Australian gem producer Namakwa Diamond Company yesterday announced that it has secured a six-month option to evaluate, and potentially acquire, a group of large-scale diamond deposits located in the heart of one of Brazil's most prolific diamond-producing regions.

Namakwa has signed a Memorandum of Understanding (MoU) with the owners of the Jequitinhonha project, giving it an exclusive option to undertake due diligence on the project.

By exercising the option, Namakwa can immediately acquire a 75% interest in a new joint-venture exploration and development company, with the option to subsequently move to 100% ownership, following a decision to commence mining.

The project, located near the historic diamond-mining centre of Diamantina in the state of Minas Gerais, comprises two distinct types of large-scale alluvial deposits, termed 'alluvials' and 'conglomerates'.

The owners have produced a JORC-compliant inferred resource for the conglomerate deposits exceeding 8,6-million m3 (approximately 20 million tons) of in-situ gravels, containing approximately 1,2-million carats, indicating their potential to form the basis of a substantial mining operation.

The average grade of these deposits is a 13,43 carats/100 m3.

The exploration and development potential of the Jequitinhonha project is supported by the strong history of mining in the region and the relative proximity of the alluvial concessions to the Domingas mine, Brazil's largest single diamond producer, which is located some 100 km upstream of the alluvial concessions, Namakwa said.

The terms of exercise of the option comprise a cash payment of $25 000 for each type of deposit, with Namakwa also agreeing to fund the cost of a two-year exploration program.

Namakwa has the right to increase its ownership to 100% following start of mining, for a total consideration of $1-million in cash and shares.