TIDMBRD
RNS Number : 3786D
BlueRock Diamonds PLC
18 February 2020
BlueRock Diamonds PLC / AIM: BRD / Sector: Natural Resources
18 February 2020
BlueRock Diamonds PLC ('BlueRock' or the 'Company')
Placing and Subscription to Raise GBP1.9 Million
BlueRock Diamonds plc, the AIM listed diamond mining company,
which owns and operates the Kareevlei Diamond Mine in the Kimberley
region of South Africa ("Kareevlei"), is pleased to announce that
it has raised GBP1.9 million via an oversubscribed placing and
subscription of 2,235,289 new ordinary shares of 5 pence each in
the Company (the "Placing Shares") at a price of 85 pence per
Placing Share (the "Placing Price") (the "Placing"). The net
proceeds of the Placing will primarily be used to fast-track a
doubling of production at Kareevlei and to reduce unit costs
significantly.
The issue of 235,289 of the Placing Shares (the "Tranche 2
Placing Shares") will be subject to shareholder approval which is
expected to be requested at the Company's 2020 Annual General
Meeting.
BlueRock Executive Chairman, Mike Houston, said, " Securing
these funds from new and existing shareholders represents an
endorsement of the opportunity that Kareevlei offers to build
production, revenues and profitability. Thanks to this Placing,
BlueRock can fast-track a material increase in production volumes
from the 323,000 tonnes achieved in 2019 to a run rate of +/-
750,000 tonnes per annum and a consequent expected increase in
carats to over 30,000 by the end of 2020. Furthermore, we are
optimising profitability through reducing unit costs by investing
in infrastructure and the benefit of the much improved economies of
scale; to this end, our target is to reduce cost per carat by
approximately USD50. We look forward to updating the market as we
implement the next step of our growth strategy."
Background & Use of Proceeds
Kareevlei hosts five known diamondiferous kimberlite pipes with
a combined inferred resource of 7.7 million tonnes / 367,000 carats
(Nov 2018) and produces excellent quality diamonds with 90% of
output gem quality. The Company is currently mining two pipes, KV1
and KV2, with KV5 and KV3 planned to be in production by Q3 2020
and 2021 respectively. Kareevlei has a 10-year life of mine (LOM)
based on the current resource statement and production of 750,000
tonnes. This is expected to increase materially given that KV1 is
approximately 25% larger in area and the improved unit revenue and
cost structure and diamond recovery will enhance the economic value
and potential depth of the various pipes. The Company expects to
update its Resource Statement in 2020.
BlueRock is focused on strengthening Kareevlei's already strong
economics. A new team, led by Gus Simbanegavi as CEO of Kareevlei,
took over running the mine in May 2019 and immediately increased
production resulting in the Group operating profitably in the
second half of 2019. As announced on 21 January 2020, BlueRock
achieved an aggressive FY 2019 guidance, increasing production
volumes by 70% to 323,000 tonnes, carats sold by 118% to 12,675
carats Additionally, the average price of carats increased by 24%
to USD415 and the grade of diamonds improved to 4.34 cpht, and a
number of high-grade diamonds were recovered, reflective of moving
into purer kimberlite mining; in 2019 a total seven stones were
sold for in excess of USD50,000 per stone.
2019 represented the completion of step 1 of the Company's
business strategy. Step 2 is to optimise the value of Kareevlei by
increasing volumes to approximately 750,000 tonnes per annum,
increasing recovery rates from approximately 70% to over 90%, and
reducing unit costs by approximately 20%.
Purchase of Numovista Plant
The Company's subsidiary, Kareevlei Mining Pty Limited, has
entered into a rent to buy agreement to acquire a processing plant
from Numovista Pty Limited ("Numovista Plant") (a related party
transaction which is discussed further below) which is similar in
design to that currently operated by Kareevlei but with a slightly
larger capacity. Under the terms of the agreement, Kareevlei will
pay a total of ZAR12.3 million (approximately GBP GBP650k) over 3
years. The Numovista plant will be positioned at a new site closer
to KV3, the largest pipe, although sufficiently far away to meet
health and safety regulations. The Numovista Plant is expected to
be operational by the end of Q2 2020. Whilst the Numovista Plant is
being established, the site will also be prepared for moving the
existing plant. The existing plant will be moved once the Numovista
Plant is operational thus minimising down time with production in
2020 expected to exceed 400,000 tonnes. Both plants are expected to
be fully operational during Q4 2020 at which point the Company is
expected to be operating at an annual run rate of approximately
750,000 tonnes. Moving the existing plant away from its current
position near KV2 has the added benefit of further opening up the
potential to continue to mine the combined KV1 and KV2 at deeper
levels.
