European Diamonds Plc (EPD: AIM) is a diamond exploration and development company with advanced projects in Finland and Lesotho.

In Finland, the company has explored a large part of the prospective Karelian Craton and identifed a number of kimberlite indicator trains. Kimberlites have been discovered in one of these areas and exploration continues in the others. Evaluation work on the promising Lahtojoki Pipe has begun with a 5,000 tonne bulk sample due to be collected before Easter 2005.

In Lesotho, European Diamonds holds a 25 year mining license to develop the Liqhobong diamondiferous kimberlites. The Liqhobong Project provides for the commencement of mining at 290,000 carats per annum from the end of 2004 from the Satellite Pipe and the evaluation of the adjacent large Main Pipe and start of a Feasibility Study in 2005.

European Diamonds will become a mid-tier diamond producer in 2005 and intends to grow through acquisition and in-house exploration. The experienced management and technical team of European Diamonds have a strong track record of discovery and a history of wealth creation for shareholders.



The Kingdom of Lesotho gained its independence from the UK in 1966 and is the only constitutional monarchy on the African continent. The country is a small, densely populated mountainous country situated in the east of the Republic of South Africa, which entirely encircles the country.

Diamonds in Lesotho
The country has long been known as a source of large, high quality diamonds, mostly from alluvial deposits. To date most of the country's diamond production has been derived from the Letseng-la-Terai deposit which was mined by De Beers between 1977-1981. Letseng has recently returned into production and is again producing high quality gems albeit on a modest scale. Apart from Letseng, the only other known significantly mineralised kimberlites in the country are the Liqhobong suite and the nearby lower grade Kao pipe all located about 40 kilometres west of Letseng also high in the Maluti mountains.





Finland project.

Project Highlights
Work undertaken by European Diamonds and the Geological Survey of Finland has proven that the Achaean-aged Karelian Craton is highly prospective for hard-rock diamond deposits.
European Diamonds currently have seven regional exploration projects in eastern and central Finland in addition to the Lathojoki project currently under evaluation.
The Company has recovered high quality kimberlite indicator minerals from all of the exploration projects and will continue with the field exploration of these areas in 2005.
Work on the Lentiira Project in central eastern Finland has identified a large kimberlite complex covering an area of some 160 square kilometres. Although the Company has recovered high quality indicator minerals and diamonds from the project area, to date only linear kimberlite dykes have been discovered.
None of the sampled dykes has proved to be the source of the highest quality indicators emanating from the highly prospective 'Railway' indicator train. Further assessment of this project will continue throughout 2005.





Corporate website : http://www.europeandiamondsplc.com/s/Home.asp

Shareholder info : http://www.europeandiamondsplc.com/s/InformationRequest.asp

philfpolio,

THAT photo!

Slight typo there, thanks for pointing it out.

Nice end to the day again, EPD up another 6.5p, and again no news to substantiate the rise.

I can only summise that the visit to the minesite in lesotho by brokers and analysts a couple of weeks ago has sparked the interest, and with minestart imminent, peeps are buying in anticipation of a rise once diamonds are actually being recovered.

Perhaps this is the start of a new move up after the announcement last week of mine start. However it looks to be a measured progress....

