Redaurum lines up mine financing

The price is $5 million. The prize is a 50% stake in a producing diamond property in Zimbabwe and the surrounding 13,474-hectare exploration permit.

When Cornerstone Investments, a private Australian company, launched a search for seed capital to finance development of the River Ranch kimberlite, it turned to Canada, where investor enthusiasm for diamonds has reached historic proportions.

Enter Redaurum Red Lake Mines (TSE). A former gold and base metal explorer, Redaurum has been dormant since the late 1980s.

By raising $5 million through private placements in Europe and Canada, Redaurum can acquire Cornerstone Investments, which in turn holds a 50% interest in the River Ranch project and a stake in several other diamond prospects, including the Kelsey Lake pipe in Colorado.

Under the terms of the purchase, Cornerstone will acquire 20.5 million of Redaurum’s 37 million outstanding shares.

A spokesman for Brawley Cathers, the firm that brought the two companies together, said the financing should be wrapped up by the end of February, in time for a special meeting of Redaurum shareholders on March 2. Test mining at River Ranch reached a rate of 4,200 carats per month in January. The largest gem-quality stone found so far weighed 28 carats and sold for US$110,000.

The pipe was discovered and sampled by De Beers in 1975, but the powerful South African company abandoned the deposit when the Rhodesian war reached a climax in the late 1970s.

Although consulting geologist Robin Baxter-Brown declined comment on the grade and stone characteristics at River Ranch, he estimates the 5.2-hectare pipe contains 17.5 million tonnes of diamond-bearing kimberlite to a depth of 150 metres. Exploration for other pipes in a potential cluster is under way. Using a plant capable of treating one million tonnes of kimberlite per year, Cornerstone is aiming for an annual production of 300,000 carats, or gross revenue of about US$11 million, for a minimum of 17 years.

Cornerstone estimates that it will cost $10 million to develop River Ranch with its equal partner, a publicly traded Australian company. The operation would be Zimbabwe’s first diamond mine.