DiamondWorks, Eastern join forces in South Africa

Eastern Diamond has agreed to a joint venture with Vancouver-based DiamondWorks (DMW-T) that would see Eastern earn a 30% interest in three alluvial diamond projects DiamondWorks is trying to acquire in South Africa.

Eastern is a private, India-based company. It employs some 7,000 diamond cutters.

The company can earn a 30% interest in the joint venture by contributing US$2 million, which will be go to working capital and to fund the acquisition of the three projects. Eastern will have the right to match market prices to buy the joint venture’s total diamond production.

DiamondWorks has an agreement in principle to acquire the rights to the Vishoek diamond mine for about US$100,000 in cash. The mine has been producing at a grade of 0.6 carat per 100 tonnes, with a value of about US$750 per carat. The capital required to run the mine at the historical production rate of 700 carats per month is about US$500,000. DiamondWorks plans to begin production as soon as possible.

The company has also acquired a three-month option to acquire the prospecting and mining permits for the Annex Saxondrift project for US$800,000 — US$500,000 in cash and the remainder in DiamondWorks shares. The project’s working capital budget is US$500,000.

DiamondWorks is also engaged in advanced negotiations to acquire an option to purchase the surface rights, infrastructure and prospecting permits at the Miners Hope project for US$350,000 in cash.

The project is adjacent to the Annex Saxondrift project and would add substantially to the life of Annex Saxondrift. It includes substantial infrastructure, including a water pipeline. This will also service Annex Saxondrift.

All three projects lie along South Africa’s Orange River. The deals are subject to board and regulatory approvals.