Kalahari Diamond

completed

The project sponsor Kalahari Diamonds Ltd. (KDL) was formed at the initiative of the BHP Billiton Group which is the world’s largest diversified resource group in terms of market capitalization, with interests in coal, iron ore, copper, oil, gas, aluminum, nickel, zinc, silver, manganese, chrome, diamonds and industrial minerals. BHP Billiton produces and markets around 8% of the world’s production of rough diamonds by value from its Ekati mine in Canada. KDL will draw extensively on the wide experience of BHP Billiton and in particular Ekati, in formulating its environmental and social sustainability strategies. KDL is seeking to raise US$12-US$20 million in equity by private placement to fund a 2/3 year exploration program. KDL’s ownership is expected to be institutional investors (including IFC) about 40%, institutions involved in diamond cutting, polishing and retailing approximately 40% and BHP Billiton 20%. IFC has been requested to provide US$2 million. KDL will acquire exploration rights to approximately 90 prospecting licenses covering about 78,000 sq km in Botswana. KDL will initially undertake a major review of existing geological information for these licenses with a view to prioritizing and ranking areas that are considered more prospective. BHP-Billiton’s proprietary airborne Falcon technology will be utilized to conduct aerial surveys of these areas. If high priority target areas are identified, KDL will follow up with ground geophysics and sampling techniques. Confirmed anomalies will be drill tested to recover samples for assessment of diamond potential. In the event of a discovery from the exploration program resulting in a proposed mine development, this would be evaluated as a new project and subject to appropriate environmental and social assessment with full consultation and disclosure. KDL has selected the latest Falcon technology since it provides an opportunity to identify kimberlites which may be hidden under the extensive cover of Kalahari sand that blankets most of Botswana. This extensive sand cover masks potential kimberlites which may not be found by conventional exploration techniques. Utilizing the Falcon technology (which employs airborne gravity gradiometer analysis to detect gravity anomalies) makes the conventional method of collecting thousands of soil samples from streams beds and flat lying terrain on foot with vehicle back-up unnecessary. One of the benefits of this technology is that there are no environmental or social impacts from the initial airborne surveys. Most of the license areas are arid and semi-arid desert. Approximately one-third of the licenses are within the boundaries of the Central Kalahari and Khutse Game Reserves. Most of the licenses (including those in the Game Reserves) have been the subject of previous ground based exploration by other companies. The project has the support of the Botswana Government which views the Game Reserves as areas in which mine exploration and development is allowable alongside conservation initiatives under strict conditions. The use of Falcon technology will also provide enhanced geological information on Botswana. This data may also have other applications, including for example an ability to be utilized for locating water resources for rural communities. KDL will make the relevant information available to the Government, and IFC assistance has been requested to develop, in consultation with KDL and Government, appropriate mechanisms for dissemination and utilization of the Falcon data beyond its mineral application. Although Botswana is heavily dependent on diamonds, the Botswana Government is promoting economic diversification and additional mineral resource development is seen as the key driver for this. The Botswana Government has a successful record of using revenues from mining over last two decades to upgrade infrastructure and services and to improve educational and health standards and this provides a sound foundation for its economic diversification program. Botswana’s rapid growth over the last 20 years has been based on the exploitation of mineral deposits, the reinvestment of the returns from minerals in the sustainable development of the economy, sensible economic polices and expenditure allocations, and a democratic system of Government. Botswana is the world’s largest diamond producer (by value), although no new major diamond mines have been developed in the last 15 years. Botswana’s ability to build on the gains made in the last 20 years will be enhanced if new mineral deposits are identified and developed. IFC will have a positive role in assisting with the development of sustainable environmental and social strategies. This role will include facilitating community consultation and partnerships, enhancing social organization and cultural activities, developing local economies, building environmental management capacity and encouraging appropriate resource utilization and conservation practices (especially associated with game reserves). KDL is willing to make available any relevant Falcon data to the Botswana Government, and IFC assistance has been requested to develop, in consultation with KDL and Government, appropriate mechanisms for dissemination and utilization of these data beyond their mineral application.