Graham Wheelock, GEM Diamonds
Send this article to a friend
Print this page

» Gem buys troubled Gope for $34m
» We've been extremely fortunate. It's a fantastic jewel - Clifford Elphick, GEM
» We'll double Letseng's throughput - Clifford Elphick, CEO of Gem Diamonds


GEM may bid for Kimberley Diamond Co.
David McKay
Posted: Tue, 17 Jul 2007

[miningmx.com] -- GEM Diamonds, the £660m diamond producer, may bid for control of Australian and London-listed Kimberley Diamond Company after a trading halt was imposed on the stock today (July 16).

"Rumour in Australia points towards a potential corporate transaction, with an offer for the company from Gem Diamonds seen as the most likely deal," said John Meyer, an analyst for Numis Securities, a UK stockbrokerage.

Angela Parr, spokesman for GEM Diamonds, declined to comment. "We may comment on Kimberley Diamond Company at an appropriate time," she said. Meyer added, however, there were other options including the possibility that Kimberley Diamond Company might be considering acquisitions of its own.

In a separate statement today, Kimberley Diamond Company said that JP Morgan Chase & Co has ceased to be a substantial stake holder. JP Morgan Cazenove was sponsor, global coordinator and sole bookrunner for GEM Diamonds in its 2007 IPO.

"With JP Morgan having sold 4.5 million shares I don't imagine this will be anything but a merger," said Jay Ashfield, an analyst for RBC Capital Markets. "We don't expect any further news for a couple of days."

"An announcement may be out on Thursday (July 19)," said Meyer commenting on the trading halt. "A trading halt is required in Australia if the company is in receipt of major share price sensitive information," he said.

GEM Diamonds has announced its intention to grow aggressively by acquisition and has earmarked production of a million carats by 2009.

Speaking in May, Graham Wheelock, head of geology at GEM Diamonds said: "We want to beat up fairly soon against the majors". The company had burst on to the London Stock Exchange and wanted to maintain its forward momentum. "We've entered the league table quite high," Wheelock said of the company's debut in London.

GEM is now the second largest pure diamond play in London after Aber Diamonds Corporation, since renamed Harry Winston Corporation, following an initial public offering earlier this year in which GEM Diamonds raised $600m.

Since then, the company has bought Gope Exploration Company in Botswana from De Beers and Xstrata, and BDI Mining for a total amount of $114m.

Click Here to subscribe to our daily newsletter
Before that, GEM bought control a 70% stake in the Letseng diamond mine in Lesotho from JCI for about $125m and then set about plans to expand it at a cost of about $45m - a development it will finance from cash flow amid higher than expected diamond prices for its Letseng production. GEM Diamonds has cash on hand of about $519m, according to a trading statement issued on July 12.

Kimberley Diamond Company is a junior diamond exploration company with a market capitalisation of about A$222m. It is developing the Ellendale project in western Australia which is expected to produce 600,000 carats/year. So far the project has produced 545,000 carats of diamonds generating sales of A$122m.

"Kimberley is one of the few junior diamond miners with significant production and we expect it to make a profit from next year following expansion investment," said Meyer of Numis Securities.