Namakwa Diamonds

Namakwa Diamonds’ joint venture in the southern African kingdom of Lesotho has obtained the mining lease to that country’s Kao kimberlite pipe.

Namakwa Bathia Diamonds, a joint venture between AIM-quoted Namakwa, Bathia Minerals, the Lesotho government and local investors, hopes to produce 700,000 carats from 10m tonnes of rock over the first five years from Kao, where the company reckons 173m tonnes of rock hold 12.4m carats altogether. Namakwa Bathia, which has not revealed estimated values per carat, has won the licence, once held by interests of controversial former Australian tycoon Alan Bond, in return for assuming potential liabilities of up to £4.1m.

Namakwa is understood to have enough money to meet its share of projected capital expenditure on the project, which lies near three other significant kimberlite diamond pipes, at Letseng, Liqhobong and Mothae. The company has enhanced its credibility by appointing as chief technical officer Keith Whitelock, a veteran of the De Beers gem giant, who worked with the discoverers of all these deposits and ran Letseng Diamonds for 14 years.

This positive development comes not a moment too soon for Namakwa, whose shares performed disastrously after its 181p float in 2007, falling not so long ago to a mere 15.25p before perking up to today’s 34p. Analysts now see losses falling from £56m in the year to last August to £3.3m in 2009-10, with pre-tax profits of £1.8m on the cards for the following year.

There are inevitable risks associated with diamond prices, the Kao project itself and the region. But investors willing to assume these risks in return for a potentially strong recovery punt might consider a flutter.