Botswana Diamonds plc (BOD) is a mining exploration company focused on diamond projects in Botswana, South Africa, and Zimbabwe. It has interests in several key projects including Ghaghoo (10% interest), KX36 (100% interest), and Thorny River (76% interest). The analyst estimates Botswana Diamonds' enterprise value at £48.7m based on risk-adjusted valuations of Ghaghoo at £36.1m and KX36 at £29.5m, with Thorny River still to be determined pending a resource model. The report recommends buying Botswana Diamonds shares based on significant upside potential from its project portfolio.

1. TP 6.1p
MARKET DATA:
Name: Botswana Diamonds
Ticker: BOD.L
Price: 1.13p
SII: 792.7m
Market Cap: £9m
Sector: Resources
Listing: AIM – London
FINANCIALS:
Cash: est. £200K - (31/08/21)
Last Placing: £363K – Jan ’21 at 0.6p.
Y/E: 30 June
Last Finc Results: Interims- 29/3/21
ACTIVITIES:
Exploration & development of diamond
projects in Botswana, South Africa and
Zimbabwe.
KEY PROJECTS / ASSETS:
Ghaghoo (10%, + option to increase to 30%)
KX36 (100%)
Thorny River (76%)
DIRECTORS & MANAGEMENT:
John Teeling (Exec Chairman)
James Campbell (MD)
Jim Finn (FD)
David Horgan (Dir)
Robert Bouquet (Dir)
SHAREHOLDINGS: (>3%)
Pershing Intl’ Nominee 15.3%
John Teeling 6.8%
HSBC Global Cust Nom Ltd 5.7%
Jim Finn 4.3%
Hargreaves Lansdown Nominee 3.3%
*First Equity Limited acts as Broker to
Botswana Diamonds Plc.
ANALYST
Jason Robertson
+44 (0)20 7374 2212
jasonrobertson@firstequitylimited.com
Botswana Diamonds (BOD) now has the exciting opportunity to develop its Thorny River
project following the exercising of pre-emption rights to acquire control over Vutomi last
week. At Thorny River, BOD revealed recently that it had discovered two thick kimberlite
intersections and that the two blows previously discovered have now been joined together.
Along with assessing the future development potential at Thorny River, this note provides a
valuation analysis for the Group’s most advanced projects at Ghaghoo, and KX36.
- As part of a JV with Vast Resources plc, the conditional acquisition of the Ghaghoo
diamond mine was announced last month, in which BOD gains a 10% free carry (up
to $15m of expenditure) in return for providing services, with an option to acquire a
further 20% stake.
- BOD will be leading the production re-start at Ghaghoo as operator and plans to
improve the mine’s operational and financial performance. Initial production could
commence as early as Q2 ‘22, with processing of dump material. Full scale
underground mining could start in late ‘22 once a feasibility study is completed.
- The new project addition at Ghaghoo provides a potential synergy benefit with the
nearby KX36 diamond discovery (60km dist.) in terms of shared infrastructure and
management. The planned work programme includes bulk sampling to improve
diamond grade and value, along with drilling to locate potential new kimberlite pipes.
- The Group’s technical team is currently creating a model of the combined blows at
Thorny River to estimate a potential resource and examine the options for a
commercial mining operation. The details of this could be announced by the end of
October.
- The objective at Thorny River is to develop a similar deposit to the high margin, low
cost, Marsfontein mine, which achieved a remarkable payback for its JV partners De
Beers and SouthernEra of only three and a half days.
Recommendation & Value - We have taken a very prudent approach by calculating an
estimated in-the-ground value using the SAMREC Indicated (at 8% value) and Inferred
(1.5%) resource figures on a risked basis to factor in development and re-start risks at
Ghaghoo (est. value $36.1m) and the KX36 discovery (est. $29.5m). At Thorny River, we
await details of the model being developed to estimate the potential resource before
ascribing a valuation, which we believe has potential to emulate the lucrative economic
upside of the Marsfontein mine. Other Group projects such as the Sekaka database and
Sunland licences are valued at a notional sum at this point.
