Lucara looks to be next big name in African diamonds

Lucara Diamond (LUC-V) is acquiring a big stake in the AK6 diamond project in Botswana.

On Nov. 10 the Vancouver-based company announced it will pay De Beers $49 million for its 70.3% interest in Boteti Exploration, which holds a 100% interest in the AK6 project.

The remaining 28.3% interest in AK6 is held by African Diamonds for now, but African Diamonds can increase its stake by 10.3% by paying Lucara US$7 million plus interest at 8% per annum.

AK6 is an advanced diamond development project in Botswana’s Orapa district. The country is the world’s largest diamond producer.

The project – which received its mining licence back in October of last year – is slated to become an open pit diamond mine, which if all goes well, would be in production in roughly 2 years time.

To get to that stage, however, the current feasibility study update must first be completed. Lucara says it expects that to be done by the first half of 2010.

Once the update feasibility study is in, the mine should be in production within 18 months – although further approvals from the Government will be needed. The government also has to approve the sale of the De Beers interest to Lucara.

Additionally, Lucara plans to have a NI 43-101 technical report on the property within four months.

AK6 is made up of three intersecting pipe-shaped lobes of diamond-bearing kimberlite with similar geology to nearby diamond mines.

Infrastructure near the site is said to be solid with paved roads, water and power from the national grid.

The deal solidifies Lucara’s position as a growing diamond player in Africa as the company also has the Mothae project in Lesotho going into pre-production test mining next year.

Lucara is financing the deal with debt, but it won’t have to deal with any cold and calculating bankers to get it. Instead the company is turning to one of its own deep pocketed insiders. While the name of the insider was not given, the person in question is loaning the company the full $49 million.

For their effort, the insider will get 12.1 million shares of Lucara, of which 5.2 million will be subject to shareholder approval.

The deal also calls for Lucara to make a US$2 million convertible loan to African Diamonds to fund their portion of the updated feasibility study and working capital.