Dissemination of a regulatory announcement that contains inside
information according to Regulation (EU) No 596/2014 (MAR).
Karelian Diamond
Resources plc
(“Karelian Diamonds” or “the
Company”)
19 September 2019
Publication of
shareholder circular and notice of extraordinary general
meeting
Further to the announcement made on 2
September 2019, Karelian Diamonds (AIM: KDR), the diamond
exploration company, announces that the Company has published a
shareholder circular and notice of general meeting in relation to
resolutions to remove certain existing directors of the Company,
being Professor Richard Conroy,
Maureen Jones, Seamus FitzPatrick, Dr Sor?a Conroy and Louis J
Maguire and appoint as new directors, Alan
Osborne, Stephen Grimmer,
Martin Doyle and Kevin Taylor (the “Circular”).
Your Board believes that the proposed
resolutions are NOT in the best interests of the Company and
Shareholders as a whole and is therefore unanimously recommending
that you VOTE AGAINST ALL of the proposed resolutions.
An extraordinary general meeting of the Company (“EGM”) has been
convened for 1.00pm on 18 October 2019 at Gandon Suite South, Davenport
Hotel, 8-10 Merrion Street Lower,
Dublin 2.
The Circular and a form of proxy for voting at the EGM were
posted to shareholders after close of business on 18 September 2019 and the Circular will also be
available shortly on the Company’s website at
www.kareliandiamondresources.com.
Extracts from the Circular are set out
below. Defined terms used in this announcement have the meaning as
set out in the Circular.
For further information please contact:
Karelian Diamond
Resources plc |
Tel:
+353-1-479-6180 |
Professor Richard
Conroy, Chairman |
|
Allenby Capital
Limited (Nomad) |
Tel:
+44-20-3328-5656 |
Nick Athanas/Nick
Harriss |
|
Brandon Hill
Capital Limited (Broker) |
Tel:
+44-20-3463-5000 |
Jonathan Evans |
|
Lothbury Financial
Services |
Tel:
+44-20-3290-0707 |
Michael Padley |
|
Hall
Communications |
Tel:
+353-1-660-9377 |
Don Hall |
|
www.kareliandiamondresources.com
Letter from the
Chairman of Karelian Diamonds
Dear Shareholder,
INTRODUCTION
I am writing to you regarding a further Extraordinary General
Meeting ("EGM") of your Company which has been requisitioned
by three shareholders working in association with Stephen Grimmer, a former employee of and
consultant to the Company ("the Requisitioning
Shareholders").
The resolutions to be considered at this further EGM are
identical to those rejected at the recent EGM of the Company held
on 26 July 2019. At this further EGM the Requisitioning
Shareholders again seek to gain control of the Board of Directors
of the Company (the "Board") by removing all but two of the
current members of the Board and electing four replacements to the
Board, namely Stephen Grimmer and
Martin Doyle (a former colleague of
Stephen Grimmer) and Alan Osborne and Kevin
Taylor, being two of the Requisitioning Shareholders.
The Board considers the requisitioning of this further EGM so
soon after the rejection of the self-same resolutions to be
vexatious. Nonetheless the Company is obliged by Irish
Company Law to convene this further EGM. Accordingly, there
is enclosed with this document a notice of the further EGM at which
the Requisitionists' Resolutions will be considered and which will
be held on 18 October 2019 at
1.00 p.m. at Gandon Suite South,
Davenport Hotel, 8-10 Merrion Street
Lower, Dublin 2. Also
enclosed is a Form of Proxy for the EGM.
The purpose of this document is to
briefly update you on the Company's activities and again explain
why your board unanimously recommends that you again VOTE AGAINST
the resolutions proposed by the Requisitioning Shareholders.
COMPANY UPDATE
The Company has been moving ahead in the short period since the
last EGM on 26 July 2019 and the
Board is determined not to allow the requisition of a further EGM
delay progress with your Company’s business and, in particular,
with the development of a diamond mine at Lahtojoki.
In this context I am delighted that Howard Bird, with his wide experience of the
diamond industry, and in particular of successful exploration and
diamond mine development, has now joined the Board as a
non-executive director in addition to his previously announced role
as a geo-science consultant and will assist on technical plans for
the development of our diamond deposit at Lahtojoki as a mine,
which when developed the Board expect will be the first diamond
mine in Europe (outside
Russia). Howard is an
internationally experienced professional geoscientist (diamonds,
gold, platinum and base metals) and has over 30 years’ diverse
junior and senior company exploration, development and mining
experience, including over 15 years at the senior executive
management level.
I am also very pleased to report that the process in relation to
compensation for landowners at Lahtojoki is now at an advanced
stage. This is an essential part of the process at this point of
moving forward with the development of a mine at Lahtojoki.
