Pangea depends on Angola

Brendan Ryan | Tue, 29 Sep 2009 15:23
[miningmx.com] -- THE future of Pangea DiamondFields (PDF) as a “going concern” depends on production from the Cassanguidi project in Angola being scaled up as planned.

Shares in the diamond explorer dropped 10% to 1.92p in London today on release of the news contained in PDF’s interim results statement for the six months to end-June which reported a loss of $8,8m (previous comparable period - $11.2m loss).

PDF has lost 97% of its value since it listed on London’s AIM bourse through a private placing at 60p a share in 2006.

The company had cash resources of $3.3m at the end of June but this had dropped to $1.54m by September 21 primarily due to the capital cost of additional equipment for Cassanguidi as well as the delayed ramp up of the project.

CEO Brett Thompson commented that, should there be any delays to scaling-up operations at Cassanguidi and should PDF be unable to source additional bridge funding, then “a material uncertainty exists which may cast doubt on the company’s ability to continue as a going concern.”

Thompson added, “similarly there exists a material uncertainty as to when rough diamond prices will recover significantly and this may also cast doubt on the company’s ability to continue as a going concern, rendering it potentially unable to realise its assets and discharge its obligations in the normal course of business.”

Angola has not proved to be a favourable operating environment for diamond companies despite the country’s considerable geological potential.

Over the past two years BHP Billiton and Petra Diamonds have shut down their exploration operations in the country. Trans Hex has put its two Angolan mines on care and maintenance and Gem Diamonds has done the same with its Chiri project.

Thompson said PDF had been working on Cassanguidi for three years and operations had gone “reasonably well.”

He added, “our Angolan partners have been very useful and the remaining issue is a technical one of scaling up the operation.”

Thompson said PDF held an attributable 58.5% stake in Cassanguidi but it would initially receive 65% of the earnings until a loan account it had provided was settled.

All going to plan Cassanguidi should be generating enough revenue to cover its operational costs by October and would reach full capacity by the end of 2009. At that stage it should be producing 8,000 carats of diamonds a month worth between $120 and $130 a carat.

In South Africa PDF has completed a feasibility study on the Bakerville project and has submitted a mining right application.

Bakerville has been put on care and maintenance to conserve cash while PDF waits for the grant of the mining right.

That could take up to a year in terms of the stated strategy of the Department of Mineral Resources but Thompson is hoping to get it faster than that.

He commented, “Bakerville is an exciting project and it’s right on our doorstep so we would love to get it going. I would like to think we could get the mining right granted fairly swiftly. “

Thompson estimated the capital cost of developing Bakerville at $8m but added, “ the company anticipates that given the favourable location of this project in South Africa a substantial amount of the equipment required could be acquired on financing terms.”