Pangea DiamondFields banking on prices to recover

The group is also hoping to get a boost from a recovery in the US

LONDON (Reuters) - 

AIM-listed Pangea DiamondFields Plc (PDF), which nearly hit rock bottom in the financial crisis, is banking on recovering diamond prices and an upturn in the wider US economy to help turn the company around.

The diamond company added it sees its new Cassanguidi mine in Angola as underpinning its prospects.

"We have a fair inventory of diamonds in the ground which we'd obviously like to bring to full value," Boris Kamstra, who takes over as chief executive on November 1, told Reuters.

PDF -- which has seven projects in Angola, South Africa, the Democratic Republic of the Congo (DRC) and Central African Republic -- said last month it had $1.54 million in cash reserves.

The company was among a host of junior miners which struggled as rough diamond prices fell significantly in the global financial crisis. It was for this reason that, nearly a year ago, the company was forced to heavily dilute its share capital to raise about 8.7 million pounds.

Although diamond prices remain substantially below pre-September 2008 levels, signs of a recovery in the U.S -- where half of the world's diamonds end up in jewellery -- are giving the company reasons to be optimistic.

Rough diamond prices have been recovering since the spring and are worth about 70% of target prices, Kamstra said, noting the company should be able to survive on anything over 50%.

Current CEO Brett Thompson, who Kamstra will be replacing, said he is optimistic diamond prices will not get much worse and an upturn in the U.S economy -- where half of the world's diamonds end up in jewellery -- will only help its recovery.

He added that he thinks China and India could also bolster demand in the future.

Kamstra added his first priority will be getting Cassanguidi up to full capacity by the year end and then to develop Bakerville in South Africa, which is in the process of getting licence approval and is expected to cost $8 million to build.

Kamstra, current operations manager, said Cassanguidi at full capacity should move the company to a cash neutral or even a cash positive position.

And if miner Rio Tinto, the world's third biggest diamond producer by volume, is any indication he could be right. Last month Rio increased prices by about 15% at one of its mines for the first time since the downturn hit.

Although Thompson -- who is leaving his post to return to Australia -- and Kamstra see prices and demand improving for diamonds, they said they are still managing the cash very tightly and would be open to possible M&A activity in the long term.

"Inevitably there is going to be consolidation in the small cap diamond sector," Kamstra said. "And many of us, including ourselves, have been in discussions for some time."

© Thomson Reuters 2009 All rights reserved

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