DiamondWorks (DMW-T) and its joint venture partner, private South African company Magma Diamond Resources, have inked a new joint venture agreement for the development and reopening of the Koidu diamond mine in Sierra Leone.
The two companies have agreed to set up a project company, to be owned equally, which would hold title to the Koidu project and act as project operator. DiamondWorks and Magma would fund the new company equally.
Magma, a company set up by Israeli diamond trader Bennie Steinmetz and Avmin executive Brian Menell, entered a joint-venture agreement with Diamondworks in June of 2002 for the Koidu property. Under the original agreement Magma could earn a 50% interest in the joint venture by funding US$1.2 million in exploration and development work on the Koidu project, and by providing US$5 million in financing, repayable at reasonable commercial rates, for pre-production work.
The Sierra Leonean government has also agreed to increase the joint venture’s ownership of the Koidu project to 80% from 60%. The government will retain a 10% carried interest and local interests can acquire a 10% working interest.
Koidu, a large hard-rock diamond mine, suspended operations during the civil war in Sierra Leone. Following the peace agreement of 2000, the government has been seeking opportunities to renew the country’s mineral industry.
About US$12 million has been spent on restoring the Koidu mine, and DiamondWorks estimates that another US$2.5 million will be needed to bring the mine back to production.
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