Botswana Diamonds PLC [BOD] - Interim Results for the Six Months Ended 31 December 2011
23 March 2012
Botswana Diamonds PLC (“Botswana” or the “Company”)
Interim Results for the Six Months Ended 31 December 2011
Statement Accompanying the Interim Results
Botswana Diamonds (BOD) has active exploration programmes in three African countries, Botswana, Cameroon and Zimbabwe. The strategy of the Company is to combine the technical skills and African exploration experience of the management team with potential opportunities to discover large high-volume, high-value diamond mines.
The fundamentals of diamonds are very strong. Diamonds are scarce and hard to find. Some of the existing hard rock mines are coming toward the end of their lives. In contrast demand for diamond jewellery is booming. China, India and other Asian countries are on target to be bigger by 2020 in total diamond consumption than the US is today – about 40% of world demand. Annual growth rates in these countries are in double digits in contrast to flat European demand and annual growth rates of 5% in the United States.
India remains the principal diamond manufacturing centre where most of the rough stones are physically turned into polished; we are seeing a greater manufacturing presence in Botswana driven by local beneficiation policies; Antwerp, Tel Aviv, Mumbai and Dubai remain the main trading centres for rough and polished diamonds.
Differences in the demand profile should be noted. India takes the bulk of small diamonds and cuts and polishes them to set in gold. China has a demand for larger stones as part of wedding ceremonies.
Prices fluctuate due to the nature of the market. The decline of the De Beers virtual monopoly has led to increased volatility in prices which is likely to continue. Overall the future looks very bright with an increasing gap between global rough supply and diamond jewellery demand.
The best place to find a mine is where there is or was a mine. Botswana is the home of diamonds, the biggest producer by value in the world and home to five of the world’s 20 producing hard rock kimberlite mines, including Orapa, the second biggest producer by volume in the world and Jwaneng, the richest diamond mine in the world. The newest mine, Karowe, was discovered by the principals of BOD and sold to Lucara Diamond Corp. (TSX: LUC) of Canada. Prospects look good for additions. The small Lerala mine is being commissioned whilst progress is being made by Petra Diamonds at Kukama.
The Orapa cluster of kimberlites, over 80 in total, is the centre of diamond exploration activity. BOD holds ground in the area and expects to be awarded a new licence near the Letlhakane mine but the principal focus is on our agreement with an international resources company to apply new thinking and new technology in the expectation of identifying previously undiscovered kimberlites. Sand and salt up to 80 metres thick cover much of North Eastern Botswana. This has made diamond exploration difficult. Our partner believes that using conventional exploration data which they reprocess and reinterpret, they can identify anomalies which are likely to be kimberlites. Further, they believe that they can pinpoint areas likely to be diamondiferous. BOD is actively providing data to our partner. This will take some months.
If and when targets are identified the partners will form a 50/50 joint venture to lodge licence applications and to undertake fieldwork. The agreement is heads-up which means that from the identification of the targets we will pay our share. First results are expected in the second half of 2012.
Eyebrows are raised when the diamonds in the Cameroon are mentioned. They rise even higher when a Korean diamond mining company is mentioned. Neither exist, yet there is a Korean company building a 1 million carat a year mine in Mobilong, eastern Cameroon. The Korean explorers found diamonds in palaeoplacer rocks. BOD applied for ground adjacent to Mobilong and was awarded a concession covering over 8,000 sq kms. A prospecting programme in 2011 discovered palaeoplacer rock on the concession. Currently a sampling programme is underway recovering up to 300 tonnes of rock from three areas identified in the earlier work. The objective is to demonstrate that the rocks are diamondiferous. Assuming they are, and we are confident of the outcome, we will undertake a larger bulk sample to identify grade and diamond value. Results from the current work are due mid 2012 with the next phase beginning at the end of this year.
The political uncertainty in the country makes investment difficult. It is likely that the Marange palaeoplacer diamond fields will become the world’s biggest diamond producer (by carats) in the very near future. The area covers over 250,000 hectares containing ore about 2 metres thick with grades of up to 8,000 carats per hundred tonnes. BOD would seek to participate in the development of Marange.
About 50 kms northeast of Marange, in an area called Chimanimani, BOD discovered diamondiferous palaeoplacers. It has proven difficult to get a licence so we have agreed with local interests to allow them to own the concession while BOD would build and operate. This is similar to arrangements made on oil concessions in the Middle East. Progress is being made in this area and we are hopeful of an agreement.
Zimbabwe has two hardrock kimberlite mines, the Rio Tinto mine at Murowe and the now closed River Ranch. BOD has joint ventured with local interests (BOD 49%/Locals 51%) on a series of claims in the Masvingo/Beitbridge area thought to contain kimberlites. A small bulk sample is underway to demonstrate whether or not they contain diamondiferous kimberlites.
BOD recently completed a £1.5m placing at 4p a share. These funds cover currently budgeted expenditure plans for at least a year.
The future for diamonds is bright. BOD is well placed with good ground, funds and skills to successfully explore. Exploration is a high risk venture but the potential rewards make the risk worthwhile.