TIDMBRD
RNS Number : 2872Z
BlueRock Diamonds PLC
16 May 2019
BlueRock Diamonds PLC / AIM: BRD / Sector: Natural Resources
16 May 2019
BlueRock Diamonds PLC ('BlueRock' or the 'Company')
Placing and Subscription raises GBP982,000
Expansion plans fully funded
Strategic partnership with the Teichmann Group
Mike Houston appointed as Executive Chairman of BlueRock
Gus Simbanegavi appointed as CEO of Kareevlei
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 the
implementation of a new mining plan in order to increase production
with a target of becoming cash flow positive at a corporate level.
In order to facilitate the revised plan the board has restructured
the management of the Company and has raised additional funding
from strategic and other investors.
The Company has raised an aggregate of GBP937,000 (before
expenses) via the issue of 937,000,000 ordinary shares of 0.01
pence each in the capital of the Company (the "Placing Shares")
through a placing and subscription at a price of 0.1 pence per
Share (the "Placing Price") (the "Fundraising"). The Company is
also issuing one warrant for every one Placing Share issued at an
exercise price of 0.2 pence with a life of two years from the date
of issue (the "Warrants"). The Warrants will not be listed.
In addition, certain Directors and a former Director of the
Company have indicated their intention to subscribe for a further
aggregate GBP45,000 via the issue of a further 45,000,000 shares at
the Placing Price ("Director Subscription Shares") subject to
approval by the Board (the "Director Subscription"). Details of
their participation and their consequent interests in the Company's
issued share capital will be described in a further announcement.
Accordingly, subject to such further Director Subscription, the
total gross amount raised is expected to be GBP982,000. It is
likely that the Director Subscription will constitute a related
party transaction under the AIM Rules for Companies.
The Board expects that the funds raised in the Fundraising will
be sufficient to reach its medium term goal of processing in excess
of 400,000 tonnes per annum (2018: 190,000 tonnes). The target for
2019 is between 280,000 tonnes and 330,000 tonnes. The Board
expects that the Company will be profitable in the second half of
2019 and expects the Company to be self-funding going forward.
Use of Proceeds
The Board is conscious of continued shareholder dilution but,
following further review of the Company's operational plan,
considered that the Fundraising was necessary in order for the
Company to invest in Kareevlei to enable it to implement the
required operational changes to sufficiently build production and
meet its strategic goals.
The Board has investigated various funding options but considers
that the Fundraising, in conjunction with the introduction of a new
strategic investor, and in the absence of compelling debt based or
other alternatives, represented the best available solution for
funding the revised operational plan and is in the best interests
of the Company and all of its stakeholders.
The funds raised will be used to implement the Company's revised
mine plan (further below) and for investment in production
improvements including:
-- Opening up and developing other pipes in order to provide flexible mining
-- Final modifications to the crushing circuit
-- Improvements in material flow to ensure consistent supply of
ore to the processing plant
-- Investment in essential stock of spares to minimise the disruption of breakdowns
-- Investment in further infrastructure, including dry
inventory, to minimise the disruption of wet weather
The Fundraising will also provide working capital to fund
operations until target throughputs are reached.
The Board expects that the funds raised in the Fundraising will
be sufficient to reach its medium term goal of processing in excess
of 400,000 tonnes per annum.
Progress to date
Since the appointment of Mike Houston as Chairman, the Company
has been reviewing its overall operation including its medium term
mine plan, and the following action has been taken:
-- Technical Skills Upgrade/ Mining disciplines: Appointment of
Mining Engineer as CEO of Kareevlei and experienced Processing and
Engineering personnel. These individuals are focusing on and
successfully introducing operating disciplines appropriate with
good mining practice.
-- Economies of scale: Improved utilisation of assets with
introduction of 7 day working week (c30% more operating hours).
Improved plant availability which now requires the support of
funding for correct levels of spares and in plant inventory.
-- Revised mid-term mining plan: The Company's new mine strategy
is to target a low strip multiple pit/variable depth mine plan in
order to de-risk the impact of excessively moist ore. This strategy
will initially allow the Company to mine to a level of
approximately 50m and will enable the Company to be profitable
during the second half of 2019. Provided that the pit grades are in
line with the resource estimate the Company will retain the
flexibility to mine deeper levels. One of Gus' key objectives will
be to complete a Resource Optimisation Review to establish the
economic mining depth of each pipe.
