BOD schedules AGM on December 12!
Botswana Diamonds plc (BOD) announces its audited annual results for the year ended 30 June 2019. The AGM is due to be held on Thursday 12th December 2019 in the London. At the occasion John Teeling, Chairman’s Statement says, Botswana Diamonds has become a diamond miner. Our project on the Marsfontein gravels has begun production and we expect it to ramp up in the coming weeks.
The general business environment is currently very uncertain. International trade faces restrictions, and the European Union is facing the first exit of a member state. Chinese growth rates which have under-pinned global economic growth are weak while in the United States the economic expansion which has lasted a record length of time is now looking fragile. Zero or negative interest rates are becoming more prevalent. This economic oddity is causing severe stress in banking and among economic/political policy makers.
Gem-quality diamonds are purely a “luxury item”. In the last year prices have been weak due more to economic uncertainty than an increase in supply. Laboratory-grown diamonds (LGD) have received a great deal of publicity and though they make up a tiny percentage of gem sales the impact on sentiment has been very negative.
Rough diamond prices have generally fallen as have the share prices of diamond producers and explorers. Yet the long term fundamentals of the industry are solid. A diamond is forever, but diamond mines are not. As an economy grows, a growing number of individuals generate significant disposable income and the demand for jewellery grows in turn. Producing diamond mines are running out or are producing at higher costs as they access deeper levels.
Asian economies are showing the fastest increase in diamond consumption. There is a long way to go until the latent demand in these markets is satisfied. There are not enough gemstone quality diamonds to provide a diamond ring for half of the population of China and India. Remarkably, the United States has continued to be an engine of growth for jewellery. Almost 50% of all diamond jewellery is purchased in the US. The technology behind LGD is improving and bigger stones can now be grown.
We believe that giving a gift of a diamond is more than a gift of a piece of carbon. LGD while perfect are not the real thing. The Mona Lisa can be reproduced by the best painters in the world but it will not be the Mona Lisa. A 2,500 million year old diamond which came from 180 kilometres down in the earth’s mantle is not the same as the stone grown in a sterile factory in Europe or China.
Turning to operations, the political situation in each of the three countries where we operate has improved. Fresh democratic elections in Botswana have led to continuity and stability. There is a slow improvement in the investment attractiveness of South Africa. In Zimbabwe there are glimmers of hope. Botswana Diamonds has made significant strides in the period under review. Delays in our projects in Botswana caused a redirection of focus onto the properties held in South Africa by our associate company Vutomi.
Initial focus was on the Thorny River, kimberlite dyke system which hosted former mines Klipspringer and Marsfontein. Both mines were discovered on the dyke system in the area, Dykes are often narrow, maybe a metre or less. A blow is where the dyke balloons out to a size capable of being mined as a conventional open pit. The Marsfontein blow was such a rich source of diamonds that the CAPEX was recovered in less than 4 days.
Vutomi explored the Thorny River dykes which are 4 kilometres away from the Klipspringer mine and processing plant. Exploration exposed a dyke system over seven kilometres long.
We negotiated both a contract mining agreement and a contract processing agreement. Vutomi would receive a 12% royalty. The Klipspringer processing plant struggled to process fresh kimberlite in a satisfactory manner and was losing diamonds to the waste dumps so we suspended operation. Meanwhile work was ongoing on a license over the nearby Marsfontein gravels.
A mining permit was obtained in September 2019. Once again contract mining and processing is being employed, this time on a 15% royalty. Two plants are processing the gravels and initial results are positive. Throughput is being increased to 400 tons of gravel per day. At the same time there is ongoing exploration on the Thorny River dyke system looking for blows. State of the art structural geophysical and geochemical techniques are being employed to identify targets. Early results are promising.
The objective of the Thorny River / Marsfontein Project is to produce a cash flow to fund exploration in South Africa, Botswana and Zimbabwe but as we have developed the projects we believe that a real prospect now exists to identify one or more blows on Thorny River which could be very rich in high quality diamonds.
While the focus of activities is in South Africa we have continued to develop our interests in Botswana. We hold eight prospecting licenses in Botswana with applications lodged for a further six. We also hold a 15% net interest in the Maibwe joint venture in the Southern Kalahari. Our interest is held through a 51% owned South African company, Siseko Minerals.
Other partners in Maibwe are BCL 51% and Future Minerals 20%. BCL is a large state-owned copper nickel company which is in liquidation. Future Minerals is a locally owned Botswana company. Diamonds were discovered on the Maibwe licences. The operator, BCL, was placed into liquidation prior to them completing the agreed exploration programme. Botswana Diamonds has made an offer to the liquidator to buy the BCL holding. We are told that the Botswana government wants more work done on the licenses before making a decision.
Work done by Botswana Diamonds on their 100% owned licences contract continues to be focused on the Central Kalahari Game Reserve (CKGR).
Extensive geophysical and geochemical analysis was conducted in 2017 and 2018 which led to the identification of high priority targets. Interest was shown by third parties to participate in the exploration of these targets. Agreement was reached with one large diamond producer but that has not come to fruition. In the view of the board it is unlikely to be finalised. Alternatives are being considered.
We also have interests in Zimbabwe. The Marange area of Zimbabwe has in recent years produced large quantities of diamonds. The geology is complex and the rocks very hard. Botswana Diamonds directors have extensive experience in mining in Zimbabwe and were pleased to agree a joint venture with Vast Resources, an AIM-traded company, over a concession in the Marange area.
We will have 13.3% of the joint venture and will provide technical and geological input to Vast. Vast agreed to provide the first US$1 million to the project in the form of loan. We understand that Vast are hopeful that a final agreement with the Zimbabwe authorities is imminent.
There are four strands to our strategy for the future, 1: Ramp up the Marsfontein gravel production to generate immediate cash flow, 2. Restore production at Thorny River whilst exploring for blows on the ground. 3. Undertake reconnaissance work on the licenses in the Central Kalahari to identify specific drill targets and then drill them whilst continuing to work with the BCL liquidator to unlock the Maibwe project & 4. Assuming Vast Resources obtain the concession in the Marange area of Zimbabwe, to start work most probably with a pilot production plant.
