Summary
A business combination in the form of a takeover of Western African Diamonds Ltd by Stellar Diamonds Ltd will have little impact on the diamond producing countries of West Africa. Production will remain small in volume and revenue. The combined company as a pure diamond company may have increased attractiveness to investors. Renewed interest in Western African diamond deposits is good for the local economies and people.
Analysis
The spinoff by African Aura Mining Inc. of its Stellar Diamonds Ltd subsidiary will result in a reverse takeover of Western African Diamonds Ltd by Stellar. In reality this will be a combination of business interests of these companies related by the mining interests and corporately. The surviving company, to retain the name Stellar Diamonds Ltd, will be a pure diamond company. This is often more attractive to the marketplace than mixed commodity companies, especially for diamond companies.
In term of current projects and future production, there will be minor economies of consolidation and better focus. However from a production and revenue standpoint the projects, Kono (49%) and Tongo in Sierra Leone and Mandala in Guinea, will remain small producers without significant potential to grow. The exploration and production of dyke, small blow and alluvial deposits in this region of West Africa has historically been only minor, although often of high value gems. Any business combination will not affect the technicalities that dictate small production here. That is not to say these operations cannot prove profitable, but certainly limits the scale of revenue.
Any impact on the diamond producing countries of West Africa will be minimal at best. Although it is a good sign of continued and even renewed interest in exploiting these small projects, and any production will be a boon for the local economies and people.
While Sierra Leone is improving in security and investment climate, Guinea is going in the other direction.
