Koidu sells initial production (February 16, 2004)

Partners DiamondWorks (DMW-T) and privately held Magma Diamond Resources have sold the first lot of stones from the recently revived Koidu project in Sierra Leone.

In January, 8,099 carats of diamond were mined from 12,480 tonnes of kimberlite material from Pipe 1. The stones sold for US$1.8 million, or US$223 per carat. January’s recovered grade averaged 0.65 carat per tonne (cpt), in line with a historical estimate of 0.67 cpt.

The average stone size is 0.31 carat, and 93% of the diamonds are described as gem quality. The package also includes 16 special stones, each of which exceeds 10 carats, including four that weigh more than 20 carats; two other stones tip the scales at more than 30 carats apiece.

The two largest diamonds weigh around 30.1 carats and 35.8 carats and sold for US$2,700 and US$2,200 per carat, respectively. In all, the special diamonds fetched US$1,108 per carat.

DiamondWorks says the initial sale from Koidu excludes diamonds recovered from Dyke Zone B, overburden, and other startup material treated during the commissioning phase late last year. That production accounted for an additional US$195,000.

Koidu is home to two kimberlite pipes (1 and 2) and four dyke zones (A, B, C and D). Historical resource figures peg resources in Pipe no. 1 at 1.6 million tonnes running 0.67 cpt; Pipe 2 is estimated to contain 3.1 million tonnes grading 0.4 cpt.

Operations resumed late last year after the end of a decade of civil war in Sierra Leone. Some US$14 million was spent to revive the project.

Says DiamondWorks CEO Anthony Teixeira: “Grade and prices achieved for the initial production from Pipe 1 have met with our expectations for this exciting project.”

DiamondWorks and Magma each own a 40% stake in Koidu; the Sierra Leone government holds the remainder.

Meanwhile, DiamondWorks has arranged a private placement of up to 14.9 million units for gross proceeds of up to $29 million. Teixeira-controlled Lyndhurst, the company’s largest shareholder, has agreed to take up around 6.7 million units at $1.95 apiece. The remaining units will be issued to institutional investors at $1.80 apiece.

A unit includes one share plus half a share purchase warrant, with a whole warrant good for one share at $2.50 per share for 18 months from the deal’s closing.

Proceeds will be used to bolster DiamondWorks’ working capital. The deal has yet to be approved by the Toronto Stock Exchange.

DiamondWorks was trading 8, or nearly 4%, higher at $2.13 in early trading in Toronto on Feb. 10.