As well as increasing production, the combined plant will enable
the increase in recovery from around 70% currently to over 90% for
a limited increase in cost through the utilisation of a finer
crushing circuit. The expectation is that grades will increase by
approximately 1 cpht to 1.5 cpht.
Cost reductions
The Company is also focused on optimising profitability through
reducing unit costs and investment in infrastructure and economies
of scale.
Accordingly, the Company has entered into an agreement to
connect to the National Grid. National Grid Power is less than 30%
of the cost of diesel generated power and even allowing for the
potential of load shedding the investment of approximately
GBP350,000 required to connect to the grid some 20km distant from
the plant, has a payback period of less than 18 months and is
expected to reduce the cost per carat by approximately USD 15 to
USD 20 per carat.
The increase in volume will reduce the fixed cost per carat
significantly as fixed costs will not increase in line with
production levels. Management estimate that this will reduce costs
by approximately USD 35 to USD 40 per carat.
Accordingly, costs per carat are expected to be below USD 250
once the modifications discussed above have been implemented.
Repayment of Director's loan
The loan from Adam Waugh, a former director of the Company,
currently stands at approximately GBP150,000 and has an effective
annual interest rate of around 35%. This will be repaid in full out
of the proceeds of the Placing in line with the original terms of
the agreement.
Teichmann Subscription
Teichmann Company Limited ("TCL"), an investment company
controlled by trusts connected with the owners of the Teichmann
Group and a substantial shareholder of the Company, along with
certain connected parties including parties connected with the
owners of Teichmann Group, subscribed for a total of GBP804,998 in
the Placing.
TCL (and its connected parties') investment will be phased over
six months in 3 equal instalments payable on 17 April 2020, 17 June
2020 and 17 August 2020 similar to its previous investment and its
shareholding (including that of connected parties) will increase
from approximately 19% of the Company's share capital to
approximately 29% of the Company's enlarged share capital. TCL has
entered into a relationship agreement with the Company and SP Angel
Corporate Finance LLP governing TCL and its connected parties'
relationship with the Company.
TCL retains the right to appoint a non-executive director to the
board whilst it maintains a holding over 10% of the Company's
shares however TCL has indicated that it does not currently intend
to take up this right.
The issue of 235,289 of the Placing Shares due to Teichmann (the
"Tranche 2 Placing Shares") will be subject to shareholder approval
which is expected to be requested at the Company's 2020 Annual
General Meeting ("AGM") expected to be held in June 2020. A
circular convening the AGM is expected to be published nearer the
time.
Options
The board intends to grant the following New Share Options to
members of the board:
2019 Target
Options 2020 Total
Mike Houston 65,160 116,404 181,564
David Facey 116,404 116,404
Gus Simbanegavi 65,160 232,807 297,967
Total 130,320 465,615 595,935
As announced on 16 May 2019, the 2019 Target Options were to be
issued provided that the Company produced more than 12,000 carats
in 2019. Accordingly, as the Company produced 14,033 in the year,
the 2019 Target Options are now due to be granted.
The New Share Options are expected to be exercisable at the
placing price of 85p, have a duration of five years and vest in two
tranches: 50% immediately upon grant and the balance on 18 February
2021.
A further announcement in respect of the grant of share options
is expected to be issued shortly.
Appointment of Chief Operating Officer
The Board has approved the appointment of Gus Simbanegavi, the
CEO of Kareevlei, to the Board of the Company as Chief Operating
Officer effective tomorrow. The Board is actively seeking the
appointment of another non-executive director.
The following details in relation to the appointment of
Augustine Tichatonga Simbanegavi, aged 45, are disclosed in
accordance with Schedule 2(g) of the AIM Rules:
Current Directorships Past directorships held within the
last five years
African Mining and Exploration -
Kareevlei Mining Pty Limited
Gus currently holds 10,000 ordinary shares in the Company,
10,000 warrants exerciseable at 100 pence each, and 65,160 options
exerciseable at 50 pence each, 32,580 of which will vest in May
2020.
There are no other disclosures in accordance with Schedule 2(g)
of the AIM Rules.
