Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
African DiamondCorp (LON:DCP) said its 74% owned Lace Diamond Mines, the company’s primary asset in South Africa, has entered into a loan funding term sheet with the Industrial Development Corporation of South Africa Limited (IDC), the company announced Monday.
IDC will grant the subsidiary a loan of 280 million Rand, approximately $33.6 million, which will be used for the underground development of Lace mine and the purchase of mining equipment, and would likely carry a term of seven years, said the company.
Paul Loudon, CEO of DiamondCorp said the key driver for management in seeking funding for the mine development was to find the optimum financing method, which is the least dilutive for shareholders.
“Therefore, we are delighted that we and our BEE partners have been able to agree in principle a debt financing proposal from the IDC to provide over 98% of the estimated capital required to establish a block cave development on the 47 level at the Lace mine,” he said.
Lace diamond mine is located 25km northwest of the town of Kroonstad in the Free State Province of South Africa. The mine operated from 1896 to 1931, and according to mine records produced approximately 700,000 carats of diamonds from 4.5 million tonnes of kimberlite at a recovered grade of 16 carats per hundred tones.
The vertical shaft and development drives were completed in 1930, a year before the mine closed when diamond prices collapsed in the Great Depression. The mine was then kept dewatered until 1939 when it was acquired by De Beers.
After progressive changes to the mining law in South Africa, DiamondCorp acquired the property from the Christiaan Potgieter Trust in 2006 in conjunction with BEE partners Shanduka Resources and Sphere Investments.
