Gem Diamonds to Buy BDI for $82.88 Million

LSE listed miner Gem Diamonds (LSE: GEMD) said today (Wednesday) that it will buy BDI Mining (AIM: BMG) for cash. The 37 pence ($0.73) per BDI share represents an 8.8 percent premium on BDI’s Tuesday closing price.

The £41.9 million ($82.88 million) price includes all the issued and to be issued share capital of BDI Mining.

The agreement gives Gem Diamonds an 80 percent holding in BDI’s premier asset Cempaka, a gem quality producing alluvial diamond mine in Indonesia.

The alluvial diamond deposits at Cempaka are located in two concealed palaeochannels: the Danau Seran palaeochannel which has produced more than 70,000 carats; and the Cempaka palaeochannel consisting of large volumes of diamondiferous palaeochannel gravels.

“We believe that Gem Diamonds’ expertise in alluvial diamond mining, together with our intention to undertake additional investment in the Cempaka mine, will significantly enhance the operational performance of Cempaka,” Gem Diamonds’ Chairman and CEO Clifford Elphick said.

He added that the deal demonstrates the firm’s interest in focusing on high quality diamond production, while providing an opportunity to diversify geographically. Gem Diamonds mines Lesotho’s Letseng diamond mine and prospecting operations in the Democratic Republic of Congo and Central African Republic.

In February, Gem Diamonds listed on the London Stock Exchange and raised over $600 million.

BDI is a diamond and gold mining company which owns, through its indirect wholly owned subsidiary AMMC, 80 percent of PTGC, which holds the mining rights to the Cempaka diamond mine.

BDI also indirectly maintains full ownership of the Woodlark gold project in Papua New Guinea through a wholly owned subsidiary. Gem Diamonds said it will review “strategic options” for this project.

The book value of the gross assets of BDI as of December 31, 2006 was $21.73 million. BDI ended 2006 with an operating loss of $4.58 million.