| Mon 21 May 2012, 8:00 | | DMC - DiamondCorp plc - Loan Funding Term Sheet with IDC |
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DMC
DMC
DMC - DiamondCorp plc - Loan Funding Term Sheet with IDC
DiamondCorp plc
JSE share code: DMC
AIM share code: DCP
ISIN: GB00B183ZC46
(Incorporated in England and Wales)
(Registration number 05400982)
(SA company registration number 2007/031444/10)
(`DiamondCorp` or `the Company`)
Loan Funding Term Sheet with IDC
DiamondCorp plc, the African diamond mine development and exploration company,
is pleased to announce that it`s 74%-owned subsidiary, Lace Diamond Mines
(Proprietary) Limited has entered into a loan funding term sheet with the
Industrial Development Corporation of South Africa Limited ("IDC"). Under the
terms of the loan funding term sheet, IDC has agreed to make a loan available
to Lace Diamond Mines (Proprietary) Limited to the value of R280 million
(approximately $33.6 million), subject to the satisfactory conclusion of due
diligence and certain other conditions precedent.
Commenting on the loan funding term sheet, DiamondCorp CEO, Paul Loudon said:
"The key driver for management in seeking funding for the Lace mine development
has been to find the optimum financing method which is the least dilutive
for shareholders of the Company. Therefore, we are delighted that we and
our Black Economic Empowerment ("BEE") partners have been able to agree in
principle a debt financing proposal from the IDC to provide over 98% of the
estimated capital required to establish a block cave development on the 47
level at the Lace mine. This is a significant milestone in DiamondCorp`s
transition from developer to producer and we welcome the support of the IDC
in funding this potentially long-life diamond mine in the Free State Province."
On 18th May, DiamondCorp`s 74%-owned subsidiary, Lace Diamond Mines
(Proprietary) Limited (the "Borrower") entered into a detailed loan funding
term sheet, pursuant to which the main terms of the proposed loan funding were
agreed in principle. It is intended that the loan funding term sheet will form
the basis of the final loan financing agreement. Under the terms of the loan
funding term sheet, IDC (the "Lender") has agreed to provide a loan facility
to the Borrower to the value of R280 million (approximately $33.6 million) for
the purpose of underground development and purchase of mining equipment at the
Lace mine.
The loan will be secured over the assets of the Borrower and will be guaranteed
by the Company. The term of the loan is expected to be 7 years. It is
anticipated that the loan will attract an interest rate of 2% over the South
African Prime Rate (which is currently 9%), such interest to be capitalised
for the first two years from the draw down date and payable semi-annually in
arrears thereafter. There will also be a two year moratorium on loan repayments.
The provision of the loan is subject to certain conditions precedent, including
the completion of satisfactory due diligence by the Lender and unconditional
approval by the Lender`s executive committee and/or board of directors. Subject
to satisfactory completion of due diligence and satisfaction of the conditions
precedent, including approval for the upgrade of the electricity supply to the
mine by Eskom, DiamondCorp anticipates that the loan financing agreement will
be finalised by the end of July 2012. The loan financing agreement will include
representations and warranties from the Borrower that are usual for transactions
of this nature.
Management`s latest estimate for the total cost of development at Lace is R384
million but with revenue expected from diamond sales after 18 months, the peak
funding requirement is forecast to be R285 million.
BACKGROUND - LACE MINE, FREE STATE PROVINCE, SOUTH AFRICA
The Lace diamond mine is located 25km northwest of the town of Kroonstad in
the Free State Province of South Africa. The mine operated from 1896 to 1931,
and according to mine records produced approximately 700,000 carats of diamonds
from 4.5 million tonnes of kimberlite at a recovered grade of 16 carats per
hundred tones(" cpht"). The production was reported to be high quality white
diamonds, with the biggest stones recorded historically being 122 and 86 carats.
The kimberlite was mined by open pit to approximately 100m depth, then by
underground methods to 240m depth. In the 1920s, higher grade kimberlite
was encountered as the workings went deeper and a decision was taken to develop
a 6.5m x 2.5m vertical shaft to the 36 level (360m) and pre-develop the
kimberlite between the 24 level and the 33 level with 2m x 2m development
drives.
The vertical shaft and development drives were completed in 1930, a year before
the mine closed when diamond prices collapsed in the Great Depression. The mine
was then kept dewatered until 1939 when it was acquired by De Beers Consolidated
Mines Limited. De Beers never operated the mine but instead let it flood,
thereby sterilising the resource as part of their control of the supply side
of the diamond industry. Following progressive changes to the mining law in
South Africa, DiamondCorp acquired the property from the Christiaan Potgieter
Trust in 2006 in conjunction with BEE partners Shanduka Resources and Sphere
Investments.
In 2007, DiamondCorp constructed a 1.2 million tonne per annum dense medium
separation plant at Lace and commenced treatment of approximately 3.4 million
tonnes of kimberlite tailings from the mining activities which took place
between 1896 and 1931. Approximately 1.1 million tonnes of tailings were treated
at a recovered grade of 8 cpht. At the same time, a 4.5m x 4.5m decline was
commenced to access and bulk test the kimberlite below the previous mining
levels. Decline development and tailings re-treatment ceased at the end of
2008 when diamond prices fell by 50 per cent during the credit crisis. Decline
development resumed in May 2009 and reached the kimberlite sampling level 25
in May 2011. Successful bulk testing on this level which confirmed high quality
white diamonds was completed in October 2011, and an Independent Engineering
Report by SRK Consulting supporting the development of a block cave on the 47
level (470m) was published in March 2012.
AIM Nomad: Fairfax I.S. plc
AIM Brokers: Fairfax I.S. plc, Ocean Equities Ltd
JSE Sponsor: PSG Capital (Pty) Limited
DiamondCorp plc - Paul Loudon +27 56 212 2308/ Euan Worthington
+44 775 3862 097
Fairfax I.S. plc - Ewan Leggat/Laura Littley +44 207 598 5368
Ocean Equities Ltd - Guy Wilkes +44 207 786 4370
PSG Capital (Pty) Ltd - John-Paul Dicks +27 21 887 9602
Russell & Associates - Charmane Russell +27 11 880 3924
Date: 21/05/2012 08:00:03 Produced by the JSE SENS Department.
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