African Diamonds has cut the cost of the first phase of its new AK6 diamond mine in Botswana to 30 million pounds ($48.86 million), and may fund it about 60% from debt and 40% through equity, the London-listed firm said yesterday, Reuters reported.



African Diamonds currently owns 29% of the AK6 diamond project, which is due to launch production in 2011, and has an option to increase that to 40%.



The cost of building the diamond mine has fallen since November 11, when the firm pegged the cost of the first phase, which will allow output of 400,000 carats per year, at $63 million, the report said.



"Due to low operating costs in Botswana, a scaled down capital cost, a distribution of large diamonds, and the presence of the rare and valuable Type II diamonds, AK6 has the potential to generate significant profits," Chairman John Teeling said.



The AK6 diamond mine is later due to expand production to 1 million carats a year.



De Beers was the previous partner in the AK6 mine but sold its 71% stake to Canada's Lucara Diamond Corp last month.



De Beers had wanted to delay building the AK6 mine, estimating that it would cost $300 million, African Diamonds said. "Our mine may not have the glitz and glamour of the De Beers proposal, but it will work," Teeling said.



The company and Lucara were currently looking at how to finance the mine and had several options, the company said.



"Early stage indicative offers of project finance were received by African Diamonds," it said. "Assuming 60% debt finance and 40% equity, African Diamonds may have to subscribe for about 5 million pounds in equity in mid to late 2010."