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Gem Diamonds Confirms Merger Talks With Lucara

Possible synergies in Lesotho and Botswana
Mar 21, 2011 4:32 AM   By Avi Krawitz
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RAPAPORT... Gem Diamonds confirmed on Monday that it is in preliminary talks to merge with Lucara Diamond Corp. “Gem Diamonds continues to monitor potential value enhancing opportunities outside of its current asset portfolio and these preliminary discussions represent part of that ongoing strategy,” the diamond mining company explained.

Bloomberg reported over the weekend that the two companies have been in negotiations since February and have signed a confidentiality accord. Clifford Elphick, chief executive officer of Gem Diamonds, said the agreement is one of eight that the company has.

Gem diamonds owns the Letseng mine in Lesotho and the Ellendale mine in Australia while Lucara is in the trial mining phase at the Mothae mine, adjascent to Letseng in Lesotho, and is constructing the AK6 mine in Botswana.
 
Analysts at Liberum Capital noted possible synergies in Lesotho and Botswana, where Gem Diamonds is developing the Gope mine but added that given Gem Diamond’s strong cash flow and its own significant growth profile to fund, the company “by no means needs the deal.”

Gem stressed that the talks are at a very early stage and there can be no certainty the contemplated merger will occur. Gem Diamonds shares rose 2 percent to 270 pence a share in early Monday morning trade on the London Stock Exchange (LSE).

 

Tags: Avi Krawitz, Gem Diamonds, Lucara Diamond
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