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Thursday, January 07, 2010
West African Diamonds says its doing well as it nears Stellar merger and eyes further consolidation



In its interim results statement for the six months ended 31st October 2009, AIM listed West African Diamonds (AIM: WAD) said it has done well as it progresses with its merger with Stellar Diamonds. During the period the Bomboko diamond mine in Guinea came on stream and the company made a number of strategic developments. The junior diamond producer said it will continue to grow through consolidation activity.

Bomboko came on stream in June and subsequent diamond sales realised an average US$117 per carat, as poor market conditions led to the lower-than-anticipated average price. However West African Diamonds reported a marked improvement in conditions for the end of 2009 with higher prices expected going forward. West African Diamonds continued an expansion programme at Bomboko, installing an additional plant which is now fully operational, boosting production capacity and enabling diamond production of 1,500 carats per month.

In the six months ended 31st October 2009 the junior diamond producer made an operating loss of £128,000, equating to 0.17 pence per share.

In order to focus its resources on the Bomboko mine and relieve its financial obligations, the AIM listed diamond company agreed joint ventures on its two projects in Sierra Leone. A Lebanese/Japanese consortium, the Thunderball JV, assumed the interest in the Pipe 3 kimberlite and surrounding dykes. Under the deal, West African Diamonds will retain a 20% free carry though to production. Elsewhere the mining licence for the Plant 11 undersize tailings near Koidu has been transferred to locally based, privately owned Pyramid Resources in return for a 5% production royalty.

According to this morning’s statement, the decision to merge with privately held Stellar Diamonds was the highlight of the period. In November the board told investors that the merger was progressing well. The newly combined venture is expected to re-list during the first quarter of 2010, subject to approvals and a new fund raising. Stellar Diamonds’ principal shareholder is African Aura Mining Inc (AIM: AAAM; TSX-V: AAZ).

The board felt the company was previously too small to attract significant investor interest and subsequently targeted a consolidation driven growth strategy. The proposed merger will combine West African Diamonds and Stellar Diamonds on a 25/75% basis before the new funding.

The new company will have two producing diamond mines in Guinea, Bomboko and Mandala, with a combined resource base of over 1.5 million carats, as well as three joint ventures in Sierra Leone. Additionally it will also hold 100% interests in two high grade kimberlite projects, Droujba in Guinea and Tongo in Sierra Leone.

In reference to the outlook going forward, the company said it will continue to grow through consolidation activity in what it believes is a fragmented and undervalued industry. Additionally the merger and planned financing is expected to strengthen the balance sheet and enable the high grade kimberlite projects to be developed.

Possibly related posts: (automatically generated)
Guinea’s Major Mining Operations
The “New” Blood Diamonds: Guinea’s Bauxite, Burma’s Rubies, the DRC…
West African Civil Society Orgs. Plan Mass Protest Against Guinean Junta
SIMON RIEKERT JOINS WEST AFRICAN DIAMONDS AS CHIEF OPERATING OFFICER






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