Mexivada Signs Diamond Deal In Sierra Leone

The 968-carat “Star of Sierra Leone” diamond was discovered in 1972 — just a few miles north of where Mexivada Mining (MNV-V, MXVDF-o) will soon start its alluvial diamond mining operations.

Under a memorandum of understanding with the area’s Gbense Chiefdom, Mexivada can start diamond mining on a one-acre site near Yaradu in the heart of Sierra Leone’s Koidu mining area, about 220 km east of the capital of Freetown. The site is about 3 km north of Koidu Town and 1 km north of the Sewa River.

Under the agreement, Mexivada will retain 70% of the net profit from any diamonds sold and the Gbense Chiefdom will receive a 30% share.

“As far as we know, this property has not been commercially mined previously,” Mexivada’s president, Richard Redfern, told The Northern Miner. “The main chief of the area has kept family control over it for years.”

But now the chiefdom wants to get started. The country has become stable and the chief wants to create jobs for his people. Mexivada was in a good position to work with the chief because the president of Mexivada’s joint-venture partner, Pink Diamond Exploration, is married to the chief’s daughter.

“This district and this particular area has produced large diamonds,” Redfern says, noting that a private American group mining the adjoining, downstream concession has reportedly found about 250 diamonds along a short stretch of the drainage. “They’ve done well. . . within a small area there and looking at the geology, it looks encouraging.”

Mexivada expects to invest about US$25,000 in the project — an amount it is prepared to gamble.

“If this project only costs us $20,000 to $25,000 and we find a few large diamonds, we’ll pay back everything and make a profit for us and the chieftain,” Redfern says.

Mexivada says the company’s business plan is to evaluate fast-track mining opportunities for gold and diamonds so that early stage cash flow can support the company’s other exploration programs.

“With the credit crisis, very few juniors have cash flow and we are determined to be one of those companies that does have cash flow.”

Redfern also notes that despite the fact that the formerly war-torn country has been calm for the last five years, it still has a black eye in the investment community.

“Everybody thinks it’s a war zone, but for the last five years it has been peaceful,” he argues. “We’re one of the first ones in.”

Artisanal diamond mining from alluvial deposits makes up about 90% of West Africa’s diamond exports and involves digging riverbank mud, sand and gravel by hand and sifting it using hand-held sieves.

Apart from the ground it holds in Sierra Leone, Mexivada also owns three gold, silver and tellurium projects in northern Mexico, controls six projects in Nevada, and holds a number of prospecting permits and exploration concessions in the Republic of Congo.

Mexivada went public on the TSX Venture Exchange in 2005 and recently traded at about 13¢ per share.

The junior has traded in a range of 8-95¢ over the last year and has 29.7 million shares outstanding.