THE DIAMOND PAGE — DiamondWorks gears up for international diamond search

Shareholders of Carson Gold (CQJ-V) have unanimously approved the acquisitions of diamond projects in Africa and China. Appropriately, the company will henceforth be known as DiamondWorks.

“We are seeing the formation of what I believe will become a major player in the upper-end, high-quality diamond market,” Chairman Eric Friedland told shareholders. The company hopes to achieve that status within three years.

DiamondWorks will acquire properties in Angola and Sierra Leone from privately held Branch Energy in exchange for 33 million common shares.

The separate acquisition of China Diamond, in exchange for 25 million common shares, will not close until the necessary mining licences have been issued by the Chinese government. China Diamond holds a 50% controlling interest in the Changma diamond mine, as well as 3,100 sq. km of prospective ground in the Chinese province of Shandong.

In addition, DiamondWorks will acquire four gold-copper exploration properties in Yunnan province from Yunnan Mining in exchange for 500,000 shares, US$1.5 million cash and the surrender of 2 million Yunnan shares that DiamondWorks holds.

Once all the acquisitions have closed, DiamondWorks will have proven and probable reserves of 11.4 million carats and a total resource of 29.7 million carats, the total value of which is estimated at US$3.7 billion.

Branch Energy has been active in Africa for the past 10 years, having acquired, in Angola, a 48% interest in the Luo project (which can be increased to 74%) and a 60% stake in the Luarica project.

The former comprises five diamondiferous kimberlite pipes (Camatchia, Camagico, Carambala, Lunhinga 1 and Lunhinga 2), as well as associated alluvials estimated to contain 800,000 carats.

The Camatchia pipe is estimated to host 6.5 million carats to a depth of 165 metres, whereas the Camagico contains about 2.4 million carats to a depth of 100 metres. Both pipes are open to depth.

The Luarica project contains an alluvial resource last estimated at 471,000 carats. The alluvial gravels will be the focus of early production. Since July, test runs have produced more than 3,000 carats at a value of about US$400 per carat.

In Sierra Leone, DiamondWorks will acquire Branch’s 60% interest in the 4-sq.-km Koidu lease, which covers two kimberlite pipes and surrounding dykes. A proven and probable reserve is estimated at 7.6 million tonnes grading 0.352 carat per tonne, for a total of 2.7 million carats. The Sierra Leone government holds a 30% carried interest in Koidu, with local investors holding the remainder. A dewatering program is planned.

The company will also be acquiring alluvial concessions, including a full interest in the Upper and Middle Sewa, Matemu and Kona Area 7, plus a 50% interest in Njei-Bafi.

Once mining licences have been issued to China Diamond, the acquisition will proceed.

China Diamond holds a 50% controlling interest in the Changma mine, which consists of three major pipes and a series of dykes.

The measured and indicated reserve is estimated at 1.8 million tonnes grading 1.17 carats to a depth of 300 metres, which is equivalent to about 2 million carats. An additional inferred reserve is estimated at 1.4 million tonnes grading 0.77 carat to a depth of 600 metres, for an additional 1 million carats. (The Chinese report that the dykes contain additional reserves.) The diamonds are valued at US$100 per carat.

The cost of developing the underground mine and upgrading the recovery plant to 250,000 tonnes per year is pegged at US$10 million

The 3,100-sq.-km land package consists of two key concessions: 702 and 703.

Previous work on the former, which surrounds the Changma mine, has identified a cluster of seven diamondiferous pipes. Exploration to shallow depths has resulted in a measured and indicated resource of 9.7 million tonnes grading 0.073 carat (equivalent to 710,000 carats) and an inferred resource of 27.7 million tonnes grading 0.16 carat (equivalent to 4.5 million carats).

Closer to home, DiamondWorks has launched an exploration program in the Northwest Territories, where an airborne survey is under way.

Looking to 1997, the Vancouver-based company hopes to produce 240,000 carats, create US$80 million in revenue and turn over a profit of US$45 million.

Towards that end, it will invest more than US$67 million in the next 12 months. Most of the money is earmarked for Angola, but some will be used to develop the Koidu pipe and the Sewa concession in Sierra Leone.

With approximately $10 million in its treasury at present, DiamondWorks intends to raise the additional capital by a combination of equity and debt financing.

Once all the acquisitions are completed, DiamondWorks will have about 82 million shares outstanding.