Loan Funding Term Sheet with IDC (7023D)
May 21 2012 - 2:00AM
UK Regulatory
TIDMDCP
RNS Number : 7023D
Diamondcorp Plc
21 May 2012
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 18(th) 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
This information is provided by RNS
The company news service from the London Stock Exchange
END
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