Botswana Diamonds plc is a diamond exploration and project development company that holds exploration licences in Botswana and Cameroon as well as early-stage diamond licence applications in certain areas of Zimbabwe. In addition, the company has an interest in exploration licenses in the Democratic Republic of Congo as well as a minority interest in Stellar Diamonds plc.
The company's strategy is to have a pipeline of projects in southern and central Africa stretching from early stage diamond exploration to existing late stage development and eventually production. The immediate focus is on the late stage Botswana licences where a conceptual study has identified possible production opportunities and the recently awarded, greenfields stage Cameroon license.
MM: For investors new to the Botswana Diamonds story can you summarise the background to the company?
BOD: Botswana Diamonds seeks to recreate the recent success of its predecessor, African Diamonds, which made a discovery that is now coming into production.
Botswana Diamonds has exploration/development projects located in the best diamond address in the world – Botswana, as well as exciting exploration projects in Cameroon and Zimbabwe. The Company was admitted to AIM in February 2011 having been spun out of African Diamonds plc, on the sale of its discovery to Lucara Diamonds Corp. The new company contains the former exploration interests of African Diamonds and the spin out was on the basis of one share-for-one share. The Company is managed by many of the team responsible for the AK6 diamond discovery in Botswana, now known as Karowe, which is coming on stream as a high value one million carat a year mine in Q1 2012.
MM: What are the company’s key strategic objectives?
BOD: To multiply the capital value of Botswana Diamonds by finding a new diamond mine.
The Botswana Diamonds’ approach to exploration is simple, but rigorous – go where the geology is best, go where there are or were mines and remember that you cannot find a mine in an office. These rules dictate low overheads and an acceptance of political risk in return for better geological opportunities. It is our intention to repeat the Botswana success, where the team discovered and developed a kimberlite mine. Secure high potential ground/projects and become a hard rock diamond producer. Our team also has unique expertise in paleo-placers to develop new opportunities in Cameroon, Zimbabwe and new horizons.
MM: What should give investors confidence that the diamond sector is a good place to invest, particularly reflecting pricing volatility in the last decade?
BOD: The fundamentals of the diamond business are the best of any mineral: demand is strong, supply is tight, new discoveries are rare and diamonds are a store of value.
Demand is expected to grow at over 6% a year while supply growth will be less than half of that. Demand growth is focused on Asia and within a few years China, India and Korea will dominate world demand. The supply side is more restricted because diamonds are hard to find. There are only seventeen kimberlite diamond mines in the world and there is a lack of new discoveries. There is an expectation of a growing supply gap from 2015 onwards. This augurs well for prices which rebounded in 2010 and 2011 to peaks above those seen in 2008.
MM: As your name suggests the company focus is Botswana. Can you outline the geopolitical risks of operating in-country and why you feel this is a good place to operate an exploration business?
BOD: Botswana is the Switzerland of Africa: prosperous, law-abiding and safe.
Our focus is Botswana, the best diamond address in the world and home to some of the world’s greatest mines such as Jwaneng and Orapa. Botswana, which is the largest diamond producer by value in the world, is a landlocked country with a small population of 1.7 million, excellent infrastructure, a stable government, a strong economy and clear mining / foreign investment rules. It is known as the Switzerland of Africa. The centre of the diamond industry is the Orapa region where there are four, soon to be five hardrock mines. Botswana Diamonds is focused on this area where we have existing licences and are applying for additional ground.
MM: Can you tell us about the prospectivity of Botswana for diamonds?
BOD: Botswana is the largest supplier by carats and value, has the highest percentage of diamond-bearing kimberlite pipes and the lowest operating cost worldwide.
Botswana is the largest diamond producer by value in the world at over $3 billion in rough diamond sales. Botswana diamond production, for 2010, was 22.2 million carats with an expected growth rate of greater than 10%, for 2011. The centre of the diamond industry is the Orapa region where there are four, soon to be five hardrock mines. Botswana Diamonds is focused on this area where we have existing licences and we are applying for additional ground. The prospectivity has been further demonstrated through our negotiations with a group who have new technologies and approaches. The objective of the joint work is to identify large diamondiferous kimberlite pipes with the potential to become high-volume, high-value long life mines.
MM: What are your key operations in Botswana, and what makes them attractive investment propositions?
BOD: Exploration on highly prospective ground close to some of the world’s leading diamond mines.
In 2011 we conducted extensive bulk sampling on two diamondiferous kimberlites, AK8 and BK5. The objective was to upgrade previous work, to define grade and value per carat. This would feed into a scoping study estimating the commerciality of an open cast mining operation to supply one of the existing ore processing facilities. Neither kimberlite produced the necessary results. AK9, the third kimberlite with existing prospecting results, is proving enigmatic. It has a thick basalt cover which could have diluted earlier drilling results. We continue to evaluate options. We have a licence in the northern part of Orapa on which we have discovered a known diamond indicator minerals, but we have not yet identified the source. The attractiveness is demonstrated by the initial focus of a new potential JV in North East Botswana including the Orapa area.
MM:What are your exploration plans for Botswana and how could these deliver value for shareholders?
BOD: We will apply new technology to ground that must hold potential mines.
Our intention going forward is to rework some of the licenses looking at different options as these are highly prospective areas, also we will be working to identify the source for diamond indicators on our license in Northern Orapa. We also believe there are more diamond mines to be found in Botswana and we are in advanced negotiations to partner with a group who have new technologies and approaches. As noted the initial focus of a JV would be in the North East we will also be reworking our other highly prospective ground.
