Botswana inks joint venture acquisition of Ghaghoo diamond
Botswana Diamonds plc (“BOD”) is pleased to announce that Okwa Diamonds Pty Ltd, a joint venture with Vast Resources plc (“VAST”) in which Botswana Diamonds has an initial 10% carried interest, has today conditionally agreed to acquire Gem Diamonds Botswana Pty Ltd (“GDB”), a wholly owned subsidiary of Gem Diamonds Ltd (“Gem Diamonds”), for a cash consideration of US$4 million. GDB’s primary asset is the fully permitted Ghaghoo diamond mine in central Botswana which is currently under care and maintenance.
BOD has an initial free carried interest of 10% in Okwa Diamonds Pty Ltd (“Okwa”) for the first US$15 million of expenditure by Okwa, which is being funded by VAST (including the acquisition cash consideration). Thereafter, BOD will not be diluted below 2.5% of Okwa. BOD can also earn up to a further 20% interest in Okwa through funding 20% of expenditure. Under the terms of the joint venture with VAST, BOD will be the operator of the Ghaghoo mine until such time as an agreed management team is in place.
Conditional inter alia
The acquisition of GDB is conditional inter alia, on relevant regulatory and competition authority approvals in Botswana and is expected to complete during the latter part of 2021. Ghaghoo is a 10.8 hectare kimberlite pipe located in the Central Kalahari of Botswana and was discovered in 1982 by Falconbridge Mining (later Xstrata) and evaluated in joint venture with De Beers up to 2007. Gem Diamonds acquired Ghaghoo from De Beers and Xstrata in May 2007. Gem Diamonds continued to evaluate the project and a study was undertaken in 2010 to determine the most viable way in which to exploit the deposit.
A Mining License was awarded to GDB in 2010. Further work on the kimberlite was deemed appropriate, and Gem Diamonds embarked on underground development to bulk sample the pipe in 2011/2012 through a decline shaft, and this developed into commercial production in 2015.
GDB is the holder of mining licence 2010/97L issued in terms of Section 41 of the Botswana Mines and Minerals act which grants GDB a mining licence for 25 years until 21 December 2036. The Government of Botswana does not have any equity in GDB but a royalty of 10% is payable to the Government of Botswana on all diamonds produced and sold.
Operations were based on a small underground mine that was ultimately not profitable due largely to the poor diamond market conditions at that time and operational issues. Accordingly, in February 2017, Gem Diamonds placed the mine on care and maintenance after recovery of just under 150,000 carats of diamonds.
