JOHANNESBURG (Business Day) -- Northern Cape diamond explorer Diamond Core Resources has agreed to merge with Toronto-listed diamond explorer BRC Diamond Corporation to create the fifth-largest diamond explorer in Africa.
Diamond Core CEO Theo Botoulas said yesterday the merged entity would rank after the continent's biggest diamond exploration companies: Petra Diamonds [AIM:PDL], Sierra Leone Diamonds [AIM:SLD], Firestone Diamonds [AIM:FDI] and African Diamonds [AIM:AFD].
The merger of the two companies would essentially be one of equals, he said. Diamond Core's shareholders would own 47% of the new company and BRC's 53%, although on a fully diluted basis the ownership was closer to 50:50.
"I started with BRC Diamond Corporation a couple of months ago, but our chairman Simon Village has been looking at Diamond Core for some time - we decided this was a good move, and when I started in May 2007 we decided to start working on this quite aggressively," Botoulas said.
Diamond Core has three advanced-stage alluvial diamond prospects around the Orange River area: Silverstreams, where bulk sampling is under way, Uitdraai and De Kalk. BRC's most advanced alluvial project is Kwango River, a 2150km^2 area on which it will shortly begin a bulk sampling programme.
Alluvial diamonds are found around rivers and oceans. The initial capital cost of accessing them is less than mining kimberlites and alluvial deposits can offer some exceptional large gems.
The two companies also own several kimberlite prospects, which are cone-shaped deposits extending deep underground.
Diamond Core's main kimberlite projects are Paardeberg East and Skeyfontein in South Africa, while BRC owns Lubao and Tshikapa in the Democratic Republic of Congo.
"There are few places where one can go looking for diamonds, but we and many other people believe the next big diamond discovery will be made in the DRC as it's under-explored. The latest technology gives us a new set of eyes, and I think when the industry finds the next big kimberlites mine that's probably going to be in the DRC."
Botoulas said that to build a portfolio of exploration properties in Congo similar to BRC's would have cost Diamond Core "a lot of time and money".
Congo had been identified as a particularly prospective area for Diamond Core. Botoulas said he and BRC CEO Mike de Wit, who will become president of the merged company, believed the next substantial diamond discovery would be made in Congo.
The merged entity, to be called BRC DiamondCore, would be listed on both the Johannesburg and the Canadian stock exchanges. This would give it access to global capital markets.
The deal requires the approval of the South Africa Reserve Bank, Diamond Core's shareholders and other regulatory authorities.
Commentary
The market's response to yesterday's announcement of the proposed merger of Diamond Core Resources with Toronto-listed BRC Diamond Corporation was subdued.
Diamond Core's shares had shed 1c to 179c by midday on the JSE, while BCR's shares were unchanged at C$7 on the Toronto Stock Exchange.
The main advantage of the merger from the point of view of Diamond Core shareholders is that they will diversify their exposure to SA and become part of a group with access to global capital markets. For BRC shareholders, the merger appears to offer some nearer-term production than BRC owns.
In exploration companies, management is key and the combined management of BRC Diamond Core will be impressive.
It will include a number of individuals with experience in diamond exploration and operating in Africa.
CEO Theo Botoulas is a mining engineer with industry and asset management experience while president Mike de Wit was until recently De Beers' exploration manager for Africa. Other managers have worked for De Beers and Trans Hex.
Botoulas and de Wit, who have known each other for some years, emphasised that there was a good cultural fit between the two teams and a similar philosophy. The plan was to share skills, for BRC to assist Diamond Core in expanding its exploration programme and for the new management team to begin drawing up a two-year strategic plan for growth and a production pipeline.
With Classic Business Day