Momentum Investor
European Diamonds, 46.5P
By: Richard Welby
The increased appetite for risk among investors has spawned a burgeoning number of
diamond mining companies coming to AIM to raise large amounts of money by
promising earth shattering returns. Very few will ever find a commercial discovery,
but the carrot is that those who will do often be transformed from acorns into big
oaks.
One that has a fighting chance of becoming the latter is AIM minnow, European
Diamonds, which has not found a commercial discovery but is also about to start
production this May.
For such a small company, European Diamonds is blessed with a geologist of the
highest calibre. Its Chef Executive, Roy Spencer, discovered the giant Grib diamond
pipe in Russia, which contains more than US$5 billion worth of the largest economic
diamond deposit outside South Africa. Fresh fro this success it wasnt difficult to find
new backers for his new vehicle, European Diamonds, which floated on AIM at 70p
in 2000, raising 3m, with a brief to make diamond discoveries in Finland.
In spite of one false start, European Diamonds second project Lathojoki, near the city
of Kuopio in central Finland, looks more promising, with a drilling program
discovering the presence of a two hectare kimberlite pipe, the classic rock formation
which can contain diamonds. Chairman, Tony Williams, who we met over the month,
gave us a how to master-class in determining the crucial tipping point at which a
diamond mine is declared commercial and this resolves around three main factors: the
size of the kimberlite area, diamond grade and average run-of-mine diamond value.
Given that independent analysis of a large sample of the Lathojoki discovery yielded
grades of .44 carats a tonne, well above the minimum acceptable range of 0.25-0.3,
thus is very encouraging although further analysis will be required on both grade and
value.
However, the area that could produce some real short term fireworks in the share
price is in Lesotho in South Africa, a country which has the highest concentration of
known kimberlite pipes in the world. Here, European Diamonds paid just 3m in
shares in October 2003 for two advanced diamond development projects, the low
price reflecting the fact that the seller could no longer finance its license obligations to
the government of Lesotho. Of the two projects, the smaller satellite pipe, in which
European Diamonds has a 65% interest , is known to contain high grade (0.7 carat)
diamonds in commercial quantities and has been independently verified. With the
help of a placing of new shares at 40p last year, which has raised 6.5m, the company
has virtually completed the construction of a new mine and processing plant and the
first diamonds from the satellite pipe are expected to be processing in the second
quarter. It should generate net cash flow of US$5m from a production rate of 290,000
carats/ year in the first full year and has a mine life of at least five years.
But that could be just the beginning, with European Diamonds, with European
Diamonds planning to use the cash flow from satellite pipe to fund the the
development of the main pipe, next door, which is much larger and deeper and
covers a whopping 9.5 hectares. While the original surveys encountered low grade
(0.16 carats) diamonds, more recent studies have indicated at least three much higher
grade zones and although early days, analysts believe it it has the making of 700.000
carats per year operation, generating revenue of $45m. With a Lesotho site visit for
institutional investors expected shortly, there could be some explosive news flow
soon. Although not without considerable risk, the shares are an exciting speculative
buy!

Pholfolio,

Many thanks for posting that article, which clearly states the potential EPD has in it's prospects IMHO.

Production is due to start at the end of April I belive, and if this date doesn't slip, I feel we will see some positive price action very soon.

The commencement of production will be the catalyst for EPD I feel, so may explorers, but very few producers on AIM!

Andy et al, greetings and thanks for the interesting posts above which I've now caught up on together with the various otehr RNS along the way.

The share seems to have been through a typical history of early ambition dissipated by (relatively minor) delays in getting set up on site. Its recent lift from the 40p support level of last year's finance raising is showing the right momentum.

It looks a good time to get in now. The NPV of the Satellite Pipe I reckon covers about 10-12p of the SP, so the rest is riding on the future prospects of the Main Pipe (which could be enormous and carries already a high degree of good sentiment, I imgine) and Finland (still a bit uncertain with pretty cool sentiment, I estimate). What's your view on the next stage for the SP as they dig the first shovel of dirt in April?

Interesting race between EPD and NML in nearby Angola which I am already in!

SD

Stockdog,

You raise a couple of interesting points, one of which was recently discussed "over the road" at ADVFN, where the poster calculated NPV @ 49p including capex.

Another poster has done a calculation on a PE of 15, giving a value of 72p per share for the satellite for the next year.

I have not had the time to check out the calculations, but believe them to be fairly accurate.

IMHO it IS a good time to "get in now", PROVIDED the minestart commences on schedule, ie late April, as I expect a surge in the share price once minestart is confirmed.

EPD have other prospects in Lesotho, and are awaiting news in finland, so there is always a chance of unexpected news arriving, in addition to the minestart RNS.

With regard to EPD and NML, I honestly believe that EPD will be mining before NML, perhaps by a period of months. I think NML are short of cash, and are still being hampered by the weather, and that may continue for another month yet, according to average rainfall figures for the area.

I should declare that I hold EPD, and not NML, at the moment.

My plan is to top slice EPD, and buy NML with the funds, provided of course that EPD can commence production before NML, and NML do in fact obtain their mining permit from the Angolan government.

If you are looking at junior diamond miners, I suggest you take a look at Firestone Diamonds, (FDI), because they already produce from three mines in Namaqualand, S. Africa, but, IMHO, also have some very interesting exploration areas too!

i have an 80p price target for the minestart

cannot be far away now, we are nearly in April!!!

Andy, thanks for your considered response. My NPV was taken as $8m @1.88 = 4.25m from their own fund-raising prospectus last September for the Satellite Pipe which with 42.5m shares in issue equates to 10p per share - plus as you say the main pipe and Finland (we'll always have Finland!) - also several suggestions that the satellite may have deeper to go for longer with higher grade ore. The 5 years plus mine life is probably the most significant limiting factor, giving a 3 year pay-back then only two years of free profits - 10 years would have been much nicer. Should I also add in the 6.5m cash just raised to the NPV of the mine - that brings total NPV to 25p which is more like it for the current SP?

