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Diamond Core may add to gem output
David McKay
Posted: Mon, 21 May 2007
[miningmx.com] -- FUND managers attending a recent visit to Northern Cape province properties being explored by diamond firm Diamond Core Resources were generally positive. “He’s got a good team and Theo Botoulas [MD] is well liked,” said Peter Major, a fund manager at Cadiz.
Moreover, the company has R100m in the bank after raising R232m last year, far more than it thought it might. So it’s well financed.
Yet questions exist. For example, there are some raised eyebrows that Diamond Core Resources is behind schedule on some of its exploration, a development Botoulas confirmed. “There were several issues we had to tie down,” he said.
One was financing an empowerment deal on its prospects, most of which are alluvial (riverine), with one kimberlite-bearing property, Paardeberg East. The other was the much-lamented issue in world mining that companies can’t source equipment and
supplies quickly enough.
Said Botoulas: “We were number 56 in line for X-ray machines. There’s huge demand for them, what with all the diamond exploration in the Congo. But there’s nothing sinister concerning the delay."
The other, more fundamental, issue is whether Diamond Core’s assets have sufficient quality. “The assets are very unproven and, well, average,” said Major, almost reluctantly. He said the properties were high grade (valuable stones are found on them) but have low frequency. That always makes investors uneasy, as cash flow is less predictable than high frequency diamond mines.
Botoulas doesn’t quite fly off the handle, but he’s defensive concerning that. “I wouldn’t say that. If Rockwell Ventures (a rival Canadian diamond exploration company) can raise millions for its assets you know there’s demand in the market.”
That’s quite true. Diamond demand is expected to grow, and so are diamond prices amid almost no new major diamond mining
developments. That means lower quality assets become more valuable than ever before. Still, Diamond Core seems to feel it requires some mining flexibility.
That’s why Botoulas confirmed an offshore secondary listing is being sought “sooner rather than later”. Although the company has cash in the bank, the point of an offshore listing is to raise the rating of the company’s shares – the value of its paper relative to its peer group – that it may need to finance a merger or acquisition deal.
“If we want to make acquisitions, we need offshore access to capital. At the moment we can’t acquire another company listed offshore,” said Botoulas. “We have no intention of moving the primary listing from Johannesburg.”
Des Kilalea, a diamond analyst at RBC Capital Markets in London, said Botoulas was viewed with confidence by investors, perhaps supported by the fact 60% of Diamond Core’s share register is crowded with institutional investors. “He’s a solid kind of guy. He’ll get there, though it may take time,” said Kilalea.
James Allan, of Allan & Hochreiter, helped Diamond Core raise its first major tranche of capital and may do so again, said Botoulas, scotching speculation the two men argued last year. “James Allan is an adviser and if he came through the door with a proposal for our board we’d definitely look at it,” said Botoulas.
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