Rex shares tumble after leases axed (April 02, 2004)

Rex shares tumble after leases axedThe government of Sierra Leone has cancelled the diamond mining leases held by Rex Diamond Mining (RXD-T).

The Tongo mining lease contains four narrow (20-50 cm), diamond-bearing kimberlite dykes that stretch to a depth of at least 500 metres and are believed to contain up to 9.4 million carats of diamonds. Extensive bulk-sampling of the lease’s Lando dyke in the 1960s and 1970s indicated that the central 2.6-km portion of the dyke contains up 1.68 million carats to a depth of 300 metres, resulting in a diluted mining grade of 0.8 carat per tonne.

Rex’s former Zimmi lease lies along the Morro River, on the border with Liberia. Kimberlites are known to occur on the Liberian side of the river, and diamonds are found in alluvial gravels in and along the major rivers in the area.

“This move [the government’s decision not to reinstate the leases] is not only unwarranted, unjust and unjustified; it will diminish the possibility for Tongo fissures ever to be developed,” says Rex CEO Serge Muller. “This will needlessly raise the risk profile of the country and debase the standard of law and title in Sierra Leone.”

He adds that the decision is “ill-advised and prejudicially motivated.”

Rex returned to Sierra Leone in 1997 after a decade of civil war; force majeure was lifted in 2002, and in 2003 the company’s team of geologists surveyed its diamond deposits in anticipation of drilling in 2004.

In related news, DiamondWorks (DMW-T) says it has won an open tender for the exclusive licence for the Tongo diamond fields. The company says its mining lease is guaranteed, provided it completes an evaluation and development program within two years. DiamondWorks says the proximity of its Koidu mine, which includes a 50-ton-per-hour treatment plant, will help fast-track evaluation and development of the Tongo Fields.

Diamond Works plans to bundle Tongo in with its other assets in Sierra Leone under the Koidu Holdings banner. Meanwhile, BSG Resources has acquired a 25% interest in Koidu Holdings from privately held Magma Diamond Resources. The deal leaves DiamondWorks with a 40% stake and Magama with 35%.