The diamonds were recovered from Monroe’s London property in the Northwest province of South Africa and sold in three parcels.
The first parcel consisted of 1,052 carats valued at US$453 per carat; the second, 1,163 carats at US$418 apiece; and the third, 197 carats at US$530 apiece.
Half of the diamonds from these sales were produced in 2004, whereas the other half were produced this year.
During test mining from August to October 2004, an average of 24,000 tonnes per month were processed, resulting in an average of 1 carat per 100 tonnes. The average stone size was 1.3 carats.
The 21-sq.-km property covers part of a tributary of the Vaal River. The tributary is often dry but flows sporadically following rainfall.
During 1999-2000, Monroe took 18 bulk samples of gravel totalling 113,280 tonnes to test the diamond grade and quality. Most of the gravel had an average grade of 0.6 carat per 100 tonnes, though locally the grade averaged 1.6 carats per 100 tonnes. The average stone size was 1 carat.
Monroe has the right to prospect and mine diamonds for 10 years ending Jan. 21, 2009. The company can extend the period to 20 years provided it converts the area to a mineral lease. Diamond production is subject to a 14.5% royalty on gross revenue.
Monroe Minerals President Derek Moran points out that the London property has been mined only on a test basis and that full production will not occur until the value of the rand decreases in relation to the U.S. dollar. But he says the results from test mining prove that high-value diamonds can be produced in economic quantities.
Owing to the current high rand, annual cash flow at the London property is not sufficiently high to warrant full production. Operating costs are estimated at US$220 per 100 tonnes.
The company owns additional diamond exploration properties in South Africa, and a subsidiary of Monroe has partnered with a South African black economic empowerment company, Vuya! Investments, to advance its grassroots exploration for primary kimberlite.
Vuya! invests in a variety of businesses and, since 2001, has helped fund small businesses in South Africa. It bought a 26% interest in the Monroe subsidiary for US$3.8 million.
Over the past couple of years, Monroe has been establishing a name for itself and building relations with Angola’s state-owned diamond mining company, Endiama.
Investing in Angola has its challenges, but Moran says the rewards are commensurate: “We have to get across to investors that the civil war ended a number of years ago. Angola is welcoming foreign investment. It is a signature to the Kimberley process.”
Each diamond concession has three stakeholders: the Angolan government owns 51% of primary (kimberlite) concessions and 30-40% of secondary (alluvial) concessions; the Angolan elite (companies owned by the ruling family or senior people in the military or government) own a percentage; as does the foreign investor, which mobilizes capital and technical expertise.
If a foreign investor does not perform as required in the operations agreement, the concession is re-allocated. A concession is typically just over 3,000 sq. km, and an initial budget of about US$5 million is required to explore such an area in the first year.
Monroe is keeping in touch with Endiama and the government, and hopes to be awarded a diamond concession this year.
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