PRETORIA () -- West Perth's Bonaparte Mining [ASX:BON] on Feb. 6 reported better than expected early results from its first foray of 2007 into Diamond Fields International's [TSX:DFI] ML-111 license area off the coast of Luderitz, Namibia, its maiden marine mining project.
"Diamond mining from Bonaparte Diamond Mines' Diaz Point 1 (DP1) project in offshore Namibia has exceeded initial expectations with 1,448 diamonds weighing 705 carats recovered in the first 8.5 days of operations," management announced in a press release.
"The diamond recoveries by the MV DF Discoverer, in the DP1 Joint Operations (JO) area in ML111 off Luderitz, Namibia are better than expected. In the area mined to date, more diamonds have been recovered than were predicted from the grade estimates within the defined Indicated Resource area derived from sampling data."
The company on Feb. 7 reported that it has raised an additional US$1.2 million, less issuance costs, of equity capital by selling 12 million new shares at a price of US$0.10 through a private placement. The funds will be used for exploration in order to identify new areas of diamond resources by developing and extending the mining operations it has underway as part of its joint venture, joint operating partnership with DFI, according to Bonaparte management.
A Promising Start to the New Year
Ninety-five percent of the diamonds recovered to date during the 2007 sampling programme are gem quality, which is consistent with Bonaparte's 2006's sampling results in the same area and typical of marine diamonds recovered in the prospect area offshore Luderitz. Averaging 0.49 carats/stone, the weight of the diamonds recovered thus far is significantly higher than displayed in most deposits delineated to date.
Also significant, the 2007 survey to date indicates that "mineralisation and payable grades are more extensive than originally defined by the sampling data," according to the company.
The current sampling programme follows on an initial survey of prospects within the ML111 license area conducted by Bonaparte late last year (see RI, ). Results were used to identify target areas for the 2007 marine sampling programme and further define indicated and inferred resources according to JORC standards.
Bonaparte last October completed a sampling programme in the DFI DP1 Joint Operations area using the MV Douglas Bay, a dedicated marine diamond sampling vessel, and recovered a total of 291 gem quality diamonds weighing 136.05 carats from a total of 577 samples. The two largest gems recovered weighed 6.38 carats and 4.07 carats.
The diamonds recovered during the 2006 sampling programme have been independently valued at a weighted average price in excess of US$400/carat.
"This valuation, which is well above the industry average for run of mine marine gem production, attests to the quality of the deposit," management stated.
Strategic Objectives
According to a Bonaparte investor presentation, management's intention is to generate early cash flow from its Namibian marine diamond mining, as well as onshore diamond prospects in which it owns an interest elsewhere. Initial revenue streams are to be used for ongoing project development purposes and to boost the company's market capitalization by keeping total share issuance to a minimum.
The company's medium to long-term objectives are to increase shareholder value through "sustained growth of mining and exploration assets along with increasing revenue streams and to develop mining production from three countries - Namibia, South Africa and Australia."
Management intends to generate additional onshore mining revenues in 2008 by either purchasing established alluvial operations and/or shallow open pit mining of kimberlite deposits. It also anticipates bringing additional marine mining projects online in 2008-2009 and to increase diamond production through corporate mergers and acquisitions.
On-Shore Prospects
Bonaparte also has interests in onshore diamond prospects in the Boegoe Hills Project in Namibia, a 60% interest in a joint venture with a South African Black Empowerment Enterprise (BEE) for two primary diamond prospects with license applications pending, Mofschaap and Bronkhorstfontein, south of Johannesburg, South Africa and a kimberlite pipe prospect in Nabberu, Australia.
In addition to completing the ML111 mining and exploration programme, Bonaparte in 2007 expects to sample and survey DFI's Luderitz ML111-DP2 area, as well as sample and survey DFI's EPL1607b license area and the Namib/Tsauschab EPL3241 area off the northern Namibian coast.
Bonaparte stands to earn 50% of net revenues from the sale of any diamonds recovered and sold if DFI opts to mine the EPL1607b license area as a result of Bonaparte's survey and exploration work.
The company also has a 70% stake in the Namib/Tsauchab project, a 1,000 square kilometre area it is licensed to explore and mine in a joint venture with Tungeni Investments, its Namibian partner.
The license area is unexplored and undeveloped to date, although indications of diamond-bearing sediments have been indicated in the past in adjacent and nearby properties. Bonaparte previously identified potential targets for initial sampling as part of its 2007 programme based on a geophysical survey it conducted in mid-2006.
Staying Focused
Given the positive early results obtained during the current ML-111 mining and sampling programme, Bonaparte is using its proprietary BOSS seabed sampler in areas that were not included in the original resource estimate and mine plans. Mining to date has progressed into some areas not included in the original resource estimate and mine plans, the company reported.
Bonaparte has prepared survey and mining plans for seven 625 square-metre mining blocks (25 x 25 metres) covering a total area of 315,000 square metres and which have been projected to contain Indicated Resources of 63,000 carats.
"The initial mining results are very encouraging and validate our expectations for generating substantial cash flow from the JO area based on the comprehensive resource development programme we completed in Q4 2006," Mike Woodborne, Bonaparte's managing director, stated in the company's press release.
Management anticipates generating US$1-$2.5 million in cash flow in three months time and anywhere from US$2.8-$6.8 million as a result of its current DFI joint venture operations in the Luderitz ML111 license area based on varying assumptions as to overall grade of diamonds recovered, sales prices and operating time.
JO Partners
According to the terms of its JV agreement for ML111 with DFI Bonaparte is entitled to a 30% net revenue share from diamond sales after deducting mining and operating costs. The partners have an Exclusive Sales Agreement in place with Diamond Tenders, Belgium NV for the sale of all DFI diamond production
The current marine mining operations are being conducted under the terms of a short-form agreement which Bonaparte says will be replaced by a more comprehensive agreement that is expected to be completed within the next few weeks.
"In summary, as DFI have elected to operate, the JO will be conducted on a 70/30 basis which gives Bonaparte the right to 30% of the proceeds from the sale of any diamonds recovered during the operations in return for an obligation to pay 30% of the operating costs," according to Bonaparte's ASX report.
"The mining shall be undertaken under an agreed Mining Plan and detailed daily schedule of agreed operational costs. Until the full agreement is signed Bonaparte's obligation to pay for its share of total costs is limited to A$350,000." Bonaparte will not have any capex (capital expenditure) requirement to move from exploration into mining production.
"We are very pleased with the participation of our JO partners and mining operator, Diamond Fields International Ltd. The cashflow to be generated from the sale of diamonds mined from the JO area will be Bonaparte Diamonds' first return from its offshore diamond mining plans," MD Woodborne noted.
