I agree with you, Schmoove. The Announcement strongly implies that Tychean - really now a merged Tychean/Bloms entity
with Ernie Blom as MD - intends to become active from exploration and production right through to cutting, polishing and trading.
The full quote talks about the "full value chain" and "experience" in the context of TYK Director, Dr Kevin Wills:
"Dr Kevin Wills, an existing Director of Tychean, has extensive experience in diamond exploration and development including being a member of the team responsible for the discovery of the famous Argyle diamond mine in Western Australia. Consequently, Tychean will have the necessary experience to combine the full value chain of diamond exploration, production, trading, beneficiation, cutting and polishing, in turn creating a vertically integrated investment vehicle."
So I am sure most of us are wondering exactly what that means in practice.
One of the key statements I have been wondering about is this one: "Transaction structure to significantly align both parties’ interests." Specifically, you have to wonder what is in this for Blom Diamonds?
They are not getting paid cash for this - this is a script only deal - and the Announcement points out that in fact "Blom Diamonds ... will provide a cash underpin to Tychean and distinguish it from the host of competitor exploration companies."
So Blom is the cash cow here, and if the merger goes ahead it will be funding Tychean as an exploration company It is quite clear from the Announcement that they mean that as diamond exploration only: "The acquisition is the culmination of significant efforts in securing a cornerstone project and will transform Tychean into a vertically integrated diamond-focused company."
This is a big tease, because it tells us that Tychean will be a "vertically integrated diamond focussed company," with some kind of intent to become a diamond producer, and cash from Blom to fund diamond exploration - but it doesn't say anything about where that exploration that will be. In fact the use of the term "cornerstone project" interests me. I'm not sure that "Blom Diamonds" is actually the cornerstone project. I have a feeling that there is another shoe still to drop.
We probably won't know until the Blom "acquisition" is actually finalised, but I'm thinking that the Blom acquisition/merger is a pre-requisite to Tychean securing a diamond exploration project. TYK has a little bit of cash, but not much. They certainly can't afford to buy a promising diamond tenement and fund a decent exploration program. The Announcement tells us that the Blom cash will be used for that.
But why would Ernie Blom merge his apparently successful diamond company with a tiny, cash strapped Aussie gold explorer??? The Announcement emphasises the considerable credibility of Kevin Wills: "Dr Kevin Wills, an existing Director of Tychean, has extensive experience in diamond exploration and development including being a member of the team responsible for the discovery of the famous Argyle diamond mine in Western Australia."
That is certainly true - but I don't think it is credible that Mr Blom is agreeing to do this just on the strength of accessing one man's experience. My bet is that Tychean has a very specific "cornerstone project" lined up. The project only makes economic sense if they can "vertically integrate" and take the raw diamonds right through from production to cutting and polishing and to market. They need Bloms for that, and they need the Blom cash to get exploration going. And Ernie Blom has clearly decided that he needs to control his own supply instead of buying off deBeers, or Argyle etc.
Looking through the web this morning I find evidence to back this up (plus a bonus photo of Ernie Blom, lol, our likely new MD:
"Tychean, which is a precious-metal explorer in Australia, sees the move as a first step into the diamond industry, according to Duncan Gordon, founder and co-principal of Adelaide Equity Partners, which advised the resources group on the acquisition.
Tychean is also in the early stages of talks to acquire diamond-exploration projects, he added. "
Source:
http://www.diamonds.net/News/NewsItem.aspx?ArticleID=58495&ArticleTitle=Blom Diamonds Set for $4M Takeover
Here is another article, (and another pic of Ernie):
http://www.idexonline.com/FullArticle?Id=42807
This one tells us that Mr Blom will "..remain in Johannesburg." but "I will be fully involved in running the business," Blom explained.
It also tells us the deal requires approval from the South African Reserve Bank.
Well - so Tychean is in "early stages of talks to acquire diamond-exploration projects." As suggested above, I don't believe Ernie Blom would be doing this unless those "early stages" were actually rather well advanced, with a high likelihood of progression.
