Vast Resources PLC (LON:VAST) said Botswana Diamonds PLC (LON:BOD) has signed up to develop the Heritage concession in the Marange diamond fields of Zimbabwe.
The conclusion of the agreement follows the announcement at the beginning of May that the two companies had signed a memorandum of understanding to jointly investigate diamond opportunities in Zimbabwe.
READ: Vast Resources and Botswana Diamonds team up to investigate Zimbabwe diamond opportunities
A separate agreement will be concluded with Botswana in due course for the joint development of diamond properties outside the Marange diamond fields, Vast Resources said. It is envisaged the collaboration will be through a 50/50 joint venture (JV).
Today’s announcement concerns the creation of a special purpose vehicle (SPV) by Botswana and Vast for the purpose of developing diamond resources within the Marange fields.
The initial shareholdings in the SPV will be Botswana 13.33% and Vast 86.67%.
Vast has agreed a deal for exclusive access to the Heritage concession to carry out due diligence, with a view to concluding a joint venture agreement with Red Mercury; Red Mercury will be responsible for providing a full mining licence and Vast for finding development funding.
Botswana will give assistance in the interpretation of geological and other information concerning the Heritage site pending the conclusion of the Red Mercury JV.
Vast will contribute up to US$1mln on loan account as the first funding to the SPV.
Any funds required in addition to US$1mln would result in an increase in the contributor’s equity in the JV. Both Botswana and Vast have the right to contribute pro rata to their shareholdings.
“Since signing the exclusive access agreement for initial due diligence and pre-agreed joint venture terms on the Heritage Concession in the Marange Diamond Fields with Red Mercury (Pvt) Ltd, Vast has commenced extensive internal work and engaged third party geologists to provide a field report and desktop study,” said Andrew Prelea.
“The company is now comfortable enough to enter into an agreement with Botswana and looks forward to the next phase of the due diligence process together with Botswana,” he added.
Shares in Vast were unchanged while Botswana’s shares were up 5.4% at 0.98p.