A report released recently by Dowgate Capital Stockbrokers noted that 2014 could be a defining year for Botswana Diamonds (BOD) as it moves ahead with its “high impact” diamond exploration projects in the Orapa region of Botswana.
The report noted that BOD made a smart decision partnering with diamond major ALROSA as this will likely yield positive results this year.
BOD cemented its relationship with ALROSA in July 2013 with a 50/50 joint venture agreement following an initial 18 month technical co-operation agreement.
One might ask what sort of value that ALROSA will bring to BOD.
ALROSA, according to the stockbroking company, has developed various techniques and adapted existing methods to locate diamond bearing rock up to 200 metres beneath the thick Siberian tundra overburden.
“The thinking is that the same techniques can be applied in Botswana, where the challenge is to locate diamondiferous kimberlites beneath the deep sand cover that covers most of the country,” said Dowgate.
With 17 active mines in Siberia, ALROSA is the world’s largest diamond production company and in 2012 it accounted for around 25 percent of global diamond production in terms of value.
It gained a listing on the Moscow Stock Exchange last October following a $1.3 billion fund raising.
Under the JV, ALROSA will provide technological exploration skills to identify target areas, while BOD will supply exploration data on various diamond prospective areas in Botswana.
“We believe the market has yet to price in the potential importance of the group’s JV with ALROSA, which is the largest diamond producer in the world,” said Dowgate.
Exploration work commenced in earnest last month on BOD’s flagship PL117 project, where the immediate plan is to locate potential targets that can be drilled in the first quarter of 2014.
PL117 is located just 10km from the Karowe mine.
“We would expect a sharp upward market re-rating for the stock if the BOD/ALROSA JV makes a significant exploration discovery in the coming months,” it said.
Dowgate noted that BOD can earn an interest of up to 75 percent (or net 37.5 percent when shared with Alrosa) in PL117 by spending $600,000 on exploration work or 51 percent (net 25.5 percent) after spending $300,000 over three years.
“If local [Botswana] project partner Eversharp (25 percent) [is] unable to fund the current exploration programme, then their interest would be diluted and BOD/ALROSA’s percentage interest correspondingly increased,” it said.
Dowgate also said that BOD’s management was familiar with the area covered by PL117, as they previously held ground under African Diamonds (AFD), when the AK10 and AK6 kimberlites were discovered 10 years ago.
AFD subsequently dropped the area covering AK10, so that they could advance the AK6 discovery located 6 kilometres away.
From preliminary work completed to date, ALROSA’S geologists believe they may have found a new kimberlite adjacent to AK10.
Part of the JV programme would also involve redefining the AK10 pipe, potential bulk sampling and work to re-establish the grades and quality of the diamonds.
In addition to PL117, the ALROSA JV partnership has identified further diamond prospective areas in Botswana and 25 licences applications have been submitted to this end.
“Some or all of these licences are expected to be granted within the next few months,” it said.
Table 1: Botswana Diamonds and ALROSA JV projects overview.
Dowgate also noted that BOD’s exploration budget for 2014 is $800 000 of which $500 000 covers the ALROSA JV.
As the market awaits for more information about the BOD/ALROSA JV project area following the current exploration programme, it is indeed safe to conclude that the eureka moment for the John Teeling led company is now in the horizon.
ALROSA’s exploration track record is for all to see and there is no doubt that it will contribute immensely to the fortunes of BOD.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