MM: You have also secured an exploration licence in Cameroon. The geology in Cameroon is less well understood when compared to Botswana, and reflecting this, why do you feel there is blue sky potential from the 8,087sq. km licence the company holds?
BOD: Our ground neighbours a recent discovery in a similar geology.
Cameroon is not yet known for diamonds. Few people, if any, in the diamond industry, believed that Cameroon has geological potential for diamonds, yet a Korean company CNK Mining (“CNK”), with no history of diamond mining, is developing a mine in the Mobilong area on the border with the Central African Republic. The answer to the apparent conundrum is what are known as palaeoplacers. Palaeoplacer deposits are ancient alluvial type deposits which have cemented together over time into consolidated rock. Until recently, gold and uranium have been the only minerals commercially mined from palaeoplacers. The massive diamond discoveries in the Marange area of Zimbabwe are set in palaeoplacers. In Cameroon, diamonds were discovered whilst CNK worked on a palaeoplacer gold opportunity at Mobilong. On the basis of this initial discovery it obtained a mining licence and is now developing a mine which is due to come onstream in 2012. Botswana Diamonds, because of our work in Zimbabwe, understands palaeoplacer diamonds and so applied for the licence adjacent to Mobilong. A concession of over 8,000 sq kms was obtained. During 2011 we prospected the concession, identified palaeoplacer rock and obtained a Stage 2 exploration permit over 400 sq km. We believe that diamonds have been discovered and recovered by local artisans on our concession. The next phase of exploration in early 2012, is to sample the ground to confirm if it contains diamonds and, if so, the type and quality of diamonds. Equipment and people have already been sourced.
MM: You also have operations in Zimbabwe. Can you tell us about your activities in country and particularly about the palaeoplacer deposit and your seven claims joint venture in the Beitbridge area?
BOD: We are both learning about the new type of discovery and applying our expertise prudently given the country-specific challenges.
Zimbabwe has long been known for diamonds. The huge Marange deposits in the south east of the country were prospected by De Beers who discovered diamonds but thought them to be of poor industrial quality – though some of them were as large as golf balls. Approximately 30 kms to the Southwest of Marange, in the Chimanimani area, some diamonds have been discovered, once again in palaeoplacers. Botswana Diamonds has an agreement with the group hoping to obtain a licence that we will act as operator to trial mine and, if viable, build and operate the mine. In a more traditional approach to diamond exploration, Botswana Diamonds holds 80% of Metro Mining Ltd, a local Zimbabwe company holding seven claims in the southeast, although local ownership is likely to rise to 51%. There is a known 2.5ha kimberlite on the claims and it is proposed to conduct a bulk sample on this in early 2012.
MM: Tell us about the management team in place and what experience they have in undertaking diamond operations and the delivery of value to investors?
BOD: Our team has over a century’s relevant African minerals exploration experience, and several discoveries to date.
As already noted a lot of this team, John Teeling, Jim Finn and David Horgan were previously involved in the discovery of the AK6 diamond mine in Botswana, now known as Karowe. This team successfully completed the sale of African Diamonds to Lucara, 0.80 of a common share of Lucara for each African Diamonds PLC common share, valuing the sale at approximately 50 pence a share plus a one for one exchange into our new vehicle Botswana Diamonds valued at 6 pence a share. Not only have we learnt from this experience with African Diamonds we have built on it by strengthening our board through the addition of Andre Fourie, a former senior De Beers executive, as Technical Director, and subsequently we added further expertise with the addition of Robert Bouquet as Commercial Director. Robert is a widely experienced diamond market specialist.
MM: How is management incentivised to ensure management interests are aligned with shareholders, including remuneration structure and shareholding interests (both actual and option based share interests)?
BOD: Our costs are low, cash is invested in the ground and the whole team benefit from discoveries through their options and shareholdings.
People are most creative outside structured and safe environments. Our model is to align the interests of managers, directors and shareholders: costs are kept low and variable. Everyone takes a stake in a new vehicle. The directors have over 16 million shares which account for 16% of the shareholding with a further 5.75 million share options. All directors back share placings when needed and lend money interest free to the company when necessary. Key workers get share options at market price. People do not sell until value is delivered – typically in a trade sale. We must raise money before we spend it. We tend to raise what we need for the next 12 to 18 months rather than what we can – this avoids dilution. Anyone coming in cheaply will do well.
MM: How well funded is the company for ongoing operations and what options are available to the company to secure funding, as and when this is required, in the future?
BOD: Directors and long-standing supporters are committed to underwriting foreseeable needs.
Currently the company has £290,000 in the bank, as we have already noted as directors we also personally fund the companies we are involved in. We currently are securing a number of high potential joint ventures and will see what is in store after that.
MM: What news flow can investors expect from the company in the coming year and what significance could this news flow hold in respect of value generation for investors?
BOD: We expect to apply new technology to our prospective Botswanan acreage and conduct exploration work on Cameroon and Zimbabwe ground.
We are very excited about the coming year. The business fundamentals for diamond exploration are strong and the company’s strategy is clear. We are confident that there are more mines to be found in Botswana where we hope to repeat our earlier success using new technology and new insights. Also there is significant potential in the new palaeoplacer diamond fields. We are at the forefront of this emerging sector. We have prospective ground in Cameroon, and an active programme in Zimbabwe. The coming months will see activity in all three countries. The board is confident of a bright future for Botswana Diamonds and lots of news on all fronts.
ENDS
Download the Botswana Diamonds Company Fact sheet here
Download "Opportunities in African Diamond Mining" here
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