Goodrich Resources (ASX: GRX) is set to acquire the Ellendale Diamond Mine in Western Australia, which produces half of the world supply of rare fancy yellow diamonds.
Goodrich has entered into a sales and purchase agreement with Gem Diamonds (LSE: GEMD) to wholly acquire Gem Diamonds Australia Holdings Pty Limited - which is the owner and operator of the mine.
Consideration comprises an upfront payment of $3.1 million with the balance of $11.2 million to be paid in instalments over 12 months from completion
In addition, Gem Diamonds will receive a further cash reimbursement for surplus working capital and agreed capital expenditure incurred between the signing of the share sale agreement and the effective date of 31 December 2012.
The project has exploration potential with 47 additional diamond pipes within the Mining Lease.
Goodrich will head to the market this week with a capital raising to fund the acquisition, which is subject to due diligence and expected to be completed in January 2013.
Ellendale Diamond Project
Ellendale is renowned for its fancy and vivid yellow diamonds, which are greatly sought after for their rarity. Off-take agreements are in place with Tiffany & Co. for the yellow diamonds accounts for around 80% of the mine revenue.
The current resource is 91.3 million tonnes at an average grade of 4.35 carats per hundred tonnes. Ellendale covers 124 square kilometres and is located 120 kilometres east of Derby in the West Kimberly Region of Western Australia.
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