“Ak6 will always be a good investment partner”, John Teeling assured investors and other interested parties at a feedback meeting in Gaborone last month.
With his infectious optimism, the bubbly veteran mineral resources expert of three decades outlined a number of reasons for his positive attitude on the new mine.
An open cast mining life of 15 years in the least, a low operating cost of $14.50 as opposed to over USD70 I Canada and Angola, the availability of type IIa diamonds which are of a very rare nature and investment security for which Botswana is world famous.
“We will be there for 15 – 25 years minimum,” he said. “And for some of us 25 years is not a long time” quipped the 64 year old mogul.
On Botswana’s foreign direct investment policy, the Harvard trained doctor had only kind words to share. “Botswana is the best diamonds address – the Switzerland of Africa” he commended adding that another plus for AK6 is that the government has no equity in the project. Instead, as provided for in the licensing terms, AK6 will be taxed under the twelfth schedule of the Income Tax Act including a variable rate of income. AK6’s mining license will span 15 years beginning 10 October 2008.
With four diamond mines – AK6 now fifth – Botswana is the world’s largest diamond producer by value. Orapa mine the second largest diamond mine in the world and Jwaneng the richest mine of any type in the world with a profit to revenue ratio in excess of 80%.
Discovered by AFD/De Beers in 2004 and now owned by AFD/Lucara, AK6 is a 9.5 hectare kimberlite pipe grading 22 plus carats per 100 tonnes (cpht). The mine contains the highest known percentage of of Type II diamonds.
“It is a very rare stone making less than 2% of the world’s diamonds” he said explaining that the gem is unique in that it contains no significant amount of nitrogen and is highly transparent in shortwave ultraviolet light. Nitrogen is the impurity responsible for the yellow colour in diamonds.
In 2008, Letseng sold a 478ct type IIa diamond for US$18.4 million and Sotheby’s auctioned a flawless (D colour) 29.53ct Type IIa diamond which fetched US$3.5 million in October 2009.
On the project makeup Teeling said, “The Boteti joint venture company, which holds the AK6 mining license, will have an ownership of 40% African Diamonds and 60% Lucara.”
Lucara, formerly Motapa Diamonds and part of the Lundin Group – a 15-company, $10billion resource group – will be the operator. Lucara bought the De Beers stake for US$49 million and gave African Diamonds (AFD) a 120day option to increase their stake 38.5%.
“A similar arrangement is in place for the 1.45% held by WATI and AFD will exercise the option by mid April 2010” said Teeling.
The AK6 diamond reserves summary was quite impressively presentred. With indicated open cast resource to 372 metres translating into 8.9 million carats; anticipated grade 25 up to 30 (cpht) in the early years as higher grade North Lobe will be mined against a modeled 22 cpht. The inferred resource is likely to be mined by underground methods, 372 to 758 metres – i.e. 6.2 million carats.
Will the mineral be exhausted?
Certainly not – according to Teeling’s presentation, this leaves 7 million carats in the ground after mining for 12 – 15 years.
On the development plan of AK6 the earmarked 15 year mine life phase one will be a contract mining scenario where almost everything will be outsourced. Phase one production will yield 2Mt/year starting 2011 and 4Mt/year for phase two which starts 2015. This is will translate into US$63MM and US$25MM for both phases, respectively.
A host of AK6 opportunities were also enumerated to the stakeholders. They include increased diamond price to be better informed by an updated evaluation expected early February and touted to significantly exceed the last De Beers valuation, significant increase in value per carat and evidence of large diamonds, probably under represented due to equipment size constraints. All these have a bearing on the diamond value and in terms of diamond recovery, increased carat recovery is anticipated owing to use of autogenous milling.
A Botswana exploration update highlighted three advanced exploration projects, namely, the AK8 discovery, AK9 both 10km away from AK6 and BK5 kimberlite. AFD holds significant prospecting licenses over ground containing more than 20 known kimberlite pipes.
Further AFD owns 5.5% of West African Diamonds which have an alluvial mine in Guinea and interests in Sierra Lione and is merging with Stellar Diamonds which has two mines in West Africa. It also holds 35% of Bugeco, which holds diamond licenses in DRC.
AFD is quoted on the AIM (London) since July 2003 and Botswana Stock Exchange since March 2004 with 76.2 million shares issues and a market capitalization of £40 million. 25% stake of the company is held by directors, family and associates and three significant institutional investors; Investec Botswana, JP Morgan hold 10% each and Black Rock – 5%.
On skilled human capital, the recession which led to the massive lay off by Debswana is a blessing in disguise for AK6.
One response to “
Ak6 hits ‘diamond hub’ with a zing ”
[...] Mail (will not be published) (required) Website. Further Reading. Group wants National Safety …Botswana Business Diary Ak6 hits diamond hub' with a zing… Canada and Angola, the availability of type IIa diamonds which are of a very rare nature … [...]
[...] Mail (will not be published) (required) Website. Further Reading. Group wants National Safety …Botswana Business Diary Ak6 hits diamond hub' with a zing… Canada and Angola, the availability of type IIa diamonds which are of a very rare nature … [...]
March 6th, 2010 at 9:22 pm