Botswana Diamonds CEO James Campbell holding a diamond from the past. Picture: FINANCIAL MAIL
Botswana Diamonds CEO James Campbell holding a diamond from the past. Picture: FINANCIAL MAIL

Botswana Diamonds is keeping risk off its balance sheet and retaining focus on a large suite of prospects in SA, Botswana and Zimbabwe as it advances an expensive study into a potential mine.

Botswana Diamonds would have needed to raise about £1m to fund the exploration and early-stage bulk sampling work to advance its confidence in the Thorny River diamond kimberlite dykes in SA, which would have meant stopping work in exploring other prospects, said CEO James Campbell.

The company is headed by the successful pairing of chair John Teeling, who chaired African Diamonds, with Campbell who was MD at the same company and later the CEO of alluvial diamond miner Rockwell Diamonds. Campbell had a long history with De Beers.

To avoid putting debt on Botswana Diamonds’ balance sheet or diluting shareholders with a rights issue to raise the money, the company has farmed out the early-bulk sampling work at Thorny River to Palaeo Minerals in exchange for 80% of revenue from diamond sales going to the contract miner.

From its 20% of revenue, Botswana Diamonds expects to generate between $2m and $7m a year, covering royalties payable to the state sales, which will be through a tender house in Johannesburg, and security at the site.

Instead of building a process plant, ore will be processed at a nearby plant.

The prospects of finding diamonds are high, said Campbell, noting that De Beers and SouthernEra had mined 1.83-million carats worth $246m at the nearby Marsfontein mine in just two years from 1998-2000, paying off the investment in the operation in less than four days.

“The discovery of Marsfontein showed that small, very rich, kimberlites can still be found in SA by following up subtle indicator anomalies using traditional systematic sampling methods,“ Mike Scott of MSA Projects and Chris Jennings of SouthernEra Resources said in a 2003 paper.

“Marsfontein proved conclusively that small pipes with subtle, small amounts of kimberliticminerals at surface can still be found in SA and can be very lucrative,” they said.

Campbell said the revenue generated by the bulk sampling work by Palaeo would be pumped into further exploration of the Thorny River property to find a bulge in the thin 0.5m-1m thick dykes that could be similar to the 0.4ha Marsfontein deposit.

Campbell said the model of using a contractor to develop deposits owned by a third party was not new, but using the contractor to do the early-stage, high-risk work to ramp up a project towards a bankable feasibility study was unusual.

The study should be complete by the end of 2019.

The nearby Klipspringer diamond mine was sold in 2017 by SouthernEra, which was 73% owned by AIM-traded ASA Resources after incurring a string of losses.