Aim-listed diamond-miner Kopane Diamond Developments has entered into a nonbinding memorandum of understanding (MoU) with an unnamed mining company to assist in developing its 75%-owned Liqhobong project, in Lesotho, miningweekly.com reported.

The London-listed miner announced to shareholders on Tuesday that the joint venture with the unnamed mining company would considerably remove risk factors in bringing the project into production, the report said.

“The signing of the MoU with the mining company is a significant step in the development of our Liqhobong assets. Our MoU partner proposes to fund 80% of the cost of new plant and the recommencement of production, which substantially reduces risks of funding and implementation, and avoids dilution for Kopane's shareholders,” Kopane chairperson Frank Scolaro said.

The unnamed company was expected to fund and operate the restart of production at the project and to recover about 200,000 ct of diamonds over an 18 month period, said the report.

The profits generated from the sale of these diamonds would be shared between Kopane and the mining company. The parties would jointly fund the completion of the definitive feasibility study (DFS) on the main pipe.

Following this, the mining company would be entitled to earn 51% of Kopane’s interest in Liqhobong’s main pipe by raising 80% of the estimated $80 million cost to develop the project to produce in excess of one-million carats a year, the report said.

The project, in which the Government of the Kingdom of Lesotho owned a 25% interest, comprised a main pipe and a satellite pipe. The funding of about $64 million would be provided in the form of equity and nonrecourse loans at asset level, while Kopane would fund the remaining 20% in the form of nonrecourse loans at asset level.

Kopane again emphasised that the outlook for the rough diamond market in 2010 was “very positive”, adding that the company was also making progress towards starting construction on a power line to connect Liqhobong to the Lesotho electricity grid by mid-2011.