BACKGROUND TO WHY YOU SHOULD VOTE
AGAINST THE RESOLUTIONS
It remains the Board’s view that the stated strategy of the
Requisitioning Shareholder does not propose anything that is
compelling or significantly different to that already adopted by
the Company. Indeed Mr. Grimmer recently produced a "study"
for the Requisitioning Shareholders which concluded that the
Company under its current board has acquired an attractive asset in
the Lahtojoki diamond deposit and that the Company should develop
that project; that, of course, is precisely in line with the
Company's existing strategy.
Board structure considerations
It is the Company’s understanding that two of the proposed new
Directors, Alan Osborne and
Kevin Taylor, have never been
involved in the discovery, advancement or development of any mining
asset, nor indeed have they been involved in the running of any
publicly quoted company. Accordingly, these individuals do not have
a track record of successfully managing and operating junior
exploration companies to exploration success.
These proposed directors have to date put forward no descriptive
technical proposals, supporting documentation or persuasive
evidence of how they expect to finance or procure financing to
support a meaningful sampling programme. Thus, there is:
• no independent programme evaluation description; and
• no budgets or timeline for an evaluation programme that
requires world-class and industry-standard methodology.
This demonstrates an absence of understanding of kimberlite
evaluation linked with adequate funding of the Lahtojoki diamond
deposit, or of the diamond junior company marketplace that has
evolved and changed significantly over the last five years.
The other two proposed directors, Stephen Grimmer and Martin Doyle, do have experience in the diamond
industry and are well aware of the value of the Company’s assets.
In particular, Stephen Grimmer is a
former consultant/employee of the Company, working as a geologist,
who previously signed a confidentiality agreement with the
Company.
In the view of the existing directors, there is no evidence that
the directorial candidates proposed by the Requisitionists would
add new value to or would provide significant improvements or
enhancements to the Company or its assets; in fact the Board
believes that the proposed changes are unnecessary and likely to
damage the interests of the shareholders.
Operational considerations
Since acquiring the Lahtojoki diamond deposit, your Board has
reviewed in detail all the previous technical work on the project
and commissioned a Preliminary Economic Assessment which indicated
the financial and technical attractiveness of the project. As a
consultant to the Company, Stephen
Grimmer became very familiar with this information and with
the potential value of the Lahtojoki deposit.
Your Company has also carried out other necessary and highly
encouraging technical work in relation to the deposit and has also
made extensive progress with the Finnish Government’s regulatory
authorities and, very importantly, with the landowners in the area.
Such steps are an essential part of the mining permit process in
Finland. The Requisitionists are
now renewing their attempt to gain control of the Company at a time
when all of this work is coming to completion.
Stephen Grimmer, who is proposed
by the Requisitionists for an executive role with the Company, was
the former Managing Director of Paragon Diamonds, of which company
his colleague, Martin Doyle, was
Chairman. According to publicly available information,
Paragon Diamonds raised funds on AIM to bring the Lemphane diamond
deposit in Lesotho into
production. Despite raising considerable funds, the company failed
to develop the diamond deposit, failed to carry out its obligations
laid down by the Lesotho Government and lost its licence over the
property. The company’s shares were suspended from trading on AIM
in November 2015 and the Company had
its admission to trading on AIM cancelled in December 2015. The shares in Paragon Diamonds are
no longer traded on AIM or any other recognised market.
Now these two individuals are, again, being proposed to become
members of the Board of your Company, with one of them to become
Operations Director. Your Board does not consider this to be
advisable or to be in the best interests of the Company or its
shareholders.
Share price
The Company’s share price is currently at a low level. Your
Board does not believe that the current share price in any way
reflects the value of your Company’s assets and, in particular, the
known potential of the Lahtojoki diamond deposit.
The Board is naturally concerned at the low share price. Members
of the Board are themselves significant shareholders and have
personally invested heavily (approximately €2.2 million) in the
Company. It is of course true that the Board members have
been paid by the Company for their work. However, the members of
the Board have collectively invested in excess of €1,000,000 more
than was paid as remuneration to all of them (net of tax) over the
whole of the 13 years to May
2018.
The valuation assigned to exploration projects has, however, not
only affected shares in Karelian Diamonds but the mining industry
in general, and the diamond industry in particular. The Board
believes, nonetheless, that the Company is now at a stage when the
asset value of its properties, including the Lahtojoki diamond
deposit, may progressively be recognised by the market.
Exploration and development of a mine is dependent on a number
of factors, including technical ability and funding. The Board is
aware of the accusation of slow progress in the development of the
Company’s assets but the amount of work that can be carried out is
dependent on the funds available. On limited funding, the Company’s
existing team has developed a very impressive portfolio of assets,
carried out the necessary work to retain the licences and built an
excellent relationship with both the Finnish authorities and the
local population.
