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South Africa continues to be a prime diamond exploration destination from a geological viewpoint, in spite of perceptions of being bureaucratic and of higher political risk. BOD has been exploring in South Africa since 2017, when it entered into an Option and Earn-In Agreement with Vutomi Mining Pty (Ltd) (‘Vutomi’) to explore Vutomi’s Prospecting Rights spanning 50,000 hectares of prospective ground in the Limpopo, North-West and Free State Provinces of South Africa.  BOD currently has a 15% interest in Vutomi. On completion of its commitments for Phase 2, BOD’s interest will increase to 40%. The Company will then have the option to increase its interest to 72% of Vutomi by issuing 96.8m shares and settling Vutomi’s shareholder loan accounts of £300,000 within 90 days of the completion of Phase 2.

A revised Mining Charter, which was promulgated in October 2018 following extensive consultation with the mining industry, banks and others, is a significant step forward in terms of improving long-term certainty and investor confidence compared with previous drafts of this document.

Key highlights of the revised Charter include:

  • A minimum black ownership remains at 26% in respect of the tenure of existing mining rights which addresses concerns of dilution of existing right holders. For new rights granted, black ownership will be 30%.
  • No required local ownership is required for prospecting rights. This is a significant step forward given the high-risk nature of exploration.
  • The ‘once empowered, always empowered’ principle has been entrenched. This allows black-empowerment shareholders to exit from projects without impacting empowerment credentials. If control over the mining rights change credentials will need to be re-established.
  • The cost of free carry ownership on a project may be recovered from a project as a first claim on the asset (although this interpretation is to be confirmed). In addition, there is an option to settle free carries by way of an ‘equity-equivalent’ in favour of employees or communities.
  • The requirement for specified minimum dividends to employees and communities in previous drafts has been removed.

A Technical and Economic Evaluation Report (‘TEE Report’) for the Thorny River project in the Limpopo Province was received in June 2018 and this followed earlier work by the Company, which included bulk sampling. The TEE Report provided the Company with sufficient information to warrant further development of the Thorny River project.

The volume of the Thorny River deposit has been modelled at between 1.2 and 2.0 million tonnes (to 100m); it has a diamond grade ranging between 46 and 74 cpht and diamond values in the range of US$120 and US$220 per carat. The diamond parcel recovered from the trench sample collected at Frischgewaagt in late 2017 proved insufficient for a full economic valuation, particularly in the large stone size range. Despite this, the TEE Report indicates that the project has commercial potential.

In November 2018 a mining contract was concluded with Palaeo Minerals Pty Ltd covering both bulk sampling activities and potentially future full-scale mining.  The contract will enable the Company to self-fund the Thorny River project from bulk sampling through to mine development, assuming positive results, with indicated net royalties of between US$2 to US$7 million annually based on current estimates.

Palaeo is an experienced mining contractor which has several mining contracts in South Africa and Zimbabwe.  The key terms of the Contract are as follows:

  • A net revenue royalty of 12% will accrue to Vutomi.
  • 8% will accrue to Vutomi to cover State Mineral Royalties, sales and security expenses.
  • 80% will accrue to Palaeo to cover its mining and processing costs.
  • A processing target of up to 30,000 tons of kimberlite per month.
  • Diamonds will be recovered using a processing facility at a nearby diamond mine.

Regulatory approvals from the South African Department of Mineral Resources have been applied for.  An advance in-fill drilling programme will allow detailed planning prior to commencing bulk sampling in 2019 and the revenue and information from this project will enable the Company to consider further long-term options for Thorny River and the surrounding kimberlite field.

Eight kimberlites were “re-discovered” in late 2017 within the Free State Project area. These eight kimberlites were identified through the integration of satellite imagery with research conducted in the SA National Archives, where evidence was uncovered that a number of diamond mines were operational between Jagersfontein and Kimberley in the late 1870’s, these diamond producing operations stopped during the Anglo Boer War (1899-1901) and never restarted.  Surface size estimates based on detailed ground geophysical surveys are in the range of 0.3 – 1.15 hectares (minimum sizes). Kimberlite mineral chemistry work has rated these kimberlites as high interest from a diamond-bearing potential perspective. Whole-rock geochemistry analyses of the kimberlites have revealed a Group 1 geochemistry, similar to the Kimberley, Koffiefontein and Jagersfontein diamond mines. The Company is planning a phased drilling programme in this area

In June 2018, Vutomi was awarded a Prospecting Right over the remaining extent of the farm Mooikloof, which hosts the 2.5-hectares Mooikloof kimberlite pipe. A subsequent claim by a South African company in respect of an allegedly overlapping Mining Permit is under review by the South African Department of Mineral Resources. BOD has followed all due process in its PR application and is confident that it holds valid title to the ground.

The Mooikloof pipe was last assessed in the late 1980’s by De Beers when the focus shifted to the advancement of the nearby Oaks mine. BOD intends to re-assess the kimberlite with modern exploration techniques, as its size and economic potential might have been underestimated at the time of its assessment.

In July 2018, Vutomi was awarded new prospecting rights over a portion of the Palmietgat farm in the Limpopo Province, approximately 50 km north of Petra’s Cullinan diamond mine. The Palmietgat area hosts six diamondiferous kimberlite pipes, three of which fall within the new granted prospecting rights. The new ground is adjacent to the Palmietgat Mine, formerly operated by Trivalence.

Drilling at the Ontevreden kimberlite, discovered by BOD in July 2017, revealed a smaller pipe size than previously indicated by geophysics. No further work is planned on this kimberlite and the Prospecting License has been relinquished.

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