Corona plans diamond spinoff to fund Botswana exploration

Gold producer Corona (TSE) has decided to form a new company, Corona Diamonds International, to finance a major diamond exploration program in Botswana, the world’s third largest producer of the valuable stones. Under an agreement with Repadre Capital (VSE), Corona will gain control of Repadre and form a joint venture with Ampal Ltd., a Botswana company holding 24 prospecting licences covering 20,600 sq. km. Repadre will be renamed Corona Diamonds International Corp. Christopher Jennings, senior vice-president of exploration for Corona, will be president and chief executive officer of the new company.

As the deal now stands, Corona Diamonds must spend $2 million by Dec. 31, 1991, in order to earn a 40% interest in Ampal’s diamond properties. For each $90,000 spent thereafter, Corona Diamonds would be entitled to an extra 1%. Once Corona’s interest reached 60%, it could increase its position to 90% unless Ampal elected to maintain its remaining interest by contributing to all future financing.

Airborne and ground surveys are in progress over several kimberlite- like targets on the licensed ground, and Corona expects to drill 30-50 of the potential zones in September. Kimberlites are the world’s major source of diamonds, although only a small percentage of known kimberlites are economic.

To finance the new venture, Corona has agreed to subscribe to a private placement of 1.3 million units of Corona Diamonds at $1 per unit. Each unit will consist of one common share and half a warrant to purchase a common share at $1.20 for two years.

Corona will also sell all of its North American diamond interests to Repadre for approximately $248,000. If the transactions meet regulatory approval, Corona will be the largest shareholder of Corona Diamonds, with a 49% interest. A corporation controlled by Corona Chairman Ned Goodman would be the next largest shareholder, with a 25% stake.

Botswana, which produces about 15 million carats annually, is estimated to be the world’s top diamond producer in terms of value. In 1989, the country’s sales of rough diamonds exceeded $1.33 billion.