The market has yet to price in the importance and potential upside of Botswana Diamonds’
recent project additions, including the high-grade KX36 kimberlite pipe and Sekaka database
last year and more recently, in August ’21, a stake and option over Ghaghoo, which
constitutes over 50% of our estimated Group enterprise value. Once the model details and
potential resource at Thorny River are known, we should understand more about the value
of this highly interesting diamond bearing system and its development upside.
As summarised below and detailed on the following pages, we estimate a Group enterprise
value of $66.3m (£48.7m), which at this point does not include the possible valuation uplift
from Thorny River. Our value per share comes to 6.1p, offering considerable upside potential
for investors from the current 1.13p share price and thus a ‘Buy’ Recommendation.
Project Asset Value Valuation Method
Ghaghoo Mine $36.1m Risked Project Value & Option Value
KX36 $29.5m Risked Resource Value
Thorny River TBD ‘To Be Determined’ – Await Model
Other Projects $0.5m Notional Cost Value
Cash $0.2m Estimate 31/08/21
Debt nil
$66.3m or £48.7m (£/US$1.36 ex rate)
Fig 1: Enterprise Value Summary (Source FEQ).
BUY
Botswana Diamonds plc (BOD.L)* 5 Oct 2021

2. Botswana Diamonds plc – 5 October 2021
Ghaghoo (10% + option to increase to 30%)
Once various regulatory approvals and conditions are met during Q4 ‘21 and funds
raised by partner Vast Resources for its $4m acquisition consideration, a feasibility
study will be conducted between Jan and April ‘22.
Initial production is likely to come from processing dump material, starting during
Q2 ‘22. Before any underground operations commence, the mine will require
dewatering, a process which will take around 4 months to complete.
Mill and replacement technology will be required to be put into place prior to full
scale underground mining. Operating efficiencies could be achieved, for example
from the installation of solar power to replace expensive diesel generation, which
would in addition enhance BOD’s ESG credentials.
To derive an accurate project value for Ghaghoo, requires knowledge of the
feasibility study findings to understand the production costs, capex, profit
margins, etc to determine an NPV. Prior to this and for the purposes of this
valuation exercise, we have based our numbers on an in the ground value (8%
for Indicated and 1.5% for Inferred) using the SAMREC resource from ‘14 and
applied various risk factors to arrive at a very prudent project valuation at this
stage in its restart phase.
Ghaghoo est.
Indicated Inferred Notes
79.3mt 28.7mt 2014 SAMREC Resource.
15.5m carats at 19.5 cpht 5.1m carats at 17.5 cpht
Contained carats, less 150,000 carats mined
from Indicated resource.
$3.7bn value at $242/ct $1.2bn value at $239/ct
In the ground value at 100% ownership
Level.
$370.6m $120.5m 10% BOD Interest.
$29.6m (8% est.) $1.8m (1.5% est.)
Est. Value attributable for Indicated and
Inferred carats, net to BOD.
$26.7m $1.6m Less 10% government royalty.
$22.7m $1.4m Less 15% est. Production Restart Risk.
$24.1m BOD’s 10% risked Project Value.
$12.0m
Value of 20% Option = 25% of 10% Free
Carry.
$36.1m TOTAL est. PROJECT VALUE net to BOD
Fig 2: Ghaghoo Valuation (Source FEQ).
KX36
The valuation of KX36 adopts a similar approach to our estimates for Ghaghoo,
using the historic SAMREC defined resource. The results from BOD’s planned bulk
sampling programme could assist in optimising the diamond grade and value, and
in addition provide a more accurate estimate and higher project valuation.
Any future feasibility study could factor in the potential cost synergies obtainable
from shared infrastructure and management with a re-opened Ghaghoo mine.
KX36 est.
Indicated Inferred Notes
17.9mt 6.7mt Historic SAMREC Resource.
6.3m carats at 35 cpht 2.4m carats at 36 cpht Contained carats.
$539m value at $86/ct. $207m value at $86/ct.
In the ground value, at 50% of modelled
upside to $107/ct.
$43.1m (8% est.) $3.1m (1.5% est.)
Est. Value attributable for Indicated and
Inferred carats.
$36.6m $2.6m Less 5% Petra royalty & 10% govt royalty.
$27.5m $1.9m Less 25% est. Development Risk.
