Gem Diamonds is holding merger talks with Lucara Diamond Corporation, Bloomberg reports.

According to the news agency, the diamond companies have been discussing a possible merger since February and Gem CEO Clifford Elphick has confirmed that a confidentiality agreement is in place. However, at this point it is not clear whether the negotiations will lead to a deal between Gem Diamond, valued at $606 million, and Lucara, valued at $412 million.

A Lucara spokeswoman said she wasn't aware of any merger negotiations or that a confidentiality agreement had been signed.

Gem Diamonds operates the Letseng diamond mine in the Kingdom of Lesotho, noted for producing diamonds of exceptional size and quality. Lucara's Mothae diamond project is located adjacent to Letseng, and a subsidiary of the company plans to sell the first parcel of Mothae diamonds in Antwerp next month.