Namakwa gets new Lesotho mine

Brendan Ryan | Tue, 05 Jan 2010 15:28

[miningmx.com] -- LONDON-listed Namakwa Diamonds (Namakwa) has acquired the Kao kimberlite pipe in Lesotho and headhunted Keith Whitelock to develop the mine.

Whitelock has more than 40 years’ experience in the diamond sector, much of which has been spent in Lesotho.

He ran the Letseng mine when it was first developed by De Beers in the mid 1970s until the mine was closed in 1982.

Whitelock was put in charge of operations at Letseng when the mine was reopened by Brett Kebble in 2004. Letseng was subsequently acquired by Gem Diamonds in 2006.

According to Namakwa CEO Nico Kruger, the Kao kimberlite hosts a total resource of 173 million tonnes (mt) of ore containing an estimated 12.4m carats of diamonds.

It is planned to process an initial 10mt of ore over a five-year period to recover 700,000 carats of diamonds. After that, the intention is to ramp production to 5mt/year over an expected life of mine of more than 40 years.

The acquisition bears out comments made by Kruger to Miningmx in October 2009, when he said: “We have not been sitting on our hands and have already looked at a number of opportunities.

“We are interested in projects that are already close to production and we are not into longer-term exploration assets.”

This followed market speculation that Namakwa – which runs a number of alluvial mines in South Africa and in the Democratic Republic of Congo - was keen to acquire a kimberlite project and had been talking to DiamondCorp about its Lace mine in the Free State.

According to a research report by RBC Capital Markets analyst Des Kilalea, “a kimberlite mine improves the quality of Namakwa’s mining portfolio as alluvials are generally more marginal.

“Much depends on the life of the Kao mine beyond the initial five years, though, as the grades outside the quarry are relatively low.

“A further positive for Namakwa is that Keith Whitelock is joining the company.”

The main Kao kimberlite pipe is the fourth-largest in Southern Africa at 19.8 hectares. It is situated at an altitude of 2,500m, about 200km north of Maseru and in close proximity to the Letseng and Liqhobong mines.

The mining lease is now held through Namakwa Batla Diamonds (NBD), in which Namakwa and Batla Minerals jointly own 62.5%; the Lesotho government 25% and “certain Lesotho investors” the remaining 12.5%.

Namakwa has board and shareholder control, meaning it must have at least a 51% equity stake.

Kruger said Namakwa had agreed to settle claims by certain Lesotho creditors against the previous holder of the Kao lease up to a maximum of $6.6m (R50.6m).

“These claims remain subject to verification by the appointed liquidators and potential reduction,” he said.

Kruger said Namakwa intended to develop Kao from its current internal cash resources. As of end-August, Namakwa had cash and cash equivalents of $13.9m and net working capital of $44.8m.

He said: “Kao represents a genuinely exciting development for the company, signalling a move into a new southern African geographical region and our first kimberlite project.”

Namakwa shares rose 7% to 34 pence in London on Tuesday. Kilalea said he rated the company “underperform – speculative risk” but added RBC would review its forecasts and investment thesis following meetings with management scheduled for next week.