats from January through June 2008, compared with the 46,305 carats recovered last year. The boost in production came from Gem Diamonds’ acquisition of Kimberley Diamonds in December 2007, which added the Ellendale mine to its portfolio.

Gem Diamonds spokespersons said it had mined 233,082 carats from Ellendale alone. The company sold 287,693 carats of Ellendale diamonds for $59.55 million, or $207 per carat.

Production from the company’s flagship Letseng mine grew 18 percent to 44,507 carats during the first half-year and 35,814 carats worth were sold for $89.95 million, or $2,512 per carat. Letseng diamonds fetched $1,776 per carat in the same period of 2007. The Cempaka alluvial mine in Indonesia saw production drop 26 percent to 6,251 carats due to heavy flooding and environmental concerns. Gem sold 21,790 carats of Cempaka diamonds during the period for $6.66 million, or $305 per carat, compared with $2.27 million, at $218 a carat, in the year prior.

Total group revenues grew 138 percent to $166.8 million, but net profits fell 15 percent to $14.8 million.

Gemfields Resources Offers Bid on TanzaniteOne

Gemfields Resources announced a proposed bid for TanzaniteOne (T1) of 83 cents per common share (45 pence) for each U.S. share, which are valued at 0.0003 cents a share. The offer would entitle T1 shareholders to elect for either cash or ordinary shares worth 0.019 cents (GBP 0.01) each in Gemfields capital or any combination of the two. The offer values the issued common share capital of T1 at approximately $61 million (GBP 33 million), a premium of 76.5 percent.

Following this offer, Sean Gilbertson, the chief executive officer (CEO) of Gemfields, released an open letter to the directors of T1. He stated that he was concerned about T1’s upcoming acquisition of TsavoriteOne, a project consisting of 12 prospecting licenses that may represent the world’s largest source of tsavorite, a type of garnet. The deal would issue TsavoriteOne a share consideration of 7.45 million shares in T1. Gilbertson believes T1 failed to remind shareholders of its directors’ interests in TsavoriteOne assets, as well as that their T1 holdings will increase if the acquisition goes through. Gilbertson requested further information from the T1 board, including an explanation of how the current value was ascribed to TsavoriteOne, adding that Gemfields reserves the right to revisit the pricing of any proposed offer.

African Diamonds, De Beers End Dispute

African Diamonds deferred its court dispute with De Beers over the AK06 mine in Botswana after the government rejected De Beers application for a retention license to delay development of the project. Spokespersons for African Diamonds, which owns 28.38 percent of AK06, with De Beers holding 71 percent, said that the company had been informed by Botswana’s director of mines that the “retention license applied for by De Beers was not considered and in his view was not formally lodged, as a mining license application was still pending.” As a result, negotiations for a mining license for AK06 were still underway at press time.

A rift over the project developed between De Beers and African Diamonds in July when De Beers stated that potential electrical supply issues meant the mine was not economically viable and the company therefore sought to delay development by two years.

The two firms also disagreed on the potential marketing of diamonds from AK06. African Diamonds said it received notification from De Beers that an agreement had been reached with the Botswana government to market the diamonds through Diamond Trading Company Botswana (DTCB) in a similar fashion to current Debswana production.

478-Carat Diamond Found at Letseng Mine

The Letseng diamond mine in Lesotho has produced the largest rough diamond of the year. Gem Diamonds and the Lesotho Government, a 30 percent partner in the mine, announced the recovery of a 478-carat type II, D color diamond, which they say could yield one of the largest flawless D color round polished diamonds in history.

Article from the Rapaport Magazine - October 2008. To subscribe click here.