Preliminary Results for the Year Ended 30 June 2012
Botswana Diamonds plc (AIM: BOD) (“Botswana Diamonds” or “the Company”) today announces financial results for the year ended 30 June 2012.
Highlights within the period:
•Awarded a new 249 square kilometre diamond exploration licence in Botswana, licence PL170/2012, about 30 kilometres from the world-class Letlhakane diamond mine
•Raised £1.51 million through a placing and direct subscriptions with the company
•First diamond recovered during sampling project at Libongo, Cameroon
Post Period End Highlights:
•Positive results from follow up gravity and ground magnetic surveys on anomalies identified in licence PL170/2012, Botswana
•13 targets, believed to contain diamondiferous kimberlites, identified following exploration activities with JV partner (a multinational diamond major) in Botswana; targets identified through use of JV partner’s bespoke technology applied to data collected by Botswana Diamonds
•Exploration licences applied for and exploration programme ready to proceed once licences obtained; 40 drill holes budgeted for
•Technical Cooperation Agreement with JV partner extended to mid-2014
•Additional diamonds discovered in Cameroon
John Teeling, Chairman, Botswana Diamonds, commented:
“In the last year Botswana Diamonds has made good progress. The early indications from the work we have carried out in both Botswana and Cameroon are encouraging. We will undertake substantial drilling in 2013, all of which is fully funded, and are targeting the discovery of one or more diamondiferous kimberlites. While nothing is certain in exploration, we are optimistic.”
Statement Accompanying the Preliminary Results
Mining lore has it that the best place to find a mine is where there is or was a mine. In diamonds, the best place is Botswana, the world’s biggest producer by value. For years the principals in Botswana Diamonds (BOD) have explored Botswana. They were successful with the discovery of what is now the Karowe mine, which opened in 2012. BOD is the successor company to that which discovered Karowe – African Diamonds. We have good ground, a large data base and a strong and experienced team.
On top of this we also have a unique advantage in that a diamond multinational is applying their proprietary technology to our data to identify what they believe will be previously unknown, large diamond-bearing kimberlites – the source of all Botswana’s diamonds. Following a year’s successful technical co-operation a total of thirteen sites have been identified in the Orapa area of northeast Botswana. Ground has been applied for and plans made to survey and drill the targets. An exciting year lies ahead.
Before discussing the exploration projects being undertaken by the company let me look at the fundamentals of the diamond industry. In a sentence, diamonds are scarce, yet women all over the world want them. A detailed Bain report predicts annual growth in demand of 6.0%. They analysed all sources and concluded that supply would be flat. It takes years from diamond discovery to first production so the only way to match demand to supply in the near future is through increased prices. Wild price swings in recent years do not help accurate forecasting. These swings reflect availability of cheap credit driving up prices and credit clampdowns leading to sell offs causing sharp price falls. But the fundamentals appear sound.
What is in a state of flux is the structure of the industry. The diamond industry was one of the world’s great monopolies. For almost a century De Beers exercised control of supply and prices. In the last two decades the monopoly first cracked then broke. Big companies such as BHP Billiton and Rio Tinto entered the industry. They either bought into or discovered new mines. Also, Alrosa, the Russian state diamond company, long excluded from selling directly to world markets, gradually took control of their domestic marketing. Alrosa now outperforms De Beers in terms of diamond output in carats – 40% of the world’s diamonds from seventeen mines. Junior exploration companies appeared but many are struggling. De Beers itself has now been re-absorbed back into Anglo American. Recently, BHP and Rio Tinto decided to exit the industry after failing to reach the scale demanded by their respective boards. What is sure is that more change is coming.
Turning now to operations, Botswana is the focus. This is a very exciting time for us in Botswana.
•We will drill our 100% owned licence PL170/2012 in early 2013. The indicators are good.
•Our year-long data analysis with our multinational colleagues has identified thirteen targets in the Orapa area. Of these, six are high priority. We have a joint budget of $1 million for 2013 to explore and to drill up to forty holes.
