QUARTERLY ACTIVITIES REPORT JUNE 2007
July 27 2007 - 5:07AM
UK Regulatory
ELKEDRA DIAMONDS NL
Level 1, 130 Hay St, Subiaco, Western Australia
QUARTERLY ACTIVITY REPORT 6008
FOR THE PERIOD ENDING Telephone: +61-8-6380 2855
30 JUNE 2007 Facsimile: +61-8-6380 1644
P O Box 8035, Subiaco East, Western Australia 6008
E-mail: elkedra@elkedra.com.au
Web Site: www.elkedra.com.au
Chapada processing plant
Listed on ASX and AIM (Code EDN)
HIGHLIGHTS
CORPORATE
� Elkedra to merge with Canadian diamond company Vaaldiam Resources Ltd (TSX: VAA).
� 38.46% (25 million shares) interest retained in Uramet Minerals Ltd (ASX: URM)
following successful $7 million IPO and listing on ASX.
� Pro rata in specie distribution to Elkedra shareholders of 25 million Uramet
Minerals Ltd shares scheduled to be completed by 17 September 2007.
BRAZIL
Chapada Diamond Project
� 5,606 carats of diamonds produced for the quarter
� Revenue of US$2,617,692 generated from sales in the quarter.
� Environmental licence received allowing development of Peba Lagoinha deposit to
commence
OVERVIEW
1.0 CORPORATE
ELKEDRA TO MERGE WITH VAALDIAM RESOURCES LTD
On 4 July 2007 the Company announced that it had received an offer from
Canadian listed diamond group Vaaldiam Resources Ltd (TSX:VAA) (Vaaldiam) to
acquire all of the outstanding shares of Elkedra in exchange for Vaaldiam
common shares by way of a Scheme of Arrangement. Under the proposed terms of
the Scheme, Vaaldiam will issue 0.52 of a Vaaldiam share for each Elkedra
share held by Elkedra shareholders after the in specie distribution to Elkedra
shareholders of the 25,000,000 Uramet shares currently held by Elkedra. The in
specie distribution will be completed prior to the finalisation of the Scheme
of Arrangement. At the time of the announcement these terms valued Elkedra
shares at A$0.53, a 60% premium to the then ASX and AIM trading share price.
Vaaldiam also made a concurrent offer to acquire all of the outstanding shares
in explorer Great Western Diamond Corp (TSXV:GWD) in exchange for Vaaldiam
common shares.
The Directors of Elkedra believe there is considerable merit in the proposed
merger of these three companies and their respective spread of complimentary
diamond assets in South America and Canada and has unanimously agreed to
recommend the Vaaldiam offer to Elkedra shareholders, subject to no competing
and more favourable bid being received. The transaction will progress pursuant
to a merger implementation deed executed between Elkedra and Vaaldiam.
Vaaldiam has executed lock-in agreements pursuant to which existing
shareholders have agreed to vote 19% of Elkedra shares in favour of the offer.
This includes a 2% lock-in by Samcor Investments Pty Ltd, a company in which
Elkedra director, Mr Sam Randazzo, has an interest.
The Scheme of Arrangement is subject to a number of conditions, including
absence of adverse material changes and receipt of all necessary regulatory,
shareholder and court approvals. The Elkedra Scheme of Arrangement is not
contingent of completion of the Great Western Offer.
It is anticipated that by mid September 2007 a notice of meeting together with
a scheme booklet will be delivered to all Elkedra shareholders providing full
details of the Scheme of Arrangement as required under the Corporation Act and
ASX Listing Rules. The implementation of the scheme, which will follow the
shareholder approval and final court approval, would involve the cancellation
of all Elkedra securities and its listing on the ASX and AIM Markets. Vaaldiam
and Elkedra have each agreed to pay a break fee equal to 1% of the enterprise
value of the respective companies in the event that one of the parties elects
not to finalise the merger under certain conditions.
Upon Vaaldiam completing the Elkedra Scheme of Arrangement and the Great
Western Offer, the resulting merger of Vaaldiam, Elkedra and Great Western
will create a leading diamond production, exploration and development company
with a pro forma market capitalization in excess of C$160 million with
approximately 190 million shares on issue. The `new' Vaaldiam will have the
ability to substantially fund the consolidated group's advanced-stage
kimberlite exploration and development costs from cash flow, thereby reducing
dilution to its shareholders. The combined group will also have strong
management expertise and the financial capacity to realise the potential value
of the extensive exploration portfolio and to capitalise on future acquisition
opportunities.
