DIAMOND PAGE — Archangel Diamond takes case to Russian PM

Determined to resolve a long-standing licence dispute with its joint-venture partner, Archangel Diamond (AAD-V) has taken its case to the highest levels of the Russian federal government.

The Denver-based junior has appealed to Russian Prime Minister Yevgenii Primakov to support the granting of title to the Verkhotina diamond licence in northwestern Russia, near the city of Archangel’sk.

During a meeting consisting of Archangel Diamond officials, Primakov and the head of the Russian Central Bank, the prime minister offered assurance that his staff would investigate the matter.

Archangel’s partner, Arkhangelskgeoldobycha (AGD), has failed to surrender title to the Verkhotina licence to a jointly held company, Almazny Bereg (BG), despite allegedly having agreed to do so. Archangel holds a 40% interest in AB, with the remainder held by a group of Russian individuals.

In July, Archangel Diamond suspended joint-venture funding when AGD failed to transfer title to the licence. The former, which says it has fulfilled all work requirements stipulated in the joint-venture agreement, has subsequently sought redress in international arbitration in Stockholm. The arbitration is under way, with hearings set to begin in late February 1999.

Meanwhile, Archangel Diamond is holding discussions with AGD in an attempt to reach an amicable solution.

Despite Archangel’s withdrawal of funding to the joint venture, exploration of Verkhotina continues. Hole 47, the fourth wide-diameter hole drilled at the Grib pipe, has been completed to a depth of 303 metres. The four holes have produced 600 tonnes of sample, more than half of which yielded 280 carats. Drilling at the Grib pipe has so far produced 7,300 diamonds greater than 1 mm, weighing 378 carats. The pipe contains 73 million tonnes of diamond-bearing material to a depth of 500 metres. The average grade is 70 carats per 100 tonnes, with a value of US$72 per carat.

For the first nine months of 1998, Archangel earned $91,386 (or nil per share), compared with a loss of $9.2 million (47 cents per share) a year ago. The 1998 income stemmed chiefly from foreign exchange gains and interest income.