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Botswana Diamonds in advanced talks with major producer for Sunland venture

Botswana Diamonds PLC is in advanced negotiations with a major diamond producer over a partnership in its Sunland Minerals (Pty.) Ltd. venture, which holds prospecting licenses in the Kalahari and Orapa areas of Botswana.

Speaking with S&P Global Market Intelligence, Managing Director James Campbell said "negotiations are far advanced, but you never quite know when the ink will go onto paper, particularly when you are dealing with a large producer."

The London-listed company's former partner in Sunland, PJSC Alrosa, formally exited the joint venture in November, with Botswana Diamonds having taken over the joint venture's operations earlier this year.

"Alrosa has had its hands full with reopening Mir because of the floods there and it seems to have subordinated grassroots exploration somewhat across all of its particular jurisdictions," Campbell said. "If large companies decide to reduce exploration expenditure, it is typically in grassroots exploration rather than advanced exploration because the potential for a commercial discovery is lower in grassroots."

"I think it was a reprioritization when a new management team came in and a reprioritization of its work and its assets. It was a very amiable parting."

Botswana Diamonds and Alrosa signed an agreement in 2013 to explore for diamonds in Botswana and initiated the Sunland joint venture in 2014 to test Alrosa's exploration technology on Botswana Diamonds' database in a bid to identify new targets.

"We had to formally conclude the relationship with Alrosa before we could really progress the relationship with the new partner," Campbell explained. "Dealing with a large corporate, it does take some time to unwind a relationship, which is why it has taken us some time for us to announce a new partner and relationship."

"We continued the work and became the operator this year. We continued spending with Alrosa's blessing as the operator doing the exploration work in the central Kalahari and produced kimberlitic indicators from the geophysical anomalies this year."

Botswana Diamonds will drill the exploration sites next year, once it has announced its new partner.

Aside from Botswana, the company also has exploration projects in South Africa and Zimbabwe, which also intersect the Kaapvaal Craton.

The company's most advanced project is the 2,771-hectare Thorny River project in South Africa, for which it signed a royalty mining contract with Palaeo Minerals Pty. Ltd. in early November covering bulk sampling activities and future full-scale mining. "Not only will it generate cash, it will generate a resource for us as well at no cost to shareholders," Campbell explained.

Bulk sampling has already yielded some stones, which "are a little bit coarser than the average," Campbell said. "There are some nice white stones in there, but more importantly there are some nice colored stones."

Botswana Diamonds closed up 15.8% at 55 pence per share on Dec. 12.