The `new' Vaaldiam will provide its shareholders with exposure to a
diversified project pipeline, including two producing alluvial diamond mines
in Brazil and advanced-stage kimberlite exploration projects in Brazil and
Canada. With its pro forma market capitalization now placing the company in
the sparsely occupied mid range of diamond companies, and with the increased
liquidity and enhanced investor profile the company will be better placed to
attract the attention of a broader group of international investors
particularly within the North American markets.
Ken Johnson will continue as President and Chief Executive Officer of Vaaldiam
while Peter Marrone will continue as Chairman of Vaaldiam. Elkedra directors
Don Best and Sam Randazzo will join Vaaldiam's executive management team as
Vice President, Operations and Vice President, Business Development,
respectively. Brent Jellicoe, President and Chief Executive Officer of Great
Western, will join as Vice President, International Exploration. Sam Randazzo
and Brent Jellicoe will also be appointed to the board of Vaaldiam.
URAMET MINERALS LIMITED - URANIUM AND BASE METALS SPIN OFF
During the quarter Elkedra's high quality portfolio of uranium and base metal
prospects in the Georgina Basin located in the Northern Territory and
Queensland were transferred to a new company, Uramet Minerals Limited
(Uramet). Uramet's initial public offering of A$7,000,000 closed
oversubscribed and it was admitted to the Official List of the ASX and trading
of Uramet shares commenced on 19 June 2007 (ASX:URM). Since that date the
share price has continued to trade at a premium to the initial offer price of
20 cents per share. The directors believe the strong IPO response reflects the
market's belief, not only in the strength of demand for uranium and base
metals, but also in the prospectivity of Uramet's targeted tenement package as
described in Uramet's IPO prospectus.
The decision to divest the Company's Australian uranium and base metal assets
reflects Elkedra's focus as an international diamond producer following the
successful development and commissioning of the Chapada Project in Brazil last
year. The spin off also creates the opportunity for Elkedra to unlock the
value of its Australian exploration interests through a separately well funded
exploration programme now being undertaken by Uramet. Uramet's tenement
package comprises approximately 7,900 km2, nearly all of which is located in
the Northern Territory. Elkedra has however retained the diamond rights on the
tenements it transferred to Uramet.
Two Elkedra directors are on the board of Uramet, Mr Sam Randazzo (as non
executive Chairman) and Mr Don Best (as non executive Director). Experienced
mining and exploration executive Mr Bill Hewitt has been appointed as Uramet's
Managing Director and mining engineer Mr Richard Procter has also been
appointed as a non-executive Director.
Uramet also acquired from Elkedra exploration plant and equipment located at
its Alice Springs premises which allows Uramet to immediately mobilise its
exploration activities.
Elkedra retains a 38.46% interest in Uramet (25,000,000 shares), which it
intends to distribute in specie to Elkedra shareholders (see page 4). Elkedra
shareholders will therefore have had the opportunity to directly participate
in the growth and future success of Uramet.
In its prospectus Uramet advised that it proposed a pro rata issue of free
options to its shareholders within 6 months of the listing date. The pro rata
entitlement of one option for every 3 shares held in Uramet on the record date
(to be advised) will have a strike price of 25 cents and a term of 18 months.
URAMET MINERALS LIMITED - IN SPECIE DISTRIBUTION
Subject to shareholder approval the Company intends to complete a
pro-rata in specie distribution of the 25 million shares it holds in Uramet to
Elkedra shareholders. The in specie distribution will constitute a capital
reduction by Elkedra and a Notice of General Meeting to obtain the required
shareholder approvals was despatched to Elkedra shareholders on 19 July 2007.
Elkedra has obtained conditional approvals under, exemptions from and waivers
of the Corporations Act and the ASX Listing rules to complete this in specie
distribution of Uramet shares.
The current time table for completion of the in specie distribution of
Uramet shares is:
17 August 2007: Shareholders meeting to approve capital reduction by
way of in specie distribution of 25 million Uramet shares
3 September 2007: Trading in Elkedra shares on an "ex return of
capital" basis starts.
10 September 2007: Record date for pro rata entitlement to Uramet
shares.
17 September 2007: Despatch date of 25 million Uramet shares to
Elkedra shareholders who were shareholders on the record
date (10 September 2007).
2.0 BRAZIL
CHAPADA DIAMOND PROJECT - Elkedra 100%
PRODUCTION
Diamond production and key operating statistics since commencement of
operations through to 30 June 2007 are shown in the following Table 1.