Many diamond companies, some of them very large and other small
explorers, have come and gone in Finland over the years. Only one company, your
Company, Karelian Diamond, has remained and built a portfolio of
assets. As these assets are developed there is the potential for
its share value to reflect the true value of that portfolio
provided the opportunity is not lost by ill-judged actions such as
those proposed by the Requisitionists.
Ongoing Progress of the Company
The Company acquired the Lahtojoki diamond deposit on a very
attractive basis, through negotiations which took several years to
complete, and it is now moving towards development in an orderly
and technically measured manner. The Company has also gained the
benefit, at a minimal cost, of the multi-million Euro expenditures
by previous operators at Lahtojoki. The current Board plans to move
forward to developing a diamond mine by continuing its sensible
technical and financial approach.
Karelian Diamond’s exploration programme has been a success. It
has taken time, but successful exploration does take time. It has
included the discovery of a diamond – the best possible indicator
of a diamond source. It has also resulted in the discovery of two
new Kimberlite bodies and has identified a series of 21 Kimberlite
indicator anomalies in the Kuhmo region of Finland and has shown the Seitapera Kimberlite
body (at 6.9 hectares) to be the largest discovered to date in
Finland.
Furthermore, the Company has a Confidentiality Agreement (with
back-in rights) in place with Rio Tinto Mining and Exploration
Limited, one of the largest mining companies in the world. This
Confidentiality Agreement has been in place since July 2010 and runs through to 30 June 2020.
The existing Board strongly believes that it is important to
build on this exploration success, rather than abandon it. The
Board acknowledges that it will take time, unless there is a
significant increase in the funds available. However, the Board
believes that the Requisitionists and their likely actions, if they
were to become directors of the Company, could result in the
Company failing to meet its licence obligations, an abandoning of
the work done to date and, ultimately, a loss of the existing
licences. It is especially important to maintain the licence around
the Lahtojoki diamond deposit so that the Company will be in a
position to commence exploration work when the permit to explore in
the surrounding area becomes legally valid and enables exploration
to commence. Any discovery in that area could add still further to
the value of the Lahtojoki project.
Far from doing very little, as the Requisitionists have tried to
assert, the Company under its existing Board, has achieved a great
deal by way of a well thought-out and carefully planned, very
focused and success-orientated exploration and acquisition
programme.
AIM Rules considerations and trading
on AIM
We have been advised that shareholders should be made aware of
the following consideration in relation to the AIM Rules and
trading on AIM, namely that if the Requisitionists’ Resolutions
were to be passed, there would be a potential risk to the admission
of the Ordinary Shares to trading on AIM as, in those
circumstances, the Company’s AIM nominated adviser will need to
consider the proposed alternative directors and the composition of
a new Board in connection with the overall suitability of the
Company to be a company with shares admitted to a public market in
the UK.
In order to comply with the AIM Rules for Nominated Advisers,
the Company’s AIM nominated adviser must undertake customary due
diligence including commissioning third-party due diligence reports
on the proposed directors and satisfy itself as to Board
composition and suitability, as a whole and the suitability and
appropriateness of each of the proposed directors.
The due diligence exercise on the proposed directors was at an
advanced stage at the time of the previous EGM being held for the
last requisition and the Company’s nominated adviser has met with
the proposed directors. However, notwithstanding the due diligence
already undertaken on the proposed directors, there can be no
guarantee of the eventual outcome of the process and further due
diligence will be required to be undertaken for this requisition
exercise.
In the event that the Company’s AIM nominated adviser cannot
reach a satisfactory conclusion as to the suitability of any new
Board for the purposes of the AIM Rules, then passing of the
Requisitionists’ Resolutions could potentially result in the
resignation of the AIM nominated adviser and trading in the
Company’s Ordinary Shares on AIM being suspended. If the Company
cannot appoint a replacement AIM nominated adviser within one month
of such suspension, the admission of the Company’s Ordinary Shares
to trading on AIM will be cancelled and, unless other arrangements
are put in place, Shareholders will not be able to trade their
Ordinary Shares. The existing Directors are of the view that, in
the circumstances, there can be no guarantee that a replacement AIM
nominated adviser can be appointed within the appropriate
timescale.
Shareholders should also be aware that the Company will no
longer be bound by the AIM Rules if the admission of the Company’s
Ordinary Shares to trading on AIM were to be cancelled. As a
consequence, investors would not be able to benefit from certain of
the protections provided by the AIM Rules. For example, the Company
would no longer be required to announce material events, interim or
final results or transactions (including transactions with related
parties) and certain previously prescribed corporate governance
procedures may not be adhered to by the Company in the future as an
unquoted company. Shareholders’ approval would also not be required
for reverse takeovers and/or fundamental changes in the Company’s
business. The Company would no longer be bound to comply with the
corporate governance requirements applicable to UK-quoted companies
and the Company would also no longer be required to have an AIM
nominated adviser, nor be required to retain a broker.
