The diamond mining sector tends to go through waves of acquisitions. The last round saw Dominion Diamond Corporation and Petra Diamonds emerge as high-volume producers as they snapped up mines that were for sale at BHP Billiton and De Beers respectively. It might make sense that the next round would see mergers between smaller mid-tier companies.
Three companies stand out as possible targets as shareholders may be looking to add value to their existing production and prospective mining developments. In fact, a super merger between Gem Diamonds, Lucara Diamond Corporation and Firestone Diamonds would create a company with substantial diamond volume and value at its disposal. There are also apparent opportunities in Canada as new mines are being developed there. But for now, the focus turns to southern Africa.
From the start, it should be stated that the premise for such a merger is speculative and not based on any official talks between these companies. Understandably, each company declined to comment for this article or had not responded to Rapaport News by press time.
However, there’s no denying that there are some interesting synergies at play among the three.
The most obvious is the makeup of their respective asset portfolios and their geographic proximity. Each has a mining or development project in Botswana and Lesotho and a consolidation of those assets would help lower costs.
“The most obvious is the makeup of their respective asset portfolios and their geographic proximity. Each has a mining or development project in Botswana and Lesotho.”
Lesotho, which is a small landlocked country entirely surrounded by South Africa, has four potential kimberlite mines. The Lesotho portfolio of the prospectively merged company would consist of the Letšeng mine, owned by Gem Diamonds, Firestone’s Liqhobong mine and Lucara’s Mothae operation. One might not rule out adding the development of the Kao mine owned by Namakwa Diamonds to the mix.
Photos E.T. Global.