TABLE 1 - PRODUCTION STATISTICS
Production Month Average Diamonds Recovered Average Average
Stone Size Value
Plant Grade
(cts/stone) per Carat
Throughput
(US$)
(bcm)1
Stones Carats
Start up 114,707 0.038 10,114 4,338 0.43 382
to 30 Sep 06
Dec 06 Qtr 154,630 0.038 10,581 5,974 0.56 406
Mar 06 Qtr 155,936 0.037 10,221 5,775 0.57 415
Jun 06 Qtr 199,252 0.028 10,138 5,606 0.55 349
Year end 30 Jun 624,525 0.035 41,054 21,694 0.53 389
07
1. "bcm" means "bank cubic metre" of insitu gravel in mining benches and plant
throughput is based on total run of mine production including all under and
oversize material.
There were no project development activities undertaken during the quarter.
SALES
During the quarter three monthly sales were completed, generating sales
revenue of US$2,617,692. Subsequent to the end of the quarter, on 25 July
2007, a further sale was achieved comprising 1763.45 carats selling at an
average price per carat of US$353. This sale generated revenue of US$623,097
will be reported in the revenues for the September 2007 quarter. Including
this sale, the Chapada project has, to date, sold a total of 22,886 carats
(44,120 stones) for a total value of US$8,862,228.
The run of mine production continues to achieve in excess of 90% gem quality
diamonds and the average stone size since the commencement of production is
achieving 0.53 carats/stone. Although the average stone size decreased
slightly this quarter (0.55 carats/stone, down from 0.57 carats/stone in the
March quarter) the stone size distribution indicates that larger size stones
(+5 carats) continue to be consistently recovered.
Diamonds falling into the specials category during the June quarter
are noted as follows:
Stones in 11+ Carat Specials Category
Valuation Average Total Highest Value
Date Value Value
No. of Stone
(2007) Stones US$ US$
12 Apr 7 3,071 405,581 27.35 carats, US$159,450 @
US$5,830/carat
15 May 4 1,607 82,196 16.71 carats, US$36,762 @
US$2,220/carat
20 Jun 2 1,100 30,867 14.04 carats, US$16,848 @
US$1,200/carat
Peba Lagoinha Tenement
On 19 June 2007, Sema, the environmental authority for the state of Mato
Grosso in Brazil, issued an installation licence which allows the Company to
commence development activities on the Peba Lagoinha deposit located
immediately adjacent to the Quilombo mine currently in operation. Planning is
now in progress to develop the Peba Lagoinha mine. It is anticipated that
mining of the Peba Lagoinha deposit should commence before the end of December
2007.
BRAZILIAN TENEMENTS AND RESERVES
The Chapada Project Tenements in Brazil cover a total area of approximately
285 km2.
Current Reserves
The Chapada Project commenced operations with a probable reserve of 5.4
million bcm of diamondiferous gravels at a grade of 0.05 carats per bcm. At
the time of production start up in late June 2006 this reserve was sufficient
to sustain a mine life of 9 years based on the proposed initial rate of gravel
processing of 600,000 bcm (1.4 million tonnes) per annum, with expected annual
diamond production of more than 30,000 carats. A total of 624,525 bcm has been
processed to the end of June 2007.
The current probable reserve of gravels is contained on two tenements,
"Quilombo", for which mining licences have been granted, and the adjacent
"Peba Lagoinha" tenement for which an environment installation licence was
received on 19 June 2007 and the mining licence is expected to follow shortly.
Exploration Tenements
Elkedra holds a further seven granted exploration tenements covering some 270
km2 within the surrounding Chapada basin region. Historical exploration
activities have shown these areas to also contain diamondiferous gravel
deposits. If ongoing exploration work indicates economic resources in these
tenements then low capital cost satellite mining operations can be established
at these tenements providing a gravel concentrate back to the Chapada process
plant for final diamond recovery.
No tenements were applied for or relinquished in Brazil during the quarter.
Exploration - Brazil
The Company continued its Brazilian exploration activities during the June
2007 quarter on its tenements surrounding the existing Chapada operations.
Activities are being concentrated on the Casca tenement where access
agreements with land owners are already in place over the majority of the
area. Exploration work to date has been focused on determining bed depth and
gravel volume, depth of overburden and bedrock profile within the Casca
tenement.
The proposed merger with Vaaldiam Resources Limited should allow the
exploration campaign at Chapada to be accelerated. Vaaldiam has several drill
rigs and exploration personnel in Brazil and following completion of the
merger, 2 drill rigs and support staff are expected to be relocated to the
Chapada project to advance the exploration programme.
3.0 AUSTRALIA
AUSTRLIAN TENEMENTS
During the quarter Elkedra's granted tenement holdings in the southern
Georgina Basin region of the Northern Territory (Mt Skinner and Altjawarra
Project Areas) were transferred to Uramet Minerals Ltd (see Fig. 10 & Table
2). Elkedra retains the rights to diamond exploration on these NT tenements.
