If you’re going to make your mark in the diamond business, it helps to have the right connections and they do not come much better than at Mantle Diamonds.
In this case, one of the co-founders of the company just happens to be Rupert Baring, who not only knows the market well through his time at De Beers but also has the confidence and contacts of his financial family roots.
For Mantle Diamonds, says the company’s other cofounder and managing director Lester Kemp, the Baring name, not to mention his partner’s retail experience is one important side of the equation. The other side is coming up with the right assets, which in Mantle’s case has meant spreading the company’s interests across three continents in order to offset the high risk of kimberlite diamond exploration.
“We feel you need to spread not only country risk but also geological risk,” says Mr Kemp who has 15 years experience in the business and believes he knows how to spot a good project when he sees one. After setting up the company with Rupert Baring in September 2005, the pair have put together an impressive list of blue chip investors and hope to raise more than £20 million when Mantle lists on AIM sometime before the summer.
“The idea is to raise enough to do justice to the current portfolio,” says Mr Kemp. “There are plenty of companies out there with good projects and/or good management but they are lacking in funding.” At the time of writing, the company is sifting through a portfolio of assets in Canada, Finland and Africa, building up the type of pipeline which will merit serious investigation once more funds are in the bank post IPO.
That said and given the above door opening connections, the company has hardly been hanging around at the private placement stage.
“One of my great issues,” says Mr Kemp, “was not going to IPO with a weak treasury position,” and he has just over £6 million in the bank plus investors of the stature of BlackRock, JPMorgan, Al Rajhi Partners and Sirius Fund 1 to prove it.
The company’s strategy to date has revolved around a combination of organic growth and acquisition. It has been exploring existing, established assets in Finland, Mali and Canada and buying new ones – either as individual projects, as has been the case in Africa and Finland or as companies which has happened in Africa and in Canada where the company hopes to take over the diamond assets, offices and management of SouthernEra Diamonds Inc.
In the case of SouthernEra, Mantle has made an offer to the company’s owner Mwana Africa plc, which, if successful, says Mr Kemp, “would be a good addition to our northern hemisphere portfolio.” At the time of writing, the company is going through the various legal processes to ensure the deal is viable.
Another deal at the heart of Mantle’s immediate ambitions has been its recent acquisition of all the Finnish assets – 28 mineral claims and reservations – of Kopane Diamonds (formerly European Diamonds). The deal, which includes the near term Lahtojoki project, gives Mantle the right to earn a 70% controlling stake by spending US$5 million on exploration and making a stages payment of £2 million in Mantle shares over the next three years.
One of the milestones listed in the joint venture announcement at the end of last year was the publication of a bankable feasibility study for Lahtojoki and this could be important proving ground for the company, predicts Mr Kemp. “In the next 18 months I’d like to see us at the decision-to-mine stage, or not, with Lahtojoki.
Part of the feasibility study at Lahtojoki will involve back-stripping to the eastern part of the target kimberlite pipe, taking out a sample of around 3,500t of material for processing. This ought to provide a representative sample of stones from which the company can get an average price.
While Lahtojoki would be a relatively small operation if it does prove to be economic – no more than 150,000-170,000ct/y – it would be a good project to cut the company’s teeth on, says Mr Kemp, moving it from exploration to production along the first two strands of its strategy.
“We realise that we must learn to walk before we can run. Once you have proven yourself you can scale up to the next level.” The next level – post-2010 by Mr Kemp’s calculation – will be to turn Mantle into a substantial diamond producer, not only producing some of the world’s sought after stones but also tapping into Mr Baring’s network of marketing and sales contacts in the industry.
In fact, he believes, lack of marketing expertise is a fundamental omission made by numerous juniors after all the efforts they put in on the exploration side.
In the meantime, the company will continue to sift projects, weighing up options and taking forward the test case project of Lahtojoki. Against a backdrop of high-risk kimberlite exploration, the company recognises the need to ‘churn and burn’ projects, spending money wisely and never lingering too long over a project once it has been subject to appropriate investigation.
This includes some of the African projects in Liberia, Mali and northern Democratic Republic of Congo which together make up the higher risk but potentially richly rewarding part of the company’s portfolio. In Liberia, for example – a country that has recently been accepted into the Kimberley Process – the company has an agreement to earn up to 70% interest in 850km2 of land which has been reconnaissance sampled but never properly processed.
The IPO, adds Mr Kemp, will just be the start of the next phase. “You’ve got to be out there. The market is still crying out for consolidation and armed with a strong treasury we believe there are opportunities ripe for the picking.”
A geologist by training, Mr Kemp has been actively involved in both diamond, gold and base metals exploration throughout Africa, South America and Western Europe for a number of junior mining companies, including Canarc Guyana Resources and Serabi Mining, and mining entrepreneurs.
Mr Baring is a highly experienced diamond broker with in-depth knowledge of the international diamond trade/site holders business, having been trained by and worked for De Beers and I Hennig & Co (broker to the Diamond Trading Corporation), sorting and valuing rough diamonds.
Mike Brennan
Technical & operations director
Cameron Pearce
Finance director
James Macdonald
Technical adviser
Caspar Fithen
Consultant
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
Managing director: Lester Kemp
E-mail: lester.kemp@mantlediamonds.com