That said, I suspect sentiment, on minestart, will take the SP to where you and Aimtrader suggest - a 50% lift would be nice for a relatively short term trade. Better try to find some dosh for the trip.

SD

Ouch, what's going on? Getting the **** kicked out of it!

philfolio

Well, nothing's going on actually. They broke sideways through the massive 3 year down trend earlier this year and are now dicking about between 40 and 60p waiting for mining to start "in April". Still technically in the middle of a well defined minor down channel.

We still have 2 weeks to go before they disappoint and the SP lurches down below the 35p support level. Or maybe they will start, and the SP will flip up to a new range above the 65p resistance level.

On balance, they're on my buy more before mining starts list, when I can arrange the necessary, rather than my sell before more bad news which I do not expect.

SD

stockdog,

Yes I am considering a top up too, as like you I expect them to more or less start on time.

Stockdog,

Well it's a total slaughter out there this morning, and EPD, IMHO, has faired better then most!

I only have one stock blue, Mano River, and only have a small holding in that anyway.

It's certainly bleak out there today. Too bleak to buy IMHO - want to see this sell off hit bottom firmly before committing more funds.

EPD could certainly have fared worse, but I have other penny stocks stocks that have not moved at all today. Hoping this is a sign of strength to come, rather than just too small to bother people who will sell these off too once they have dealt with the bigger fish.

Having posted lyrically about being a born again stop-losser on the ARX (funnily enough the one bit of blue on my screen today) thread yesterday, in practice I am sitting like the proverbial rabbit in the headlights again, hoping the wheels will go either side of me.

SD

Shouldnt this stock be going NORTH instead of SOUTH. I Know its murder out there today.

When can we expect to see a movement back up?

Stockdog,

Well I have been selectively selling since Friday (not EPD), as I suspected we were due a fall today, and I agree, before I commit those funds back into the market I want to see a solid base too.

I have a nasty feeling the US market is going to have a quick correction, and drag UK down too.

On my non oil stocks, I have placed stop losses, and am selling as soon as they are breached. I have made several sales today, and I can buy them all back CURRENTLY at cheaper prices.

I relaise there is a risk of missing a quick rise, but I have lowered my risk, and am happy to sit out today, to see how Wall St. CLOSES!

Sceniroute,

The quick answer is yes, but with the market being so soft, until EPD actually announce official minestart, which could be any day now, I think we will wallow around this price.

Any opinions from anyone about todays news?

Well, the issue price of the units for 45p suggests some support for the SP at around that price (above today's 41.5p mid-price), since the warrants for half a share at 75p are well out of the money and are therefore just a kicker at this stage. But investors must think 75p will be cheap enough by the time they swap their warrants into shares within quite a limited time-frame of 1 year.

"Each whole warrant will entitle its holder to
acquire one ordinary share of the Company for a period of one year following the
closing date at an exercise price of 75 pence per share."

Is the closing date the date of closing of this issue or some date specified in the issue documents?

Also, a little surprised to see reference to an EGM to be convened "shortly", but a listing date of 25th April for the new shares. Don't they know when the EGM will be yet - today, Friday or Monday - and what happened to 21 days notice of a GM?

The private placing in Bermuda has overtones of dodgy funds - was it so much better than raising in London? Is EPD listged on a Bermudan stock exchange?

Basically very good news for the operational side of the company and no discount to the SP, but a couple of tiny alarm bells about the corporate administration - or am I being too sensitive?

SD

I agree Stockdog, some questions need answers, but at least so far the SP is not collapsing again. Looking again at today's release, I note that the 4.25m shares have already been subscribed, and it is these that they hope to start trading 25th April. The remaining 6.86m shares are the ones for which they are calling an AGM to seek approval.

Stockdog,

I think you are confusing two issues.

I think they already have shareholder permission to issue the 4.25 million shares, hence so they will commence trading on 25/04/2005.

In order to obtain shareholder approval for the additional shares and warrants, they will need to call an EGM, and give, as you rightly say, 21 days notice.

Once the EGM approves the additional shares / warrants, they will be issued, but not before.

Bermuda is a taxhaven, so not necessarily "dodgy", possibly simply tax avoidance.