Of course that doesn't tell us what the project(s) might be, but here is a suggestion. Bob Kennedy is Chair of Flinders Mines Ltd. (FMS). FMS is an iron ore focussed hopeful, busily trying to develop some interesting Fe projects in the Pilbara. However, until mid 2008 they used to be Flinders Diamonds Ltd.
In the period 2004 - 2008, with Kevin Wills as MD, they were certainly exploring for diamonds, and they had a lot of interesting prospects in SA. There was an unfortunate error, on 1 July 2008 when a diamond find announced in June was reclassified as a non-diamond mineral.
Even so, they did lot of interesting exploration, but in 2008 their Pilbara iron ore discoveries became the priority. They changed their name from Flinders Diamonds to Flinders Mines and stopped all work on their SA diamond projects.
However, "Flinders Diamonds Mines" does still exist as a wholly owned subsidiary of Flinders Mines Ltd.
Flinders continued its on-going strategy to divest all diamond projects and continued to seek interest in its remaining South Australian projects. There were no exploration and evaluation activities carried out on South Australian tenements during the year.
The Flinders Mines 2016 Annual Report just says no work was done on the SA projects. The 2015 Annual Report states that:
"Flinders continued its on-going strategy to divest all diamond projects and continued to seek interest in its remaining South Australian projects. There were no exploration and evaluation activities carried out on South Australian tenements during the year."
I can't find much about anyone taking over their diamond projects. Diamond Resources apparently did buy their Eurelia project (more about that below) but they had several others. So possibly TYK is discussing an option for that? Presumably Flinders still wants to get rid of those assets. Dr Kevin Wills was the man who was running FDL when those projects were being actively pursued, and Bob Kennedy is Chair of both Tychean and of Flinders Mines.
Of course then the question would be - how good are the projects? This link contains a lot of useful summaries of the exploration they were doing:
https://copper.com.au/threads/asx-fdl-does-anyone-give-a-stuff-about-fdl-now
And here is a presentation by Dr Wills from the FDL 2005 AGM:
http://www.flindersmines.com/lib/pdf/presentations/2005/AGM2005sreen.pdf
What else could there be? Well - Bob is also Chair of Monax Mining, which has a diamond prospect "Kimberlite":
http://www.monaxmining.com.au/site/projects/overview.html
They don't seem to be doing anything with it - no mention at all in their last Annual Report.
And then we come to "Diamond Resources Ltd" - with Dr Wills as Chairman and several other people with very serious diamond exploration credentials on the Board. They were formed in 2012:
So far as I can see they were planning a capital raising to fund a multi-year exploration program, at the Eurelia Project they obtained from Flinders Mines, and at the very interesting Nabberu Project in WA - previously owned by deBeers - where several pink diamonds have been found.
I can't find out anything much about them. They don't seem to have floated and I assume they have no cash and are "on hold." Does anyone know anything more?
They clearly did some preliminary work in 2013, and apparently nothing since then. The Nabberu Project is described here:
http://www.diamondr.com.au/nabberu-project.html
The Eurelia Project is described here:
http://www.diamondr.com.au/eurelia-project.html
It looks interesting too. They say they were planning "bulk sampling" in 2015 - but there is no record on their website of anything happening.
If they still hold the Nabberu and Eurelia tenements, (especially Nabberu) then a deal between Diamond Resources and Tychean sounds like a real possibility.
Well - that's my guesswork based on some down and dirty web research. My suggestion is that the Blom acquisition/merger is just step one. Step 2 will be a deal to take over a promising diamond exploration project. Maybe even a buyout of Diamond Resources?
Time alone will tell, as they say.
And it all depends upon the Blom deal being finalised. I would say the odds of that are good. I'm definitely holding, and will probably buy some more if I can scrape up some more cash. Sure it's a speculative investment - and high risk - but this could get very interesting indeed.
Best wishes to all
Dave
(20min delay)