Wanetsha Mosinyi
13 October 2008
Boteti Exploration on Friday received a 15-year mining licence from the Botswana government for its proposed AK06 diamond project near Orapa.
De Beers (70 percent) and African Diamonds (28 percent) own Boteti Exploration.
Production is scheduled to start in April 2011, with all of Boteti's diamond production to be sold through Diamond Trading Company Botswana (DTCB).
Statements from the Joint Venture partners said government has undertaken to supply power to the project from the national grid, and had decided not to take equity in the venture. Government had the right to buy up to a 10 percent stake in the mine.
This is the second new diamond mine in which the government has decided not to invest after it declined to buy into the Lerala mine recently opened by BSE listed junior Diamonex.
Government has also agreed to waive a road levy on imported diesel until 2013, should the mine need additional power.
Boteti said the mine development would proceed in two phases, running from next year to 2014. Development costs are estimated at P2.76 billion and life of mine is expected to be 10 years.
Its production has been estimated at 600, 000 carats a year in the first three years, increasing to 880, 000 carats yearly over the remainder of the mine's lifespan.
This equates to about 8,1 million carats, with Boteti earning about $138 per carat. Boteti will pay a 10 percent royalty.
The company said employment levels would vary during development, with 850 people to be employed during construction of phase one. The figure will drop to 274 permanent employees during the operational stage of the same phase.
"This is an important milestone for African Diamonds," said chairperson John Teeling.
"We look forward to developing AK06 as quickly and effectively as possible."
For his part, Boteti chairman Tony Guthrie said company directors would continue to do everything to ensure that the full economic value of this deposit is realised for the benefit of the shareholders and the people of Botswana.
"We are excited about this the new development and I would like to thank the Botswana government and the joint negotiating team of Boteti who have worked tirelessly to ensure that all matters pertaining to the licence were concluded in time and satisfactorily," Guthrie said.
The agreement ends one of most disruptive confrontations in the diamond industry, where junior partner African Diamonds effectively declared war on diamond giant De Beers.
The dispute became public in July when African Diamonds announced it was taking legal action against De Beers. The junior miner alleged De Beers was looking to stall development of the mine because it had not been able to agree terms with government on the marketing of diamonds from AK06.
Government wanted the diamonds to be sold by auction in the country, separate from the De Beers Diamond Trading Company (DTC) marketing channel.
De Beers denied this, stating its main concern was over the power supply to the mine, given future power supply constraints in southern Africa.
Government rejection of De Beers retention licence application is said to have left the diamond giant with little or no option except to bury the hatchet with African Diamonds and accept the mining licence terms.
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