RAPAPORT… Gibb River Diamonds has sold the Ellendale mine in Australia as it veers away from diamonds to focus on its gold project.
Australia-based Burgundy Diamond Mines will pay Gibb River a total of AUD 6.7 million ($5.1 million) in cash, 16 million company shares, and a 1.5% gross-revenue royalty on any diamonds obtained from the site, Gibb River said Wednesday. The deal is structured as a three-part option plan that will take place over three years. If Burgundy fails to meet the terms of each option, Gibb River will retain ownership of the assets.
The transaction will also include the Blina alluvial diamond project, which lies adjacent to Ellendale. Burgundy aims to have the entire operation up and running, and begin production, within two years, it noted. Ellendale is the third diamond project Burgundy has acquired since the end of 2019, as it turns its focus primarily to that mineral, it explained.
“This transaction…ticks many of our strategic boxes as we build out Burgundy as the world’s leading mid-cap diamond company,” said Burgundy managing director Peter Ravenscroft. “It is one of our focus jurisdictions of low-risk diamond countries; it provides us potential for early cash flow to underpin our expansive growth strategy; and it focuses on the production of high-value colored stones in the same way as our Naujaat diamond project in Canada.”
Gibb River signed a lease with the Western Australian government to operate Ellendale in 2019. Although the company already owned neighboring Blina, it has not begun work at the site, as it was still in need of an AUD 2.5 million ($1.7 million) investment to move to the next phase.
“The Ellendale diamond project requires significant capital to progress, and Gibb believes the involvement of Burgundy will provide greater certainty and upside for Gibb shareholders,” Gibb River added. “This Ellendale option sale will now enable Gibb to focus more attention on the further exploration and development at [its] Edjudina [gold project].”
Image: The Ellendale mine. (The Government of Western Australia/DMIRS)
Source: diamonds.net Rapaport