Clifford Elphick, CEO, GEM Diamonds
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» Elphick targets five mines by year-end
» GEM may bid for Kimberley Diamond Co.
» Diamond Core may add to gem output
» Gem buys troubled Gope for $34m
» We'll double Letseng's throughput - Clifford Elphick, CEO of Gem Diamonds
» We've been extremely fortunate. It's a fantastic jewel - Clifford Elphick, GEM


Gem Diamonds buys third producing mine
Allan Seccombe
Posted: Thu, 19 Jul 2007

[miningmx.com] -- GEM Diamonds has made a $263m cash offer for ASX-listed Kimberley Diamond Company, growing its production profile and broadening its geographic spread as part of its aggressive growth strategy.

Gem, which is headed by Clifford Elphick and a management team drawn mainly from De Beers, has made a A$0.70 per share offer for Kimberley and its primary asset the Ellendale mine in Western Australia, a source of rare diamonds known as “fancy yellows”.

Miningmx reported on Tuesday that Gem was to bid for Kimberley.

“Whilst the Ellendale operation has faced challenges, I have no doubt that Gem Diamonds’ technical expertise combined with its ongoing support of the current operational and technical management will ensure these challenges are overcome,” Gem CEO Clifford Elphick said.
Ellendale operation has faced challenges
GEM planned to have five producing diamond mines by the end of this year as it jockeys for a position amongst the world’s top five producers. The Ellendale mine will certainly give those ambitions a healthy shove.

Ellendale has produced 700,000 carats worth A$165m since the start of mining in mid-2002 and during the ramp up to the end of financial 2007. The operation is mining two kimberlite pipes and has a processing capacity of 8.3 million tonnes a year, which should produce 600,000 carats annually.

Kimberley also has a large exploration programme around Ellendale to add to its existing resource base of five million carats contained in 78 million tonnes at 6.4 carats per hundred tonnes.

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"Gem Diamonds brings the required balance sheet strength to complete the production ramp-up at Ellendale and optimise production and marketing strategies to ensure the longevity of the operation,” said Miles Kennedy, Kimberley’s executive chairman.

Gem will provide a A$10m loan towards Kimberley's working capital.

This is the third acquisition Gem has made since its listing on the London Stock Exchange in February 2007. It has raised $600m towards acquisitions and its internal growth projects. The acquisition will give Gem its third producing asset.

Its flagship asset is the Letseng mine in Lesotho, which is known for large, good quality diamonds. Letseng will double its production to 100,000 carats next year.

Gem recently acquired alluvial Cempaka project in Indonesia. That operation is in production. Gem has three alluvial diamond mines set to begin production by the end of the year in Democratic Republic of Congo and the Central African Republic.

Gem will pay for Kimberley out of its existing cash resources. The conclusion of the transaction is subject to a number of regulatory and shareholder approvals. There is a break fee of A$2m. Gem will post the takeover documents to shareholders on 16 August.

Kimberley's directors have recommended the bid. Gem has agreements in place with a number of shareholders to acquire 15% of Kimberley's shares. It needs 90%.