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

What date is the EGM?

Any views on Sunrise Diamonds spun off from Tertiary minerals and soon to apply for an AIM listing?

EGM is 11.30am today

Philfolio,
Cheers
Ald.

EPD is ticking slowly back up towards 40p, and still the official minestart RNS is awaited.

I feel we will have it later this month, but with This weak market it may well be absorbed.

What a shame a good opportunity was lost, ahd they announced two months ago I genuinely think we would have had up to a 50% increase, and now, probably no more than 10% IMO.

Who rattled their cage today, I wonder. Anyone got any news - no RNS, but an interesting rise of 2p which was sustained through closing, in spite of a couple of sells of 50,000 shares each at about 15.30.

Has someone put a spade through a kimberlite pipe, or something? Any views, Andy?

sd

stockdog,

Well we are due a minestart RNS IMO, and there has been a board meeting in the Uk this week, so maybe people are anticipating some positive news in the near future?

EPD was selected as an undervalued stock by a new mining report according to posters on ADVFN, so that would have helped too I would have thought.

Approaching the 50DMA, which I would like to see us break.

EPD has been recommended by James Picton in his latest report. Not only that but there are hints that the recent board meeting decided something which will improve the share price dramatically. There have been rumours about what this information might be. That a well known major has been making approaches to EPD with a view to either buying the company outright, or at least buying a stake in the company. We have to consider that if there is an veracity in these rumours, then EPD holders are going to benefit.

Guesswork

Baughfell - 25 Jun'05 - 13:24 - 96 of 96
Guesswork

Jealousy!

I'd be surprised if we were a takeover target for a major unless they know
more about Finland than we do.
Lesotho is a great start for EPD but its small fry for a major imo...

stockdog,

I'll be watching the price and volume closely here in the morning, hoping to see both increase, and break the 50DMA.

Higher volume may indicate some news is in the offing.

Andy

Seen the RNS today - they started mining. It's been so long I can't remember who we were betting on to start first, NML or EPD. The report sounds like they may be quite organised, promising 420,000 tonnes per annum at a grade of 0.69 carats per tonne priced at $42 per carat plus 30% price increase = $15,823,080 per annum revenues - about 18.5p per share. What's it cost to get them out of the ground and amortise the 8m capital cost?

Anyway SP is up 3p over last couple of days in response, so maybe there's life in the old fella yet. Wait till we hit the main pipe!

stockdog -

My calculations show net post-everything earnings from Satellite of approx 2.5 million p.a. attributable to EPD.

That's based on the figures given by the company, adjusted for an additional 30% on carat value, and slightly increased costs. The original cost figures (payable in Rand) were calculated with a Rand/$ rate of 9 - these days it's more like 7.

Hard to take Satellite in isolation though, as its life is so short. I have done a 13 year NPV for the Lesotho projects combined - 5 years of Satellite overlapping with 10 years of Main. At 8% (as per this morning's Numis note), assuming that Main is 16.2 cpht, carat value is +30%, and costs and capex are adjusted for a Rand/$ rate of 7, the NPV is approx 25 million after allowing for a 9 year repayment of $80 million (43 million - 8 years x 5 mill + 1 year x 3 mill)) Main capex.

If Main turns out to be higher grade, as is currently thought, then the figures are very much better. With all the same factors as above, plus Main=25 cpht, the NPV is 70 million.

If Main capex is paid back faster, then both NPVs will reduce, as the earnings in the early years, which carry the least discount, will also reduce.

I believe that these figures are slightly higher than those produced by Anomalous - that may be because I have treated Lesotho as a "whole" project rather than trying to add together two separate NPVs.

Wendy - thanks for this, very interesting. I agree the Lesotho project should be treated as a whole because management and much infrastructure, processing and tailings are common capex etc.