•The good results from the Orapa analysis have led us to extend the Technical Cooperation Agreement with the multinational to mid-2014 so that the southern part of Botswana can also be analysed.
In April we were awarded PL170/2012 – a very prospective 249 sq km licence about 30 km from the world class Letlhakane diamond mine. Geology indicates that this part of Botswana should be very prospective for diamonds but sand and basalt cover meant that there was relatively little serious exploration unlike the two adjacent licences where excellent indicators were found. Incidentally, so impressed are we with the results to date from PL170 that we have applied for the adjacent ground which is now available.
An intensive programme of evaluating all historical data on PL170 was followed by ground gravity and ground magnetic surveys combined with soil sampling which found G-9 and a few G-10 garnets. Twelve anomalies were whittled down to five of which three have been prioritised for drilling in early 2013. Of particular interest is BOD7, a fifteen hectare anomaly with good signatures.
The work being done with the diamond multinational is focussed and producing very specific results. This company, as yet unnamed, has applied their specific, proven technology to a large data base compiled by Botswana Diamonds personnel. The objective is to identify sites which may contain diamond-bearing kimberlites. The work outlined thirteen targets in the Orapa region. We have agreed a budget to explore and drill these targets. The budget allows for forty drill holes. We need to secure the ground and to negotiate the details of the joint venture. It is important to note that these sites are thought to contain previously undiscovered kimberlites which may contain diamonds.
The success of the first year of analysis led the partners to extend their Technical Cooperation Agreement until mid-2014 so that the south part of Botswana can be evaluated. This means we are running two separate programmes with our colleagues.
Our second area of operations is in Cameroon where the search is for palaeoplacer diamonds. Diamonds in palaeoplacer conglomerates is a new concept only slowly gaining credence in the exploration industry. A Korean company, CNK, has found diamonds in such rock in Mobilong in Eastern Cameroon – a very remote rainforest up to seven days drive in wet weather from the capital Yaounde. But you must go where the diamonds are.
Botswana Diamonds applied for ground adjacent to the Mobilong diamond discovery. Libongo is an 8,000 sq km block of rainforest. Preliminary prospecting found palaeoplacer rock. A follow up sampling programme in 2012 was designed to discover if the rock contains diamonds. It does. The next stage is a ground sampling exercise to discover the spread of diamonds followed by drilling. But, the sampling programme recently completed also identified the difficulties of operating in such remote areas. Over the past year discussions have taken place with CNK on how we might cooperate. Ideas range from shared logistics to equity involvement. In the coming months Botswana Diamonds will work with CNK and with expert consultants to see how best we can work together.
Zimbabwe, our remaining theatre of activity, remains problematic. It is believed that the Marange palaeoplacer deposit is producing 12 million carats a year of diamonds worth $40 a carat. We had an interest in developing Block J in Marange. The ground was given to a Chinese/Zimbabwean group. We had an agreement with locals to develop and mine in the Chimanimani area where we discovered diamonds in palaeoplacers in 2010. After tortuous negotiations a licence was obtained but the cash demands of locals made the project non-viable.
Finance
Botswana Diamonds raised £1.51m in March 2012. This money will fund all proposed exploration until end 2013. In common with other AIM listed companies we believe that our share price does not reflect the value in the company. Many investors in Botswana Diamonds got their shares for nothing as part of the Lucara deal to buy African Diamonds. Arbitrageurs bought into African Diamonds as a proxy for Lucara, which is quoted in Toronto. They ended up with unwanted Botswana Diamonds shares. At various times over the short two year life of Botswana Diamonds blocks of shares have hit the market driving down the price. We hope and believe that these loose holders have now all sold.
The Future
Drilling and more drilling. The target in 2013 is one or more diamondiferous kimberlites. More mines will be discovered in Botswana. We have data and the best available technology to outline targets.
The drilling will tell the truth. We are optimistic.
John Teeling
Chairman
18 December 2012