TORONTO (miningweekly.com) – Vancouver-based Lucara Diamond Corp has signed a letter of intent to acquire fellow junior Motapa Diamonds in an all-share transaction, the firms announced on Tuesday.

Both companies are exploring for diamonds in various parts of Africa, but their most advanced assets are stakes in the Mothae project, in Lesotho, in which Lucara owns 65% and Motapa holds the balance.

Lucara is led by veteran mining entrepreneur Lukas Lundin.

The firms have proposed that each Motapa share will be exchanged for 0,9055 of a Lucara share, through a plan of arrangement, which has the backing of both companies' boards.

The swap ratio represents a 104% premium to Motapa's trailing 20 day volume weighted average price on the TSX Venture Exchange.

If the deal is successful, Motapa shareholders will hold 35% of the combined company.

“This is an opportune time to consolidate Mothae and create a larger, more robust company while strategically assessing future growth opportunities,” commented Lucara GM William Lamb.

The 24,7-km² Mothae diamond project hosts a large diamondiferous kimberlite pipe with an estimated surface extent of 8,8 ha and is located 6,5 km to the north west of Gem Diamonds' lucrative Letseng mine.

The joint venture partners are in the final stages of a 100 000-t bulk sample of the Mothae kimberlite, and diamond recovery results to date confirm the presence of a coarse stone size distribution and the presence of a significant population of Type IIa diamonds, the firms reported.

To date, four diamonds greater than 20 carats, 10 diamonds greater than 10 carats and 51 diamonds greater than five carats have been recovered.

According to an existing agreement between the two companies, Lucara can earn up to 70% of the project by funding exploration, studies and development of the asset.

The tie-up will also provide the merged entity with the critical mass needed to expand its reach in Africa through organic growth, as well as acquisition opportunities, Lamb said.

The enlarged firm will have exploration assets in Namibia, Gabon and the Democratic Republic of Congo.

Motapa and Lucara have agreed to finalise a definitive agreement on or before April 23, in which they will set out the board and management structure, and other details of the consolidated company.

The transaction will require Motapa shareholder approval.

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