At todays market cap of 19.41 million, your 2.5m pa earnings gives a PE of 7.8 - pretty humble IMHO. At a PE of nearer 18 for a company with the Main Pipe still in prospect, the SP might be about double today's price. News of first diamonds and first sales will be big positives to look forward to.

sd

Wendy,

Thanks for updating your figures, today's news, after FDI yesterday, may stir the junior diamond sector a bit from it's recent slumber.



Stockdog,

Yes I remember those days!

Good news indeed, and (hopefully) a discovery or two in Finland to ice the cake.

The general consensus puts a value on EPD around 60p, some say more, but 60p for now is the most we can expect IMO.

Lets all stick to this thread, it will make things less confusing.

aldwickk,

yes I agree, multiple threads can cause some posts to be missed.

Quiet day again so far, only 11,000 shares traded.

Roll on September!

Nice write up on www.minesite.com.


Minews Story
Date: July 14, 2005

European Diamonds Has Started Production At Satellite Pipe Mine In Lesotho

The market can act in a very perverse way on many occasions. The week before last European Diamonds announced that commissioning of the diamond recovery plant at the company's Liqhobong property in Lesotho was complete and initial production of diamonds had commenced. The shares dropped 10 per cent to 42p on the week. Last week Last week our London Correspondent reported in That Was The Week That Was that the shares had fallen back by 14 per cent to 37.5p. Agreed the start of diamond production came as no surprise, but it is worth remembering that European Diamonds is only capitalised at 42 million. Kimberlite diamond production tends to merit a high rating.

As John Meyer, analyst at Numis Securities points out, the implied valuation for the Diavik diamond mine in Canada is simple to deduce from the $1.7billion market capitalisation of Aber Resources which holds 40 per cent of the deposit. This implies a $4.25billion valuation for the Diavik diamond mine. Compare it with the Ekati diamond mine which lies relatively near-by in Canada. BHP Billiton went on to acquire 29 per cent of the Ekati diamond pipe for $446million effectively valuing the project at $1.54billion at that time. OK, production at these two mines is a whole lot higher than at Liqhobong, but the question that the market should be pondering is whether the differential between $4.25 billion and 42 million is sensible.

The first materials being processed are tailings from previous bulk sampling and surface mining activities. Production will gradually increase over the next four months to around 35,000 tonnes of ore per month, and by the end of the third month the first batch of primary kimberlite will enter the processing stream. This primary material is expected to contain significantly higher diamond grades and values than the surface material and tails. As Roy Spencer, the chief executive, points out European Diamonds is targeting a production rate of 24,000 carats per month by the end of this year. This makes for a total annual production of just under 300,000 carats compared with the 6 to 7 million carats produced at Diavik, which helps put things in perspective. European Diamonds has yet to sell any diamonds from run-of-mine production, but the presence of fancy yellow stones could have an impact on value.

The other plus for investors interested in the Liqhobong property is that the 1.6 hectare diamondiferous Satellite pipe was brought into production 20 per cent below the original US$10 million budget and in only just over 9 months. And this was achieved despite paying for increased engineering capacity at the crushing section of the processing plant and for a larger tailings dam for waste disposal. It is an open pit operation which will be mined at a rate of 420,000 tonnes/year so has an initial life of 5 years. This life may well be extended, but well before that time production will also have started from the Main pipe which is considerably larger. It is 9.5 hectares in area and Roy Spencer thinks the economics are very promising. He expects to use existing infrastructure to accelerate production from it once economic evaluation is complete.

In recognition of this achievement the Welsh Wizard is stepping down as chairman to bog standard director and in his place comes Buddy Doyle, former head of diamond exploration for Rio Tinto in Canada. Buddy led the team which was helping Eira Thomas when she discovered the A-154 pipe which became the Diavik mine. The fact that he is taking over at the junior says something for what Tony Williams has achieved over the past 4.5 years and it should not be forgotten that European Diamonds has also had success with its exploration on the prospective Karelian Craton in Finland. Kimberlites have been discovered and evaluation work on the promising Lahtojoki pipe has begun with a 5,000 tonne bulk sample now underway.