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Update on Lemphane Diamond Project and Placing
Paragon Diamonds Limited, the AIM quoted vertically integrated diamond development company in Lesotho, Africa, has issued an update on the development of its Lemphane kimberlite Pipe Project located in Lesotho, Africa, and in respect to a proposed acquisition of a diamond resource in Africa. If successful the proposed acquisition will significantly enhance the asset base of the Company and its valuation ahead of Stage I production at Lemphane in Q2 2015.
Highlights
* Stage I production at Lemphane remains on track to commence in Q2 2015
*
+ Lemphane is located among a cluster of kimberlites known for producing
exceptionally large, high value diamonds
+ Extraction of approximately 1 million tonnes of kimberlite over an 18
month to two year period
+ Targeting recovery of over 100 diamonds larger than 9 carats, including
stones over 100 carats in size
* Potential to significantly reduce future operating costs at Lemphane-
discussions remain on-going with contractors with regards to the
electrification of the mining operations
* £130,000 raised in new equity to fund critical due diligence on a
prospective diamond mine acquisition with validated resource in Africa,
supported by International Triangle General Trading LLC (“ITGT”) financing
the acquisition as opposed to equity dilution
Paragon’s Chairman Philip Falzon Sant Manduca said:
“We continue to work aggressively to add value for shareholders. Discussions to reduce our energy costs at Lemphane by tapping in to the electrification which is now being established will be a significant contributor to added net revenues. In addition, we are seeking a new acquisition target which has a kimberlite diamond resource in Africa, and have been performing due diligence to validate our strategy for development.
“We can achieve significant economies of scale by combining management teams at both Lemphane and the potential acquisition mine and through the ordering of relevant plant equipment and use of sub-contractors should our efforts at an acquisition be successful, we would look to develop both mines simultaneously. At this stage Paragon is one of a number of potential acquirers and there is no guarantee that the Company will be successful. If we do not make an immediate acquisition, nothing changes and we remain on schedule for Q2 2015 production at Lemphane.
“We have completed a small fund raise to isolate and thus segregate the costs associated with a potential acquisition of a resource, rather than utilise development capital to acquire other assets. If an acquisition is successful it should significantly re-rate the company, significantly escalate production and revenue numbers and of course one would hope be reflected in a higher share price. As a consequence, I support this fundraise from existing shareholders to finance the rigorous due diligence involved to support an acquisition, which is not inconsistent with my stated ambition to keep share dilution to a minimum. Should the acquisition be successful, ITGT will finance it on agreeable terms, and at a lower rate of interest, rather than via further share issuance.
“Paragon Diamonds is a company in the right place at the right time and I firmly believe with the right strategy to develop itself into a holistic diamond company controlling the sourcing and supply of investment grade diamonds. In the six months that I have been a director, we have cleaned up the shareholder register and agreed significant funding and financing with ITGT on favourable terms.
“Furthermore we have established the Company’s distribution channels in Dubai, and upgraded our business strategy to focus on production and not exploration, which is evidenced by our decision to move away from our current ownership of unexplored licenses in Zambia, Botswana and Tanzania and towards the potential acquisition of a further resource which can combine with Lemphane to produce significant economies of scale and an increased level of production.
“I have become increasingly positive about our prospects month on month since I became the Chairman, a time when Titanium Capital Investments Ltd. evaluated Paragon as the best value diamond company on the market in which to invest in, alongside having the greatest potential.”
Lemphane Mine Site
Preparatory earthworks are already scheduled at Lemphane. The first stage will involve the construction of a dual haul road, capable of handling the larger 40 tonne haul trucks between the kimberlite orebody and processing plant site; preparing the 75tph (0.5Mt/year) processing plant site in anticipation of civil construction of foundations and footings; and commencing work on a terraced site for intended residential staff camp, planned to house circa 75 employees and contractors.
Immediately following completion of the preparatory earthworks, earth moving machinery will be deployed to undertake final pre-stripping of overburden over the Lemphane kimberlite to enable initial pit development; the construction of access ramps and roads within the planned 1 million tonne sub-pit and earthworks on the access to, and retention wall toe for the planned 0.5mln cubic metres tailings storage facility, and associated drainage, retaining wall and water dams, the design of which has recently been finalised by the Company’s civil engineering consultants.
It is proposed that the dam construction and mining will be undertaken by leading mining contractor, Matekane Mining Investment Company, the principals of which hold a 12.9% interest in Paragon Diamonds. MMIC is the main mining contractor on two neighbouring mines moving in excess of 20 million tonnes of kimberlite and basalt waste rock per annum.
Importantly, discussions are on-going with the consortium developing the Lesotho Electric Corporation HT regional 132kV power line with regards to the electrification for both Stage I and Stage II mining operations which has the potential to significantly reduce the Project’s operating costs.
Additional Drilling
Drilling of a final eight holes to confirm the dimensions of the kimberlite at between 200-300m depth below surface is due to complete shortly. Geotechnical drilling will also be carried out for the purposes of the tailings storage facility and open pit construction at Lemphane by Rodio Geotechnical Services, who are the main core drilling contractor at the nearby Letšeng Diamond Mine.
Issue of Equity
The Company has raised approximately £130,000 by placing 2,363,637 new ordinary shares of 1p each in the Company with existing shareholders at a placing price of 5.5 pence per share (the “New Ordinary Shares”). In anticipation of the funding package from ITGT, a privately owned international investment group with a focus on construction, automobiles, real estate and banking completing imminently, the Company will use these proceeds to advance due diligence on a proposed acquisition of a diamond resource in Africa which, if successful, will significantly enhance the asset base of the Company and its valuation.
Management believe that it is important to segregate capital already raised and allocated to production at Lemphane from any additional investment expended to acquire additional resource. ITGT will partner with Titanium Capital Investments Ltd. to additionally finance any acquisition should it be successful. This funding keeps dilution to existing shareholders to a minimum whilst ensuring that the relevant work can be undertaken on the targeted acquisition in a timely manner, which will add significantly to shareholder value.