$29.5m TOTAL est. PROJECT VALUE net to BOD
Fig 3: KX36 Valuation (Source FEQ).

3. Botswana Diamonds plc – 5 October 2021
Thorny River
The recent exploration news last month that two previously identified blows at
River and River Extension had been joined together, with two thick kimberlite
zones identified of 19.1 and 13.5 metres from two holes raises the hope
considerably of a Marsfontein style mine being developed.
In addition, it is encouraging to note that BOD has now acquired control on the
Thorny River Project following the exercising of its pre-emption rights over Vutomi
Mining, which will give it an effective 76% interest, subject to regulatory
approvals. The minority interest will be held by Baroville Trade and Investments
02 Proprietary Limited, a local South African Empowerment partner.
To understand the economic potential of Thorny River, we need to examine what
was achieved at Marsfontein by its JV partners over 20 years ago. The kimberlite
from this mine was treated between 1998 and 2000, reaching an economic limit
at a depth of 150 metres, producing 1.8 million carats, at an average recovered
grade of 188 cpht, at an average value of $128.7 per carat. This profitable mine
generated revenues of US$246m, with margins of around 90% and a payback
period of just three and half days on R29m CAPEX (£3.5m at ‘98 exchange rates).
As highlighted in the 21 Sept RNS, BOD’s technical team are now creating a model
of the combined blows to estimate a potential resource. They will also be looking
at the commercial mining options for the Thorny River property. The results of
this analysis should be announced by BOD by the end of October. We have
excluded Thorny River from our valuation until the details of this analysis are
known and announced.

4. Botswana Diamonds plc – 5 October 2021
Regulatory Disclaimers and Disclosures
This document is non-independent research and a marketing communication under the FCA
Conduct of Business Rules. It has not been prepared in accordance with legal requirements
designed to promote the independence of investment research and is not subject to any
prohibition on dealing ahead of the dissemination of the investment research. FEQ does have
procedures in place to manage any conflicts which might arise in the production of
investment research, including Chinese Wall procedures.
This research note is designed for information purposes only and does not constitute a
personal recommendation, offer or invitation to buy or sell any investment referred to within
it. Investors should form their own conclusions and/or seek their own advice to determine
whether any particular transaction is suitable for them in the light of their investment
objectives, the benefits and risks associated with the transaction and all other relevant
circumstances.
The views expressed in this note are those of First Equity’s analyst. They are based on
information believed to be reliable from mainly primary sources but no warranty or
representation, express or implied, is made about the accuracy or completeness of this
information, which may be subject to change without notice. Any opinion given reflects the
analyst’s judgement as at the date of this document’s publication. Any or all statements
about the future may turn out to be incorrect.
This document is not for distribution into the United States,
Canada, Australia or Japan
Neither this document nor any copy of it may be taken or transmitted into the United States
of America, or distributed, directly or indirectly, in the United States of America or to any US
person as defined in Regulation S under the United States Securities Act of 1933. Any failure
to comply with this restriction may constitute a violation of United States securities laws.
Neither this document nor any copy of it may be taken or transmitted into Canada or
distributed in Canada or to any individual outside Canada who is a resident of Canada, except
in compliance with applicable Canadian securities laws.
Neither this document nor any copy of it may be taken or transmitted into or distributed in
Australian or to any resident thereof except in compliance with Australian securities laws.
Any failure to comply with this restriction may constitute a violation of Australian securities
laws.
Neither this document nor any copy of it may be taken or transmitted into or distributed in
Japan or to any resident thereof for the purpose of solicitation or subscription or offer for
sale of any securities. Any failure to comply with this restriction may constitute a violation
of Japanese securities laws.
Important Declarations
First Equity Limited acts as Broker to Botswana Diamonds plc.
First Equity Limited clients and employees hold shares and warrants in
Botswana Diamonds plc.
First Equity Limited is a member of the London Stock Exchange
Salisbury House,
London Wall,
London, EC2M 5QQ
UK
Tel:020 7374 2212 www: firstequitylimited.com
tw:FirstEquityLtd
Authorised and regulated by the Financial Conduct Authority
(FCA No. 124394)
Registered in England and Wales,
No: 2019652 / VAT No: 283 0100 45