Canaf eyes DRC diamond miner (December 24, 2007)

Vancouver — Canaf Group (CAF-V) is planning to gain a toehold in the Democratic Republic of the Congo’s (DRC) diamond sector through a majority interest in a private Congolese mining company.

The proposal sees Canaf buying 51% of New Stone Mining, which has operated in the DRC since 1990. It will pay US$20 million for its stake — with an initial sum of US$1 million due in February 2008 and the balance payable within two years of 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 Mining’s 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. Initial work indicates a diamond grade of 15-20 carats per 100 tonnes of gravel, while internal estimates peg a mine life for one of the operations at about 14 years.

The DRC miner also estimates that a gold recovery plant, run along 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 obviates the need for human contact with the final recovered product.

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

The company recently cancelled an agreement to acquire mineral assets in Zimbabwe due to new policies in the country that hinder 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 reducing agent in steel and manganese production.

Shares of the aspiring alluvial diamond producer recently traded at around 18, for a market capitalization of $7.7 million, based on its 43 million shares outstanding.