Gem shares sparkle on Lucara talks

RARE diamond producer Gem is in early-stage takeover talks with Africa-focused rival Lucara Diamond, it confirmed yesterday.

London-listed Gem, which told investors last week it was eyeing acquisitions for growth, said any deal would currently be classed as a reverse takeover because recent reserve statements show its assets to be lower than Lucara’s.

But Gem said it would publish an updated statement of reserves and resources “at or before the time of the company’s interim management statement in April 2011”.

That statement will include reserves at Gem’s Gope project in Botswana, which it bought from De Beers and Xstrata in May 2007 and is expected to produce about 780,000 carats of diamonds annually from 2013. This may change the terms of the deal.

Toronto-listed Lucara, which like Gem holds diamond assets in Botswana and Lesotho in Africa, said it was not talking to Gem exclusively. “The company is in regular contact and in discussions with many companies in the diamond sector, one of which is Gem, as part of its strategy to continuously review possible growth opportunities,” Lucara’s president William Lamb said.

Gem’s shares closed up 5.3 per cent at 284.2p on the news.

MEET THE ADVISERS

IAN HANNAM

JP MORGAN CAZENOVE

IAN Hannam, managing director at JP Morgan Cazenove, is lead adviser to Gem Diamonds on its acquisition trail and a highly-experienced mining and resources dealmaker.

He is currently also advising Heritage Oil & Gas, Nat Rothschild’s Vallar mining venture, which is due to seal its first purchases in April, and others such as Fresnillo. He has notably been unable to participate in metals trader Glencor’s forthcoming IPO due to his long-standing role advising its rival Xstrata and close links to its chief executive, Mick Davis, since they worked on the 2001 merger and 2005 London listing of BHP Billiton. Advising Gem alongside him are Barry Weir and Neil Passmore.