London-listed Firestone Diamonds said on Thursday it hoped to start building a major new diamond mine in South Africa as early as 2007 after signing a joint venture with the world No.1 producer De Beers last week.
Firestone Chief Executive Philip Kenny told an investor and press briefing that its Groen River project on the west coast, north of Cape Town, was one of the most attractive alluvial diamond projects in the world.
"The diamonds are a large average size and very high quality. This has the potential to be a world-class producing area," Kenny said.
Diamond prices have soared in recent years: demand from established and emerging markets is strong and miners have struggled to find the world's next sizeable deposit as extra supply from the sale of De Beers' stockpile has dried up.
The deal announced on Tuesday, gives De Beers a 61 percent interest in Groen River in return for financing the project up to the completion of a bankable feasibility study.
A joint De Beers-Firestone team will now speed up exploration of the 500 sq km site that potentially contains millions of carats of diamonds worth billions of dollars, Kenny said.
Firestone should have the first exploration results by the end of this year and have finished secondary testing by the end of next, he said. A detailed study to hammer out plans for a mine would then take another three to six months.
"We would be there or thereabouts by the end of next year. We would go into production almost immediately," said Kenny, adding that a relatively simple, shallow mine would only take around a year to build.
Diamonds have been mined on the west coast of South Africa since 1925.
Unlike many of the world's biggest diamond mines which tap concentrated deposits inside extinct volcanic pipes, diamonds on South Africa's west coast were carried there by ancient rivers rising in modern-day Botswana and Namibia, and are scattered widely across gravel deposits.
"Any one of these features is big enough to put a mine on," said Kenny, pointing to a number of ancient bends and pools on now-extinct rivers where diamonds are most likely to have settled.
"There will probably be multiple mines in the area. It's basically the last unexplored river system on the west coast."
The deal is the fourth that Firestone has signed with De Beers in the last 12 months, aiding sentiment towards the junior miner, worth some 70 million pounds.
"There's been a high degree of scepticism about Groen River. Signing up with De Beers is giving the project credibility it didn't have before," Kenny said, adding that as far as he was aware it was the first joint venture De Beers had ever signed on an alluvial project.
"I think you can see the relationship with De Beers continuing to expand."