Three tenement applications in the Mt Skinner Project area (EL25573, EL25574
and EL25610) will also be transferred to Uramet Mineral Ltd when granted.
Elkedra has retained its Queensland tenements but Uramet Minerals Ltd holds
the rights to explore for commodities other than diamonds. Elkedra Diamonds
has retained a 100% interest for all minerals on tenement applications on the
Tiwi Islands (Fig. 10).
Remaining tenements held by Elkedra in the NT and Queensland total 6,750 km2,
including both granted tenements and pending applications. Tenements in the NT
now held by Uramet Minerals Ltd in which Elkedra retains the diamond rights
total 6,119 km2.
Diamonds - Elkedra 100%
Tiwi Islands Diamond Project (NT)
Elkedra is investigating the potential for on-shore Tertiary-age lamproite
pipes in the Tiwi Islands analogous to the numerous 30 million year old
lamproite diatremes known in the Timor Sea some 200 km offshore. Analysis of
an NT Government aerial magnetic survey over the Tiwi Islands was completed
during the quarter. Of the 36 targets originally identified, 17 targets were
considered of sufficient priority for detailed modelling. Following the
modelling study only one target was identified as a priority volcanic pipe
style target.
Thorntonia Diamond Project (Queensland)
A field visit was undertaken during the quarter to review ground conditions
and exploration access to the project area to enable commencement of
exploration planning activities.
Base Metals and Uranium
Elkedra's base metal and uranium assets were spun off into a separate company
Uramet Minerals Ltd which successfully listed on the ASX (code URM) on 19 June
2007.
TABLE 2 Tenements & Rights to explore transferred or to be transferred
to Uramet Mineral Limited (URM)
State Tenement Project Area Status URM interest
NT EL 25366 Mt Skinner Granted Tenement transferred to URM
NT EL 25367 Mt Skinner Granted Tenement transferred to URM
NT EL 25573 Mt Skinner Application Tenement to be transferred to URM
NT EL 25574 Mt Skinner Application Tenement to be transferred to URM
NT EL 25610 Mt Skinner Application Tenement to be transferred to URM
NT EL 22537 Box Hole Granted Tenement transferred to URM
NT SEL 24769 Marqua-Field Granted Tenement transferred to URM
River
NT EL 24693 Marqua-Field Granted Tenement transferred to URM
River
NT SEL 24768 Toko Range Granted Tenement transferred to URM
QLD EPM 15083 Toko Range Granted Rights to explore for commodities other
than diamonds granted to URM
QLD EPM 15230 Toko Range Granted Rights to explore for commodities other
than diamonds granted to URM
QLD EPM 15014 Thorntonia Granted Rights to explore for commodities other
than diamonds granted to URM
QLD EPM 15015 Thonrtonia Granted Rights to explore for commodities other
than diamonds granted to URM
SECURITIES
During the quarter 4,516,120 ordinary shares were issued upon conversion of
451,612 10% $3.60 convertible notes. A further 45,000 convertible notes
matured on 24 June 2007 and were redeemed on that date. At 30 June 2007 there
were no outstanding convertible notes on issue.
During the quarter 605,188 new shares were issued for 605,188 warrants
exercised at 12 pence. These issues raised A$175,505.
The total number of issued shares of the company at 30 June 2007 was
104,596,211 shares.
As at 30 June 2007 a total of 12,133,334 unlisted options exercisable at
between A$0.35 and A$1.20 are on issue, in addition to 2,734,444 warrants
exercisable at 12 pence listed on AIM in the UK.
The Company regularly updates its Web Site at www.elkedra.com.au
For and on behalf of the Board
M.D.J. Cozijn
Director/Company Secretary
27 July 2007
The resource information on the Brazilian Chapada Alluvial Diamond Project has
been prepared in accordance with the 2004 edition of the Australasian Code for
Reporting Exploration Results, Mineral Resources and Ore Reserves (the "JORC
Code"). The term "Probable Reserve" is used as per its definition in the JORC
Code (available at www.jorc.org). The information is based on data compiled by
and reported upon by Mr Hugh Durey of Hugh Durey & Associates Pty Ltd. Mr
Durey is a member of the Australasian Institute of Mining & Metallurgy and
qualifies as a Competent Person as defined in the JORC Code. Mr Durey consents
to the inclusion in this report of the matters in the form and context in
which it appears.
The geological information on the Australian projects is based on information
compiled by and reported upon by Dr Wayne Taylor, Elkedra's Chief
Mineralogist, who is a member of the Australian Institute of Geoscientists and
qualifies as a Competent Person as defined in the JORC Code. Dr Taylor
consents to the inclusion in this report of the matters in the form and
context in which it appears.
ENDS
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