African Diamonds rejects takeover approach

African Diamonds today said it had received and rejected a takeover approach following a 21% surge in its share price late yesterday.

The shares gained another 1p today, pushing them up to 41p and valuing the company at £41 million.

African Diamonds said it "does not consider the proposals as currently constituted to be one which it can recommend to shareholders".

It is understood that this implies the bid price was not high enough, although the phrasing of the rejection leaves the door open to a higher offer.

African Diamonds' main asset is a 40% stake in a diamond deposit in Botswana. Last year, after a very public spat, the company engineered the replacement of its former partner in the venture, De Beers, by local group Lucara Diamond Corporation.

The Botswana deposit has been valued at $2.2 billion (£1.38 billion).

Analysts said it was not immediately clear who any potential bidder could be. They pointed out that Lucara and African Diamonds appear to have a good working relationship, so it is unlikely to be the major partner buying out the minor one.

A third potential unnamed investor is being lined up by the two companies to provide the extra finance which will be needed if the Botswana project is to move into full production late next year.