Exploration Insights by Robert Tyerman

Diamonds are making the news again, as rough gem prices continue to recover from recessionary lows 

Stellar Diamonds has made its AIM debut after reversing into wheeler-dealer John Teeling’s West African Diamonds, and at 19.75p offers speculative potential for the nimble, as does another Teeling venture, African Diamonds, at 46.5p on rising carat values at the AK6 discovery in Botswana.

Botswana is also host to copper play Discovery Metals, which has been negotiating an imminent offtake deal with a major potential investor. Based in Brisbane and quoted Down Under and on AIM, Discovery has been talking to ‘credible potential partners’, says managing director Brad Sampson, who suggests an offtake deal for its Boseto project could be struck even before a current feasibility study is completed this month.

The company, which is also interested in nickel, has already indicated that Boseto could yield an 18-month to two-year payback on £100 million of capital expenditure, funded 60-40 debt/equity, and says product sales could start by late 2011, with estimated operating costs of $1 a lb, against current prices of around $3.20 a lb. Sampson, an experienced mining figure, says Discovery hopes Boseto’s estimated ten-year mine life as an open-cast operation could be significantly extended on the basis of a current underground scoping study. The company has £10 million cash and awaits up to £4 million more on the exercise of ‘in the money’ options.

Highlighted by Growth Company Investor at 15.5p last year, the shares now trade at 36.5p. With China and other markets keen to secure copper supplies, there could be more mileage yet for the brave.

Silver service from Mexico
Arian Silver is poised to start production at San Jose in Mexico after raising £3.5 million from Canadian investment  group Sprott and others, says entrepreneurial Jim Williams, chief executive officer of the London-based company. He declares Arian has finally extricated itself from the overhang of financier Willie West’s share swap vehicle Grafton Resources’ stake and is ‘ready to go’.

San Jose holds an estimated potential resource of nearly 300,000 tonnes of ore with 189 grammes of silver per tonne of ore. With silver now trading at around $16 an ounce and industry watchers targeting $20 soon, Williams hints at a 160 per cent internal rate of return at a price of $14 an ounce.His plan is for AIM-quoted Arian (which stands to receive nearly £2 million in two stages from selling another project, Tepal) to use cash from San Jose to establish a major silver deposit in the area. Williams foreshadows operating costs at San Jose of $40 a tonne, against an in situ metal value of $100 a tonne. With many imponderables, the shares could justify a flutter at 5.75p.

A fur-lined punt
Phil Edmonds’s Sable Mining is paying $17.6 million (£11.2 million) for 29.3 per cent of private South African coal play Delta Mining to gain exposure to its four key projects.

Sable, in which Edmonds and deal-making chief executive officer Andrew Groves hold a combined 30 per cent, is paying for its Delta stake out of a £40 million cash pile, partly the residue of previous deals and partly the proceeds of a £27 million fundraising at 10p in December. Delta lost £4 million in the year to last September, which it ended with net assets of £12 million.

Sable shares have soared from 2.25p to 19.25p and promise to be a lively, if speculative, market.