THE BOURSE WHISPERER: Goodrich Resources (ASX: GRX) has entered into a sales and purchase agreement with Gem Diamonds Limited (LSE: GEMD).
The deal will result in Goodrich acquiring 100 per cent of the shares of Gem Diamonds Australia Holdings, owner and operator of the Ellendale diamond mine.
The Ellendale Mining Lease (covering 123.9 square kilometres) is located approximately 120 kilometres east of Derby in the West Kimberly Region of Western Australia.
Project location. Source: Company announcement
“The Ellendale diamond project presents an excellent opportunity for Goodrich Resources and a significant value to our shareholders,” Goodrich Resources chairman Alex Alexander said in the company’s announcement to the Australian Securities Exchange.
“We intend to complement the existing mining operation with an aggressive exploration program on Ellendale’s highly-prospective ground, aimed to increase the reserves and the life of the mine.”
Goodrich described Ellendale as being renowned for fancy and vivid yellow diamonds, which are greatly sought after for their rarity.
Ellendale contributes an estimated 50 per cent of the world supply of these fancy yellow diamonds.
The operation extracts and processes ore from a single diamond-bearing lamproite pipe known as E9.
A second pipe, E4, together with its processing plant, is currently under care and maintenance.
The latest mineral resource statement for Ellendale, dated 1 January 2012, shows a total combined – Indicated and Inferred – resource of 91.3 million tonnes at an average grade of 4.35 carats per hundred tons.
In addition to E9 and E4, Goodrich indicated there to be a further 47 lamproite pipes known to exist within the Ellendale Mining Lease.
Approximately half of these pipes are thought to be diamond-bearing.
Gem Diamonds has conducted only limited sampling of these pipes, which Goodrich considers to indicate potential exists for the discovery of additional diamond resources.
The Ellendale Mine has approximately 18 months of mine life remaining based on the current mine plan and reserve estimate.
Ellendale’s historical operations have produced strong recorded profits for Kimberley Diamond Company, a subsidiary of Gem Diamonds Australia, with 14 per cent EBITDA in FY 2011.
Kimberley Diamond Company generated sales revenues of US$57.6 million from Ellendale’s diamond operation for the January to June 2012 period; recovering a total 78,881 carats overall.
Ellendale’s fancy yellow diamonds comprised 15 per cent of the total carats sold during the period, accounting for approximately 80 per cent of the company’s revenue.
These fancy, yellow diamonds are sold directly under an off-take agreement to Laurelton Diamonds Inc., the diamond sourcing and manufacturing subsidiary of the world’s premier jeweller, Tiffany & Co.