March 8, 2012 / 4:08 PM / in 6 years

Koidu discussing possible IPO: CEO

FREETOWN (Reuters) - Sierra Leonean diamond miner Koidu Holdings is studying a possible flotation and aims to reach a previously stated target of quadrupling its output to 45,000 carats a month in July.

“There is significant benefit in having access to capital markets ... Discussions are taking place,” Chief Executive Jan Joubert told Reuters in an interview on Thursday.

Joubert said a $200 million expansion of its existing facility would push output from a current 10,000 carats a month to 35,000 in May and to 45,000 carats in July.

Koidu is privately owned by billionaire Israeli diamond trader Beny Steinmetz’s BSG Resources through its Octea diamond unit. The proceeds from any IPO would go towards developing the separate Tongo diamond concession south of the Koidu project.

Joubert gave no further details. Steinmetz, who now acts as adviser to the BSGR board, was quoted by the Financial Times last month as saying there was a “good possibility” of a Hong Kong flotation in the second half of this year. The paper said the aim was to raise $400m-$600 million and achieve a valuation of $2-3 billion.

“The assets that we have are in our opinion high value,” Joubert said. “The two kimberlite pipes and the dykes that you see in Koidu produce some of the world’s highest quality diamonds,” he said of two geological formations in which diamonds can be found

Kimberlite mining is a process that involves excavating far down into the ground. Other miners in the West African country, whose gemstones gained notoriety during its civil war in the 1990s as ‘blood diamonds,’ use alluvial techniques.

Alluvial mining is much less expensive, and involves searching for gems that have been spread into the upper layers of the earth when kimberlite formations erode.

Koidu’s plant currently deals with 50 tonnes of ore per hour and produces 10,000 carats of gems per month.

TIFFANY‘S BACKING

Of the $200 million expansion plan, Joubert said Standard Chartered Bank had provided $135 million in funding, while the jeweler Tiffany & Co, which buys around 60 percent of Koidu’s output, is also contributing.

“We entered into a formal agreement in 2011 whereby we loaned Koidu $50 million to help them expand production of the mine, and increase its sale of high quality rough diamond output to us,” Tiffany’s spokeswoman Linda Buckley said in an email.

“Tiffany’s is a very important factor here,” Joubert said. “Tiffany’s commitment to us is demonstration of the quality of our project,”

The company acquired a concession at Tongo in 2004, and has spent $15 million exploring kimberlite formations there.

Joubert said the quality of the diamonds from Tongo is high, with 90 percent fitting the Tiffany profile, as opposed to 60 percent of those mined in Koidu.

However he said it was too early to give production estimates. “It’s got exceptional potential, but how to unlock that potential is the question at the moment,” he said.

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