Botswana Diamonds seeks funding to revive domestic exploration

By David Whitehouse
Posted on Tuesday, 6 September 2022 09:44

REUTERS/Siphiwe Sibeko

Securing funding for Botswana Diamonds projects has the potential to contribute to a revival of domestic exploration as the country’s established mines age, the company’s managing director James Campbell tells The Africa Report.

Initial funding of about $4m is needed to complete the company’s purchase of the Ghaghoo mine, which is located in the central Kalahari basin. A previous agreement to buy the mine from Gem Diamonds fell through in February when partner Vast Resources withdrew its financial backing for the purchase.

Gem Diamonds put the mine on care and maintenance in February 2017 after recovery of just under 150,000 carats of diamonds. Getting $6.5m of funding would allow for an update of the feasibility study and create time to seek $20m in debt to get the mine back into operation, Campbell says. He has been in discussions with one unnamed group who he hopes will “eventually deliver.”

Botswana Diamonds, market cap of $8.4m, is one of a number of smaller players in a sector dominated by behemoth Debswana, a joint venture between De Beers and Botswana. Debswana exported $3.5bn of diamonds in 2021.

Botswana is the world’s largest diamond producer by value and the second largest by volume. The funding would have a wider impact beyond the company’s projects. Campbell has been pushing for the Botswana government to convert its 10% royalty right into a debt or equity stake.

The government understands the logic of doing this for smaller projects as the country’s larger mines are in the “back end” of their life, meaning more exploration in the country is needed, Campbell says. Officials want to see Botswana Diamonds complete the Ghaghoo purchase first before deciding on the change, which would “absolutely” have a wider impact, he adds.

  • The Kalahari basin is “the last frontier” in Botswana for diamond exploration, Campbell says. But South Africa’s diamond industry, he argues, has benefited from lower or zero royalties on diamonds than in Botswana.
  • Getting Ghaghoo started would help to make a further deposit at the KX36 project 60km to the south viable, by providing the scale needed for logistics in remote areas, Campbell says. “You need Ghaghoo to work for KX36 to work.”
  • The plan is to use solar power at the project, which makes better economic sense than diesel generators, he adds.

Zimbabwe Potential

Botswana Diamonds trades on London’s Alternative Investment Market (AIM), and on the Botswana stock exchange. The company predicts that global diamond production capacity will shrink from over 50 mines now to about 14 by 2040, with carat production falling from 145m to about 60m. Demand will be supported by the major growth markets of China and India, the company says.

Campbell is seeking opportunities to apply for more licenses. The company announced on September 5 that it has been awarded a five-year prospecting licence in the Barkley West area of South Africa. It has also applied for a mining permit at the Thorny River diamond project in South Africa following a drilling campaign.

Zimbabwe is a jurisdiction where Campbell wants to explore. Entry into diamond exploration there is currently restricted, but Campbell says he is “working quietly in the background” to be allowed access. “We believe Zimbabwe to be highly prospective.”

  • The fact that restrictions on platinum mining have been eased in Zimbabwe gives him optimism that access will be granted at some point.

Campbell worked at De Beers for more than 20 years. One thing that doesn’t worry him is competition from cheap, lab-made diamonds. These only affect demand for mined diamonds at the bottom of the range, he says.

  • Overall, the impact of lab diamonds is to stimulate demand for the real thing, as more people get interested younger and at a lower pricing point, he argues.
  • Statistics show that there is a very high probability of a first diamond purchase leading to a second one, he says.

Bottom Line

A shrinking global production base makes it a good time for Botswana to stimulate exploration.

 

 

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