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BRC DiamondCore on the brink
Allan Seccombe
Posted: Fri, 13 Mar 2009

[miningmx.com] -- THE technically insolvent BRC DiamondCore is widely said to have made a potentially company-making kimberlite discovery in the Democratic Republic of Congo as it grapples with laying off workers at its mothballed South African operations, which are being looked at by potential buyers.

The six-month-old discovery of the kimberlite is said by many in the industry to be one of the worst-kept secrets in the diamond community yet the company has not told its shareholders.

“If and when we’ve compiled sufficient geological data we will release it. We are not hiding anything,” said BRC spokesman Martin Jones. An update from the company is expected in the next 10 days.

Brian Scallan, BRC's financial director, said: "There is no way we are in violation of TSX rules in that regard."

The discovery is thought to be linked to respected diamond geologist Mike de Witt’s search for the source of the rich alluvial deposits in southwest DRC.
its mining licences for the projects could be revoked
The Tshikapa areas has long been regarded by BRC DiamondCore as an area with strong potential to yield rare diamondiferous kimberlite deposits, a point it makes clear in documents carried on its website.

BRC had tried to include Rio Tinto in the exploration programme of the kimberlite, and asked it to pay C$6m upfront to earn into the programme. However, Rio declined to become involved, with the downturn in the global diamond market and its unwillingness to pay the money upfront.

Clifford Elphick’s Gem Diamonds subsequently became involved in the programme, spending enough to keep the exploration work ticking over with the view of possibly buying into the project once it has satisfied itself of the kimberlite’s potential. It also declined to pay C$6m upfront.

Gem has since pulled out of the programme given the parlous state of BRC’s finances, which could mean the company may not receive whatever it is possibly entitled to in the project. The state of the diamond market would also make it difficult to fund any development of a kimberlite mine if the deposit was proved.

Questions have been raised about the quality of the kimberlite or kimberlites that might have been found, with the only exceptional feature of the discovery being that they’re in a place where nobody thought they’d be.

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The actual richness of the deposit or whether it is economically viable to exploit is something no one is clear on.

In Johannesburg, BRC shares have fallen to a low of R0.30 off a year-high of R23.70. In Toronto, the shares at a low of C$0.07, off a 12-month high C$3.10. Nearly all diamond juniors have experienced sharp falls in their share prices as demand for their products dries up.

BRC’s current liabilities, or payment that falls due within the financial year, stood at C$12m at the end of its third quarter of 2008, with half that figure made up of a C$6m backed by its large shareholder Banro. Current assets came to C$2.8m, of which C$1.2m was cash.

This is a common financial position for an exploration company to find itself in, Scallan said.

The fourth quarter results are due out by 31 March.

Mining licences may be revoked

In South Africa, BRC declined to meet South African trade union Solidarity on Thursday as planned because “its financial situation had not improved since the last meeting and there would be no merit in engaging labour”, said a union spokesman, citing BRC management.

BRC has served legal notice it intends laying off nearly 200 workers at its Silverstreams alluvial project and kimberlitic Paardeberg project.

Solidarity intends asking the Department of Minerals and Energy if BRC had sent a Section 52 notice to the department, notifying it of the retrenchments. If BRC has not followed due process its mining licences for the projects could be revoked.

If that happens, it will put a serious kink into any efforts to sell the assets. BRC is understood to want to sell the assets as a complete package, but only the Silverstreams project stands out as desirable.

Scallan said he was sure the Section 52 notice had been sent to the DME. "I'm sure we're in full compliance." The job cuts are effective on 15 April.

BRC has already sold off non-core assets in South Africa like a guest house, old equipment and other property, he said. "Otherwise, we are keeping all our assets in care and maintenance until the diamond market recovers," Scallan said.

The one name that keeps coming up in connection with possible buyers is diversified mineral holding company and coal miner Miranda Minerals.

“We are always looking at assets. In our energy portfolio we have reached critical mass. We have substantial diamond interests and we are looking to build that portfolio to get it to critical mass,” said Miranda CEO Ron Nel.

Asked if BRC was talking to anyone about selling the South African assets, Scallan said, paraphrasing Rockwell CEO John Bristow: "Everybody is talking to everybody else. That is true."

Jones said BRC had no comment to make on the matter and would tell all shareholders if and when something happened.