South Africa – AIM-listed vertically integrated diamond development company Paragon Diamonds, who is currently developing its Lemphane kimberlite pipe project in Lesotho, plans to acquire a second diamond resource in Africa.

If successful the proposed acquisition will significantly enhance the asset base of the Paragon and its valuation ahead of Stage I production at Lemphane in the second quarter of 2015.

Paragon Diamonds chairperson Philip Falzon Sant Manduca says that the company has already been performing due diligence to validate our strategy for development of the kimberlite diamond resource it aims to acquire

Paragon has raised £130 000 in new equity for the acquisition and critical due diligence on the resource to isolate and thus segregate the costs associated with a potential acquisition of a resource, rather than use development capital to acquire other assets or as opposed to equity dilution.

But if the acquisition is successful, Falzon Sant Manduca it should significantly re-rate the company, significantly escalate production and revenue numbers and of course one would hope be reflected in a higher share price.

Should the acquisition be successful, International Triangle General Trading will finance it on agreeable terms, and at a lower rate of interest, rather than via further share issuance.

Further, Falzon Sant Manduca believes that Paragon could “achieve significant economies of scale” by combining management teams at both Lemphane and the potential acquisition mine and through the ordering of relevant plant equipment and use of sub-contractors.

He further says that should its efforts at an acquisition be successful, bearing in mind that Paragon is one of a number of potential acquirers, it would look to develop both mines simultaneously.

However, Falzon Sant Manduca says that if it does not make an immediate acquisition, the company will remain on schedule for second quarter production at Lemphane.

While continuing to work towards adding value for its shareholders, Paragon Diamonds is also working towards establishing its distribution channels in Dubai, and has upgraded it business strategy to focus on production and not exploration.

Evidence of this is its decision to move away from its current ownership of unexplored licenses in Zambia, Botswana and Tanzania towards the potential acquisition of a further resource which can combine with Lemphane to produce significant economies of scale and an increased level of production.

Lemphane Update

Meanwhile, Lemphane, which is located among a cluster of kimberlites known for producing exceptionally large, high value diamonds, is already scheduled to undertake preparatory earthworks.

The project is estimated to extract about 1Mt of kimberlite over an 18 month to two year period targeting recovery of over 100 diamonds larger than 9 carats, including stones over 100 carats in size.

The first stage of the preparatory earthworks will involve the construction of a dual haul road, capable of handling the larger 40 t haul trucks between the kimberlite orebody and processing plant site; preparing the 75tph, or 0.5Mt/y, processing plant site in anticipation of civil construction of foundations and footings; and commencing work on a terraced site for intended residential staff camp, planned to house circa 75 employees and contractors.

Immediately following completion of the preparatory earthworks, earth moving machinery will be deployed to undertake final pre-stripping of overburden over the Lemphane kimberlite to enable initial pit development.

This will be followed by construction of access ramps and roads within the planned 1Mt sub-pit and earthworks on the access to, and retention wall toe for the planned 0.5-million m3 tailings storage facility, and associated drainage, retaining wall and water dams, the design of which has recently been finalised by Paragons civil engineering consultants.

It is proposed that the dam construction and mining will be undertaken by leading mining contractor, Matekane Mining Investment Company (MMIC), the principals of which hold a 12.9% interest in Paragon Diamonds. MMIC is also the main mining contractor on two neighbouring mines moving in excess of 20Mt of kimberlite and basalt waste rock a year.

Meanwhile, discussions are on-going with the consortium developing the Lesotho Electric Corporation HT regional 132kV power line with regards to the electrification for both Stage I and Stage II mining operations, which has the potential to significantly reduce the project’s operating costs.

Further, drilling of a final eight holes to confirm the dimensions of the kimberlite at between 200 m to 300m depth below surface is due to be complete shortly.  Geotechnical drilling will also be carried out for the purposes of the tailings storage facility and open pit construction at Lemphane by Rodio Geotechnical Services, who are the main core drilling contractor at the nearby Letšeng Diamond Mine, jointly owned by Gem Diamonds  (70%) with the Government of the Kingdom of Lesotho owning the remaining 30%.

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