Endangering the Progress Already
Made
The existing Board believes that this success in acquiring and
moving forward the Lahtojoki diamond deposit is now being
imperilled by proposed impetuous technical and financial actions,
just as years of work potentially comes to fruition. Your Board
believes the timing of this second attempt to gain control is not
accidental.
Equally, the existing Board believes that the success which the
Company has had, and the persistence to keep going to achieve it,
is in great part due, not only to the commitment and expertise of
the existing directors, but also to the constant ongoing financial
support over many years that they have provided to the Company.
They have also ensured that, of the money raised by the Company to
date, the greater part of it has gone into exploration and
development. The existing Directors have, in other words, made a
major personal financial commitment to the Company.
No definitive plans of any sort have been put forward by the
Requisitionists in respect of either the short term or medium term
financing of the Company’s operations and indeed they have failed
to provide to the Board even the most basic financial information.
No indication has been given, as to from whom, or from where, or at
what price, or under what terms or conditions, funds might be
raised. Moreover, little information of a definitive nature has
been provided in relation to the Requisitionists’ future strategy
for the Company.
The technical plans of the Requisitionists are also largely
absent or deficient, other than some worrying indications that
courses of action may be planned which could potentially
destabilise the Lahtojoki project and leave it undeveloped, whilst
risking the loss of the other licences due to work not being
carried out.
A measured, well thought-out approach from the Company’s
existing Board and management led to the acquisition of the
Lahtojoki diamond project for a minimal cost. The same careful
measured approach is essential to achieve its successful
development as a mine, which your Board believes will be the first
European diamond mine (outside Russia). Few other diamond exploration
companies hold a potential diamond mine in their portfolio.
The Board urges you not to allow a campaign of misinformation
and misrepresentation regarding your Directors or the progress that
your Company has made cause this effort and hard-won success to be
jeopardised through the actions of a small group of shareholders
who, with a former consultant/employee are endeavouring to gain
control of the Board of your Company.
Please support your current Board.
They have brought the Company to this stage successfully and will
now endeavour to bring about the development of a mine and a
profitable Company with a corresponding share price that will
reflect what the Board believes to be the true value of your
Company.
You are asked not to risk it all by placing confidence in, and
voting for, individuals who either have no knowledge of the
industry or have already overseen the failure of another diamond
company.
It does take time to explore, find and then develop a diamond
mine, but impatience and dissatisfaction with the low share price
and the comments of a former consultant seems to have led to the
Requisitionists requiring the calling of an EGM, which, no matter
how it goes, is disruptive and expensive for the Company. To do so
a second time when these proposals have already been rejected by
shareholders in July 2019 is adding
further disruption and expense for the Company and seems designed
to hamper the Company in the orderly conduct of its business.
Your Board believes that the individuals seeking to gain control
of the Board of the Company at the EGM are being opportunistic and
their plans are ill-advised and likely to damage the interests of
shareholders.
WE WOULD URGE YOU TO VOTE AGAINST
THESE PROPOSALS.
Yours faithfully
Professor Richard Conroy
Chairman
NOTICE OF EXTRAORDINARY GENERAL
MEETING
NOTICE is hereby given that an Extraordinary General Meeting of
Karelian Diamond Resources plc (the “Company”) will be at
1.00pm on 18
October 2019 at Gandon Suite South, Davenport Hotel, 8-10
Merrion Street Lower, Dublin 2 held for the purposes of considering
and, if thought fit, passing the following as ordinary
resolutions:
1. That Professor Richard
Conroy be and is hereby removed from office as a director of
the Company in accordance with Section 146 of the Companies Act
2014 with effect from the end of the Extraordinary General
Meeting;
2. That Maureen Jones be and is hereby removed from office
as a director of the Company in accordance with Section 146 of the
Companies Act 2014 with effect from the end of the Extraordinary
General Meeting;
3. That Seamus Fitzpatrick be and is hereby removed from
office as a director of the Company in accordance with Section 146
of the Companies Act 2014 with immediate effect;
4. That Louis Maguire be and is hereby removed from office
as a director of the Company in accordance with Section 146 of the
Companies Act 2014 with immediate effect;
5. That Dr. Sor?a Conroy be and is hereby removed from
office as a director of the Company in accordance with Section 146
of the Companies Act 2014 with immediate effect;
6. That Alan Osborne be appointed
as director with immediate effect;
7. That Stephen Grimmer be
appointed as director with immediate effect;
8. That Martin Doyle be appointed
as director with immediate effect; and
9. That Kevin Taylor be appointed
as director with immediate effect.
By Order of the Board
Dated 18 September, 2019
Maureen T.A.
Jones
Secretary
-ENDS-