Diamond news – Mining news: Diamond miner Kopane Diamond Developments plc intends to raise approximately £5.7 million before expenses (approximately £5.4 million after expenses) through a placing by FinnCap of 47,774,522 new Ordinary Shares with certain institutional and other investors at 12 pence per share. In addition, the Company is to issue a further 2,477,418 new Ordinary Shares to satisfy a debt as described in the section headed “The Proposed Placing” below. In view of the structure of the Placing as described in this announcement, the actual proceeds of the Placing may in practice be more or less than this amount.
Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM and it is anticipated that dealings in the New Ordinary Shares will commence on AIM on 18 January 2010.
Reasons for the Placing, Use of Proceeds and Outlook
Since the first quarter of 2009, the market price of rough diamonds has been recovering from the substantial falls seen in late 2008. Market indications are that, by late 2009, prices recovered to some
80% of those achieved in 2008. The Company is therefore closely monitoring the level of prices and their sustainability with a view to a recommencement in production at the best time. The Placing will enable the Company to resume production, to carry out further work on the Definitive Feasibility Study for the Main Pipe at Liqhobong and to assess strategic investment opportunities.
The Company announced on 28 October 2009 that it had placed 25.7 million new ordinary shares to raise £3.6 million before expenses, of which £3.15 million would be payable over 24 months dependent on the Company’s share price. These funds were raised to enable the Company to have sufficient funds to allow it to assess potential strategic opportunities and for general working capital purposes, which it believed to be in shareholders’ best interests. It was noted that, absent a strategic investment in the Group, further funding would be required to re-start diamond production, invest in a significant expansion of the
Satellite Plant and for the construction of new Main Pipe Plant.
In December 2009, a new Main Pipe resource statement was issued showing a total of 90.67 million tonnes of kimberlite, containing 31.1 million carats. Using the valuation of diamonds recovered in the DFS of $86 per
carat (obtained in September 2008), the in-situ value of the Main Pipe is $2.7 billion. The recovery of bonanza stones in the Main Pipe would be upside to this value.
Following a Memorandum of Understanding signed in August 2009 between the Company’s subsidiary Liqhobong Mining Development Company (Pty) Limited, Standard Lesotho Bank, Lesotho Electricity Company and the Government of Lesotho in respect of funding of the construction of a power line to connect the Liqhobong mine to the Lesotho electricity grid, the Company is advancing to loan documentation and the commencement of construction work in the next few months. It is planned that agreement of loan terms will allow construction to commence in order for connection of grid power at Liqhobong to be achieved by mid 2011.
The Proposed Placing
The Company is proposing to raise approximately £5.7 million before expenses by the issue of the Placing Shares pursuant to the Placing at 12p per share. The Placing Shares have been conditionally placed by
Finncap on behalf of the Company with institutional and other investors subject to, inter alia, admission of the Placing Shares to trading on AIM becoming effective in accordance with the AIM Rules. The Placing has not been underwritten.
As part of the Placing, 24,774,187 of the Placing Shares at 12p per share will be issued to Lanstead Capital L.P., an institutional investor, for an aggregate subscription price of £2,972,902.44. In addition, the Company will enter into an Equity Swap Agreement with Lanstead so the Company will retain much of the economic interest in the shares issued to Lanstead. The Equity Swap Agreement will allow the Company to secure much of the potential upside arising from near term news flow. The completion of the Placing is conditional in addition upon the completion of the Equity Swap Agreement and associated documentation prior to Admission.
The Equity Swap Agreement provides that the Company’s economic interest will be determined and payable in 18 monthly tranches as measured against a Benchmark Price of 16p per share. If the measured share price exceeds the Benchmark Price, for that month the Company will receive more than 100 per cent. of the monthly payment due. There is no upper limit placed on the proceeds receivable by the Company as part of the monthly tranche payments. Should the share price be below the Benchmark Price, the Company will receive less than 100 per cent. of the monthly payment due, and there is no lower limit placed on the proceeds receivable. In no case would a decline in the Company’s share price result in any increase in the number of Ordinary Shares received by Lanstead or any other advantage accruing to Lanstead. The mid market price of an Ordinary Share at the close of business on 12 January 2010 (being the latest practicable day prior to the publication of this announcement) was 12.75p. The costs of entry into the Equity Swap Agreement excluding legal fees is £297,290.16, which will be satisfied by the issue of 2,477,418 of the New Ordinary Shares to Lanstead. There is also a carrying cost arising from the Equity Swap Agreement anticipated to be approximately £12,000 per annum.
The New Ordinary Shares represent approximately 20 per cent. of the existing issued share capital of the Company and will when issued rank pari passu with the existing Ordinary Shares in issue on the date of this
announcement.
Francesco Scolaro, Chairman of the Company today said: “The share placement has been oversubscribed which indicates the excellent support received from investors as we move to the next phase of recommencing production at Liqhobong, power line construction and further assessment of our Liqhobong assets. Production will focus on those facies of the Main Pipe where we have previously found large and bonanza stones. As announced last year, the Main Pipe is considerably larger than previously thought and we will continue to consider strategic options in its development to maximise shareholder value.”
Related posts:
- Kopane Diamond Developments Enters in MoU For Liqhobong Diamond Project in Lesotho
- Diamond Developer DiamondCorp Raising £3.48 million
- Petra Diamonds Completes Second Tranche of Placing to Raise Total of $120 Million; Increases Ownership in Cullinan Diamond Mine to 74%
- Karelian Diamond Resources Plc Announces Placing To Raise GBP350,000
- Kopane: Liqhobong Main Pipe Indicated Resource Increases by 141 % to 38.6 Million Tons