-- Plant Modifications: Management have completed a Plant
Upgrade Plan and work commenced on this in Q2 2019. The key is to
enable the front end of the plant to handle the variable ore and
ensure adequate inventories are in place so that the operation
maximises capacity.
Strategic Partnership
The Company expects to shortly enter into a contracting
agreement with a member of the Teichmann Group, a pan African civil
engineering and mining group, to provide the quantity of ore
necessary to meet BlueRock's production plans. Teichmann's
extensive experience in mining operations is expected to
significantly de-risk the Company's mining activities and allow
BlueRock to meet its production targets in a cost effective
manner.
In addition, Teichmann Company Limited ("TCL"), an investment
company controlled by trusts connected with the owners of the
Teichmann Group, has demonstrated its confidence in BlueRock's
plans by subscribing for 310,000,000 shares in the Fundraising for
a total of GBP310,000 payable in three instalments, GBP155,000 now,
GBP77,500 on the 31 August 2019 and GBP77,500 on 30 November
2019.
TCL will hold approximately 19% of the Company's shares
following the Fundraising and will retain a right to appoint a
non-executive director to the board while it maintains a holding
over 10%. It is expected that this position will be filled by one
of the senior executives of the group with further announcements
being made as appropriate.
Board and key management changes
The Board is delighted to announce the appointment of Gus
Simbanegavi as CEO of the Company's principal operating company
Kareevlei Mining Limited ("KML"). Gus is a mining engineer and has
extensive experience of working in mining operations in South
Africa and Zimbabwe and has previously worked closely with the
Company's Chairman Mike Houston. Importantly, Gus's experience
encompasses both small and large scale mining operations including
extensive open cast mining. Gus's initial focus will be on
increasing production levels and his short term and long term
remuneration has been structured to reflect this.
Mike Houston will become Executive Chairman to oversee the
transformation of the Company to profitability with the expectation
that Gus Simbanegavi will be appointed as CEO of BlueRock once the
initial task of reaching and stabilising production at agreed
targets has been completed.
Adam Waugh is standing down today as CEO of BlueRock and KML.
The Board would like to thank Adam for his contribution to the
Company and his input on and support of the necessary changes. Adam
will stay on as a Non-Executive Director of BlueRock Diamonds in
order to provide a smooth handover to Gus.
Mining Right and changes to the South African Mining Charter
The mining right for Kareevlei is due for renewal in August 2019
and the application for renewal is in an advanced state. The
Company does not expect any issues in the renewal process.
The new Mining Charter came into force in December 2018,
although it is under judicial review. Under the new Mining Charter
there is a requirement to increase the Broadly Based Economic
Empowerment partner's stake from 26% to 30% within 5 years from the
date of renewal of the licence, although this is one of the
elements of the Mining Charter which is under judicial review.
Given the structure of the shareholders' agreement from the Company
to Kareevlei Mining Limited ("KVM"), which requires the loan to
BlueRock, which currently stands at over GBP6 million, to be repaid
before any dividends are declared in KVM, this is expected to have
little or no economic impact to the Group.
Guidance for 2019 and 2020
The Company gives the following guidance for FY2019 and
FY2020:
2019 2020
Volume ('000 tonnes) 280 - 330 380 - 430
------------ ------------
Grade (cpht) 4.25 - 5.0 4.25-5.0
------------ ------------
Carats ('000) 11.9 - 16.5 16.2 - 21.5
------------ ------------
Value per carat (USD) 340 340
------------ ------------
As has been noted in earlier announcements, the Company is
recovering a higher number of larger stones. On a statistical
basis, as production increases and the mining of pure kimberlite
increases, the incidence of these larger stones should
increase.
Headline unaudited financials for the year ended 31 December
2018
The unaudited turnover and operating loss for the year ended 31
December 2018 were GBP1,417,000 and GBP1,319,000 respectively. The
Company expects to publish audited annual results for the year to
31 December 2018 during June 2019.
Options
The Board intends to grant the following share options to
members of the board and senior management:
Number Price
Mike Houston 48,870,057 0.1p
------------ ------
Gus Simbanegavi 32,580,038 0.1p
------------ ------
David Facey 32,580,038 0.1p
------------ ------
Total 114,030,134
------------ ------
The Options have a five-year life and will vest in 2 equal
tranches, 50% on grant and 50% on the first anniversary of the
grant of the options.