Production Guidance
2019 2020 2021
Actual (unaudited)
------------------ --------------------- ------------------- ---------
Volume (tonnes) 323,000 400,000 - 500,000 750,000
------------------ --------------------- ------------------- ---------
Grade (cpht) 4.34 4.00 - 4.50 4.50
------------------ --------------------- ------------------- ---------
Carats sold 12,675 16,000 - 21,250 33,750
------------------ --------------------- ------------------- ---------
Value per carat
(USD) 415 360 - 400* 360*
================== ===================== =================== =========
* Fall in value per carat attributable to higher recovery of
lower value stones.
Related Party Transactions
Numovista Pty Limited, the current owner of the Numovista Plant,
is 30% owned by Wedge Mining and Exploration, and 70% owned by
Umamate (Pty) Ltd ("Umamate"). Umamate is 80% owned by parties
connected with the Teichmann Group and 10% owned by Mike Houston,
Executive Chairman of the Company.
Given Mike Houston and Teichmann Group's connection with
Numovista, the acquisition of the Numovista Plant is considered to
be a "related party" transaction as defined under the AIM
Rules.
The directors independent of the transaction, being David Facey
and Tim Leslie, consider, having consulted with the Company's
Nominated Adviser, SP Angel Corporate Finance LLP, that the terms
of the purchase of the Numovista Plant are fair and reasonable
insofar as the shareholders of the Company are concerned.
TCL, as a substantial shareholder of the Company, along with
certain parties connected with TCL's owners, is considered to be a
"related party" as defined under the AIM Rules and accordingly,
TCL's participation (along with that of its owners' connected
parties) in the Placing constitutes a related party transaction for
the purposes of Rule 13 of the AIM Rules.
The directors independent of the transaction, being David Facey,
Tim Leslie and Mike Houston, consider, having consulted with the
Company's Nominated Adviser, SP Angel Corporate Finance LLP, that
the terms of TCL and its owners' connected parties' participation
in the Placing are fair and reasonable insofar as the shareholders
of the Company are concerned.
Admission to Trading on AIM and Total Voting Rights
Application will be made for the 2,000,000 Tranche 1 Placing
Shares, which will rank pari passu with the existing Ordinary
Shares, to be admitted to trading on AIM ("Admission"). It is
expected that Admission will become effective and dealings will
commence on or around 21 February 2020.
Following the issue of the Tranche 1 Placing Shares, the issued
share capital of the Company will consist of 5,258,004 Ordinary
Shares. No shares were held in treasury at the date of this
announcement. The total current voting rights in the Company are
therefore 5,258,004.
The above total current voting rights number is the figure which
may be used by shareholders as the denominator for the calculation
by which they will determine if they are required to notify their
interest in, or a change to their interest in the Company.
An application for Admission of the Tranche 2 Placing Shares
will be made in due course with such shares expected to admit
following the Company's 2020 AGM.
Upon Admission of the Tranche 2 Placing Shares the conversion
price of the outstanding convertible loan of GBP925,000 will be
approximately GBP1.66.
Market Abuse Regulation (MAR) Disclosure - Certain information
contained in this announcement would have been deemed inside
information for the purposes of Article 7 of Regulation (EU) No
596/2014 until the release of this announcement.
**ENDS**
For further information, please visit www.bluerockdiamonds.co.uk
or contact:
BlueRock Diamonds PLC
Mike Houston mhouston@bluerockdiamonds.co.uk
David Facey, FD dfacey@bluerockdiamonds.co.uk
SP Angel (NOMAD and Broker)
Stuart Gledhill / Caroline Rowe Tel: +44 (0)20 3470 0470
----------------------------------
St Brides Partners Ltd (Financial
PR) Tel: +44 (0)20 7236 1177
Isabel de Salis / Cosima Akerman
/ Susie Geliher
----------------------------------
Notes to editors:
BlueRock Diamonds is an AIM-listed diamond producer which
operates the Kareevlei Diamond Mine near Kimberley in South Africa
which produces diamonds of exceptional quality and ranks in the top
ten in the world in terms of average value per carat. The Kareevlei
licence area covers 3,000 hectares and hosts five known
diamondiferous kimberlite pipes. As at November 2018, it was
estimated that the remaining Inferred Mineral Resource from the
four kimberlite pipes (KV1, KV2, KV3 and KV5) represents a
potential inground number of carats of 367,000.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IOEBSGDDSSBDGGI
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