Exploration group African Diamonds says it has made a significant diamond discovery that has the potential to be worth as much as $360 million (€295 million).

In a presentation yesterday, the Dublin-based company said AK6, its joint venture with mining giant De Beers in Botswana, had the potential to be "very, very big". "This is going to be the making of our company," said Dr John Teeling, chairman and founder of African Diamonds.

The Irish company, which is also searching for diamonds in parts of west Africa, has a 49 per cent stake in the Botswana venture, with the remainder being held by De Beers. The project is currently only at the exploration stage.

Once a feasibility study has been completed and drilling commences, African Diamonds' stake will reduce to 30 per cent. Dr Teeling yesterday estimated that the mine had the potential to be worth as much as $1.2 billion.

Speaking at the presentation,James Campbell, general manager of group exploration at De Beers, said AK6 was the only advanced diamond project that De Beers was currently working on, except for one in Canada that has been at the exploratory stage for the best part of 12 years.

Mr Campbell said the first stage of the test drilling process, which is almost complete, had produced positive results.

The outcome of the feasibility study is likely to be known at the end of 2007.

Under the terms of the joint venture agreement, African Diamonds has what is known as a "free carry" and therefore does not contribute any money to the project until drilling commences. De Beers will spend $19 million on the venture this year.

Shares in the group, which are traded on London's Alternative Investment Market (AIM), closed up 1.3 per cent at 80 pence.