Canaf eyes DRC diamond miner (November 20, 2007)

Vancouver – Canaf Group (CAF-V, CAFZF-O) looks to gain a toe-hold in the Democratic Republic of Congo diamond business through a majority interest of a private mining company in the country.

The plan sees Canaf buying 51% of New Stone Mining that has operated in the DRC since 1990. For the majority stake it will pay US$20 million – with an initial sum of US$1 million due in February 2008 and the balance payable within two years from the effective closing date (anticipated by May 1, 2008).

Canaf (previously CanAfrican Metals and Mining) foresees paying the US$19 million balance from diamond production at New Stone Minings operations in the eastern DRC.

New Stone has a pair of alluvial diamond operations in the Tshikapa and Kisingani areas and is ramping up development towards full production. A diamond grade of 15-20 carats per 100 tonnes of gravel has been indicated from initial work while internal estimates peg a mine-life of about 14 years for one of the operations.

The DRC miner also estimates a gold recovery plant, run in unison with the diamond circuit, could yield up to 1.8 grams gold per cubic metre.

Conscious of the security issues associated with alluvial diamond operations Canaf points out New Stone has developed a processing and recovery system that removes human contact with the final recovered product.

In addition to acquiring regulatory approval, Canaf plans a due diligence review of New Stone including financials and National Instrument 43-101 reviews of the projects.

The company recently cancelled an agreement to acquire mineral assets in Zimbabwe due to new policies in that country greatly encumbering foreign investment.

Canaf owns Quantum Screening and Crushing, a South African firm that processes coal products into carbon through calcining. The process sees anthracite coal fed through a high-temperature rotary kiln to reduce and drive off volatiles (sulphur and nitrogen). The final product is calcine a coke substitute with a high carbon content of 82%-85% – used as a reductant in steel and manganese production.

Shares of the aspiring alluvial diamond producer recently trade at the 18-level, giving a $7.7-million market capitalization based on its 43-million shares outstanding.