In addition, the Board intends to grant 32,580,038 options in
January 2020 each to Michael Houston and Gus Simbanegavi at an
exercise price based on the market price at the time of grant
subject to a production target of achieving in excess of 12,000
carats for the year ended 31 December 2019.
It is likely that the grant of share options to Directors will
constitute a related party transaction under the AIM Rules for
Companies. A further announcement in respect of the grant of share
options is expected to be issued shortly.
Extension of repayment terms of the loan from Adam Waugh
The loan from Adam Waugh ("Waugh Loan") to BlueRock currently
stands at GBP225,000 comprising principal of GBP181,000, interest
due of GBP16,000 and GBP27,000 of accrued repayment premium. It has
been agreed that:
1) Interest due of GBP9,000 payable in cash will be rolled forward;
2) Interest payable in shares of GBP7,000 is intended to be
satisfied by the issue of 6,811,000 ordinary shares at a price of
0.1p ("Interest Shares"), subject to approval by the Board;
3) A payment of GBP50,000 will be made by 31 May 2019; and
4) A payment of GBP30,000 per quarter will be payable in arrears
(except for the first quarterly payment which will fall due on 31
August 2019) accruing from 1 July 2019 until the loan, all
outstanding interest and repayment premium are repaid in accordance
with the original terms.
It is the Company's intention to pay off the loan as soon as is
practicable however early repayments will only be made if it does
not impact upon the Company's ability to achieve its production
targets.
The Company confirms that the loan to Paul Beck which was
GBP50,000 has been repaid in full.
Related Party Transaction
Adam Waugh, as a director of the Company, is considered to be a
"related party" as defined under the AIM Rules and accordingly, the
extension of the loan repayment constitutes a related party
transaction for the purposes of Rule 13 of the AIM Rules.
The Directors independent of the Loan, being David Facey, Mike
Houston and Tim Leslie, consider, having consulted with the
Company's nominated adviser, SP Angel, that the terms of the Loan
repayment extension are fair and reasonable insofar as the
Company's shareholders are concerned.
Issue of shares for payment of services
A further 5,000,000 Shares will be issued at the Placing Price
in payment for services received ("Services Shares").
Further Details relating to the Fundraising
Application will be made for the Placing Shares, the intended
Director Subscription Shares, the Services Shares and the Interest
Shares (together the "New 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 22 May 2019.
Total Voting Rights
Following the issue of the New Shares, the issued share capital
of the Company will consist of 1,629,001,910 Ordinary Shares. No
shares were held in treasury at the date of this announcement. The
total current voting rights in the Company are therefore
1,629,001,910.
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.
Mike Houston, Chairman commented: "The key challenge for
management will be achieving the economies of scale and this is
largely centred around material handling of what can at times be a
difficult product in both the mining and plant operations. This
requires a disciplined, innovative and technically competent
management team and I believe we have been able to put this team in
place now. Improvements have already been implemented which will
have a material impact on throughput and cashflow. The capital
raised will allow management to make further improvements and
importantly de-risk the business. The optimisation of the mine plan
and right sizing the cost structure will be key objectives for
management in the short term.
Accordingly, following this necessary investment, the Board now
expects the Company to be self-funding going forward.
I look forward to keeping shareholders regularly informed of the
progress."
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 BRD's website
www.bluerockdiamonds.co.uk or contact:
BlueRock Diamonds PLC
David Facey, FD dfacey@bluerockdiamonds.co.uk
Mike Houston, Executive mhouston@bluerockdiamonds.co.uk
Chairman
SP Angel (NOMAD and
Broker) Tel: +44 (0)20 3470 0470
Stuart Gledhill / Caroline
Rowe
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SVS Securities Limited Tel +44 (0)20 3700 0093
Tom Curran/Ben Tadd
----------------------------------
St Brides Partners Ltd
(Financial PR) Tel: +44 (0)20 7236 1177
Melissa Hancock / Juliet
Earl
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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
IOEUNORRKVAVAAR
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