A private UK-based company plans to take on the world diamond trade armed with lustrous assets from across the globe. By Chris Cann
The price of rough diamonds is benefiting from a critical supply shortfall that has been developing for years and this trend shows no sign of moderating and is the principal reason Mantle Diamonds has entered the diamond game.
The junior, which plans to list before summer next year in Toronto or London, has a global strategy based on kimberlite discoveries with the aim of becoming a fully integrated diamond company with a pipeline of projects and a diamond marketing arm.
It’s ambitious, there’s no denying it. But Mantle believes it has the pieces in place to make its lofty ambitions a reality and by the looks of its share registry – including JP Morgan, BlackRock, Sirius Investment Fund 1, Scottish Value and the AM2 Fund – the investment community agrees.
Mantle has spread its focus across three main regions to achieve geological and geographical diversity to reduce risk. At the time of publication, the company hoped to have completed three separate deals that will add significantly to its assets in Canada, Finland and Africa, forming an early stage pipeline of production possibilities.
All the junior’s projects are kimberlite exploration and development plays. Mantle managing director Lester Kemp told RESOURCESTOCKS that while there was some value in alluvial diamond mining, many operations were difficult to manage, and were not capable of delivering the large scale production that was possible from a kimberlite deposit.
He said the best way to take advantage of the shortfall in diamond production was to make kimberlite discoveries capable of producing more than 150,000 carats per year.
That was the thinking behind the company’s deal last month with Kopane Diamond Developments (formerly European Diamonds). Kopane has agreed to transfer all its Finnish assets – 28 mineral claims and reservations – in which Mantle will earn a 70% controlling stake by spending $US5 million on exploration and evaluation; and making a staged payment of £2 million in Mantle shares over three years.
Within the Kopane assets and central to Mantle’s spending commitment is the Lahtojoki project, where Mantle has plans to fund a feasibility study and potentially commission the project, with a 2010-2011 start-up date targeted.
This is the most likely site for Mantle’s graduation from explorer to producer, which could provide cash flow for the company and inspire belief within the market, according to Kemp.
“The project has somewhat of a chequered past because extensive cover has made bulk sampling somewhat difficult,” he said.
“It is our intention to go in there and push back the till cover to expose the entire area of the pipe, then use a bauer rig to sink holes around the pipe to get a representative sample of material down to about 50 metres.
“We’ll systematically test the whole pipe to get a sample of about 5000 tonnes. Once that’s processed, we can send the parcel away to get an average price for the stones.”
Two previous independent studies returned average grades for the project of 35 carats per 100 tonnes.
“We have completed an initial scoping study and the economics looked pretty good even with a 25 percent contingency factored in,” Kemp said.
“If Lahtojoki went into production it would be small, but what’s important is that we show people we can walk before we start running – start small and grow. We’re quite happy to prove ourselves as miners, then scale up accordingly.”
Mantle has ensured it has several avenues through which it can “scale up” in Canada and Africa, as well as the Kuusamo-Ruka early stage exploration project, also in Finland.
The African assets make up the highrisk part of the portfolio, but also have the potential for handsome rewards.
Mantle holds prospects in Liberia, Mali, and hopefully in northern Democratic Republic of Congo (DRC) following the expected acquisition of two British Virgin Island-held companies.
The DRC deals cover a large holding in far northern DRC, bordering the Central African Republic, in a region said to be “highly prospective”. Mantle is in good company with other operators in the country including Gem Diamonds, BRC Diamonds, and Mwana Africa – Mwana added to its DRC holdings when it recently took out SouthernEra Diamonds and prior to that Gravity Diamonds.
Mantle has commissioned the Africa Museum in Brussels to complete a desktop study on the tenements.
Kemp was also hopeful about the company’s pipeline joint venture in Liberia – the troubled nation has recently been accepted into the Kimberley Process and delivered its first shipment of diamonds earlier this year. Mantle is earning a 70% interest over 850 square kilometres of prospective land on the border of Sierra Leone.
“The whole project area has been covered by reconnaissance sampling that has never been processed so that’s where we come in. We’ll take the samples to Mali, ‘pre-con’ them and send them to South Africa for analysis – for that we’ll earn an immediate 15 percent interest. If the results are good we’ll stay and earn a staged interest.”
The company’s local consultants have reported the presence of kimberlite indicators on the property and Kemp is encouraged by other companies’ discoveries of kimberlite nearby. Mantle has recently made an offer to Mwana Africa for the Canadian assets of SouthernEra.
If successful, Mantle’s Canadian acquisition would consist of properties in the Northwest Territories and Ontario, along with the Canadian office and staff. The package would add to the junior’s Canadian portfolio that includes the Yellowknife project that was to be drilled at the time of writing.
Consideration for the assets would largely be Mantle scrip, which Kemp believes would give Mwana “cheap and easy” entry into Mantle and more exposure to the DRC.
Meanwhile, the Canadian assets are all within 50km of large, known kimberlite and diamond mines – Diavik (BHP Billiton) and Ekati (Rio Tinto) in the Northwest Territories and Victor (De Beers) in Ontario.
The most exciting area for Mantle in Canada would be the ground near De Beers’ Victor mine, where diamond values of around $419 per carat have been returned. Mantle has 24 drill-ready targets that Kemp is keen to explore. There are another 10 aeromagnetic anomalies within the area that are awaiting ground geophysics in order to position a rig.
This brief synopsis of the Mantle portfolio barely scratches the surface, but has hopefully conveyed a picture of breadth and potential. The most important factor across all the mentioned projects is that Mantle holds, or is earning, a majority stake in each and wherever possible the diamond marketing rights.
“Marketing rights ensure that you have control over the commodity for which you’re raising money to explore, develop and mine,” Kemp said. “You have control so you can make sure you don’t undersell. But it all comes back to knowing how to sell your product.”
Diamonds are a specialised case and marketing them is generally left to the experts, which is why co-founder Rupert Baring is so crucial to the company’s fortunes.
Baring has the contacts and expertise to ensure the best possible price for the company’s end product, not through the traditional diamond centre in Antwerp, but through the emerging power in diamonds, Dubai, where all Mantle’s rough produce will be sold through a tendering process. “Rupert has worked for De Beers and been a diamond broker – he knows how to sell rough,” Kemp said.
“One of his former colleagues, Neil Haddock, has set up Global Diamond Tenders in Dubai, of which Rupert is the marketing director. Global Diamond Tenders is a rival to Antwerp.
“So rather than selling to Antwerp or through De Beers, the BHP price book, or Rio – we have a natural selling platform and we know how to extract maximum value.”
Diamond prices at the moment are at historic highs and look to be heading higher. With that in mind, Mantle has set itself up with global production options and a ready-made platform from which to sell its diamonds to ensure maximum return for its shareholders.
3rd Floor
40-41 Pall Mall
London SW1Y 5JG
Ph: +44 (0) 207 389 8193
Fax: +44 (0) 207 930 3154
Email: info@mantlediamonds.com
Web: www.mantlediamonds.com
Lester Kemp, Rupert Baring, Mike Brennan, Cameron Pearce, A James Macdonald, Caspar Fithen
~ £11 million (at press time)
