Gray Woods puts some questions to Botswana Diamonds John Teeling

Botswana Diamonds (LON:BOD) is the spin-off from Lucara Diamonds' purchase of African Diamonds, as Lucara was focused on AK6, therefore African Diamond's smaller exploration assets were bundled together to create this new vehicle. But relatively little seems to be known about this vehicle, so I decided to put some questions to Botswana’s Executive Chairman John Teeling. Unfortunately, at present, he is in Botswana working hard on getting the company on its feet, but he did kindly point me to the presentation that he is currently using in Botswana, which is definitely worth a look.  Also, he very kindly briefly answered my questions via his phone, and his answers are certainly interesting, and worth a read:

DGW:  I note your main prospects are AK8, AK9 and BK5, and that you plan to do sampling over this year on these projects, so can I ask when do you hope to start gathering these samples, and when do you hope to start releasing the results?

JT:  Starts in March and the whole programme should take eight months with results coming in four.

*DGW:  In terms of the work planned, from their website:

• AK8:  Bulk sampling is planned to test the higher grade, near surface, southern lobe of the kimberlite in order to verify the diamond revenue as well as the grade.
• AK9:  Portions of the kimberlite has significant overburden but bulk sampling is planned to test the near surface portions of the kimberlite in order to verify the diamond revenue (USD 26/carat), estimated from a small parcel of only 4 carats, as well as the grade.
• BK5:  Further drilling and some bulk sampling is planned to constrain the geological model and to verify the grade and diamond revenue.
• PL7/2004:  Follow-up sampling is planned to confirm the presence of undiscovered kimberlite pipes followed by ground geophysical survey and drilling if justified.

DGW:  Is AK8 likely to be your main target due to it being the most advanced exploration wise?

JT:  We will focus on BK5 as it has the greatest potential.

*DGW:  Just to note none of their prospects at current look mouth watering, again from their website:

• AK8:  The kimberlite has an estimated size of between 5 and 6 hectares, determined through drilling and ground geophysics. The kimberlite appears to be tri-lobate and the southern lobe (up to 2.5ha) has an estimated grade of between 3-7cpht whilst the northern and eastern lobes are lower at 1-2cpht. The average diamond revenue is USD 100/carat. Initial modelling indicates that the pipe may contain up to 20 million tonnes of ore to a depth of 300 metres.
• AK9:  The kimberlite has an estimated size of 3 hectares, that was determined from drilling and ground geophysics. The grade is currently shown to be between 2.5 to 3.5 cpht, albeit from limited sampling information. Initial modelling indicates that pipe may contain up to 11 million tonnes of ore to a depth of 250 metres.
• BK5:  The kimberlite is mostly sub-cropping and the near surface area is estimated to be 5.8 hectares in size as determined from drilling and ground geophysics. Earlier sampling showed the grade to be between 4 to 7cpht.

Though just to note, though AK8 and AK9 are more explored, and near AK6, BK5 as he says has the most potential likely due to its close vicinity to Orapa - 18km away and is the world’s second largest diamond mine – and Damtshaa – 6km away and is on care and maintenance at current (the only one of the four shut down by De beers and Debswana in the crisis not to come back online yet as it was the least profitable), but it is expected to come back online at full steam next year).

DGW:  Do you have any estimates to when any sort of drilling campaigns will begin if the sampling goes well?

JT:  We need $10 a ton ore in the ground. Grade and value will decide.

DGW:  Do you expect to try to acquire any other licences to explore, or will you just be focussing solely on your current assets?

JT:  We will push the Cameroon licence hard (See page 21 of the presentation).  We also will apply for new ground in Orapa (the location of the world’s second largest mine).

DGW:  Is there anything else you can add for the investment case for Botswana Diamonds?

JT:  Zimbabwe could be a company maker (See pages 19 and 20 of the presentation).

*DGW:  Just to note he talks about the Marange diamond field, which has truly amazing potential, with diamond worth being estimated at $800bn, with the diamonds apparently literally just lying on the ground in some cases.  But a Google Search shows why this may also be a very high risk direction.

END

Also just to note, there was a very interesting comment made by John Teeling in an interview he gave to Proactive Investors:

Proactive: What are your ambitions and targets for 2011?

For Botswana Diamonds: Producing Diamonds – it’s that simple, either in Botswana or Zimbabwe.

This, I feel, is a very confident statement to make, and it will be very interesting to see how he intends to achieve this considering their current acreage.

Conclusion

To conclude as said earlier, none of their prospects really look mouth watering to me, with the grades quite low, and the tonnage of the known prospects is not of the highest (in total at AK8 and AK9 – their most advanced – using current known tonnage and median grade, the potential runs at less than 1m carats of low value diamonds).  However, they are fully funded for 2011, with $2m in cash. Also, they are on a very small market cap of just £6.5m at present.  

The factor that actually makes them of most interest is the management team, as John Teeling has done it a couple of times before (most recently, as known to most Botswana Diamond holders, with African Diamonds), plus their technical director Andre Fourie has eighteen years of experience in the industry via working with Anglo American and more importantly De Beers.  The other two directors are also highly experienced and successful. Even better, combined the directors hold 15% of the company, and, though this is from their previous holding in African Diamonds, director holdings are always a plus.  Another plus is that they have two strong institutional holders, with JP Morgan holding 10%, and Investec holding 13% (again due to them holding African Diamonds).

Therefore, with them seeming a bit like the diamond version of Greatland Gold, they warrant a place in the potential company changing news section of ‘Grays Stocks to Watch’ (you can view ‘Grays Stocks to Watch’ anytime via clicking the link at the top of the page), even if they are in there as a freebie by default,  thanks to me keeping Lucara in there.