Africa-focused Gem Diamonds (LSE: GEMD) is selling its Botswana subsidiary to Okwa Diamonds, owned by Vast Resources (LSE: VAST) and Botswana Diamonds (LSE: BOD), for only US$4 million.
Okwa Diamond's main target is the mothballed Ghaghoo in central Botswana, which Gem acquired from De Beers in 2007. The company had hoped the buy would help it diversify its portfolio away from Lesotho, where its only producing asset - the prolific Let??eng mine - is located.
Weak market conditions, however, forced Gem Diamonds to place Ghaghoo under care and maintenance in February 2017.
Vast Resources said the acquisition of Gem Diamonds Botswana Proprietary Ltd. (GDB) was a compelling opportunity to deliver diamond production in a relatively short period, benefiting from a fully equipped mine.
Gem Diamonds added the deal was in line with its strategy to dispose noncore assets and focus on Let??eng.
As of 31 December 2020, the gross assets of GDB were US$3.5 million and the loss attributable to GDB for the 12-month period ended 31 December 2020 was US$3.3 million. Vast and Botswana Diamonds will take over all assets and assume all liabilities of GDB, the parties said.
The Ghaghoo mine - previously called Gope - has been a source of headaches for Gem Diamonds ever since its acquisition. The miner spent about US$85 million developing the mine, which came online in 2015 only to be shut down two years later. In the period, Gem recovered less than 150,000 carats.
The mine is currently flooded after an earthquake in 2017 ruptured the underground water seal.
Ghaghoo is not Gem Diamonds' only failed attempt to extend operations beyond Lesotho. In 2008, the company shut down the Cempaka alluvial mine in Indonesia. Four years later, it had to sell its Ellendale mine in Australia, a source of rare yellow diamonds, for US$15 million.
Let??eng has more than made up for Gem's unsuccessful assets. Since acquiring the mine in 2006, Gem Diamonds has found five of the 20 largest white gem quality diamonds ever recovered, which makes Let??eng the mine the world's highest dollar per carat kimberlite diamond operation.
At an average elevation of 3,100 metres above sea level, Let??eng is also one of the world's highest diamond mines.