African Diamonds sees big Botswana mine by end-2009

Mon 15 Oct 2007, James Macharia

JOHANNESBURG (Reuters) - African Diamonds Plc has applied for a diamond mining lease for a one-million -carat-a-year mine in Botswana and is due to start production by late 2009, Managing Director James Campbell said on Monday.

Botswana is the world's biggest diamond producer by value, and several other junior companies are prospecting in the southern African country.

"This is the world's next big diamond mine," said Campbell, a former official at the world's top diamond producer De Beers on the sidelines of a junior miners exploration meeting.

"Very few large diamond mines are being put on the table."

The AK6 mine would initially produce about 600,000 carats yearly, and ramp up to one million in three years, he said. African Diamonds is developing the mine in a joint venture with De Beers, which is 45 percent owned by Anglo American.

Some $175 million is the initial investment in the mine, and its operating costs would be $8 per tonne, with revenues estimated at $30/tonne, Campbell said.

The AK6 deposit -- near De Beers' massive Orapa mine, which is the world's second largest with output of 17 million carats a year -- was first discovered by De Beers in 1969 and later abandoned, but was revisited in 1998 using new technology.

Campbell said the mining lease application on the AK6, which has an inferred resource of 11.4 million carats, was lodged at the end of September, and he hoped the process of negotiating the lease would take about up to six months.

Orapa is one of four large operating diamond mines in Botswana, which produced 35 million carats last year.

DiamonEx, which is gearing up to launch production early next year, Firestone Diamonds and Tawana Resources are other firms exploring for diamonds in Botswana.

Campbell said African Diamonds is also exploring in the north east region of Botswana, where it was evaluating the AK8 mine and was hoping to find other economically viable mines.

He said diamond exploration was being pushed by the strong retail demand for diamond jewellery, which is growing at 6-7 percent yearly, with supply growing at only 2-3 percent a year.

He said with the long lead times required to develop mines, the upward pressure on rough and polished prices was rising.

"There is a growing gap between supply and demand, particularly in the larger better quality goods, while we are seeing few large primary diamond resource discoveries," he said.

"There's talk of exploration and the next big find being in Canada but nothing has come of it, and there's also talk of exploration in Angola, but anything big there is at least 15 years away from being realised."

Campbell said his firm would later this month launch a gold and diamond operation in the West African nation of Sierra Leone, to be run by a sister company, West African Diamonds, which would mine old diamond dumps.

He said the mine would churn out alluvial diamonds as a by-product, with gold being the main output as the dumps are located in gold-rich green stone belts.