Diamondcorp Plc Update re Loan Funding by IDC (2001I)

TIDMDCP

RNS Number : 2001I

Diamondcorp Plc

23 July 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')

Update re Loan Funding by IDC

DiamondCorp plc, the African diamond mine development and exploration company, announced on 21 May 2012 that its 74%-owned subsidiary, Lace Diamond Mines (Proprietary) Limited (the "Borrower") had entered into a detailed loan funding term sheet with the Industrial Development Corporation of South Africa Limited ("IDC"). Under the terms of the loan funding term sheet, IDC (the "Lender") has agreed to provide a loan facility to the Borrower for the purpose of underground development and purchase of mining equipment required for completion of a 1.2 mtpa block cave mining operation on the 47 Level (470m) at the Lace mine.

The provision of the loan is subject to certain conditions precedent, including completion of satisfactory due diligence by the Lender, Eskom approval for the required power upgrade at the mine and unconditional approval by the Lender's executive committee and/or board of directors.

The Company is pleased to report that the IDC has completed its due diligence and that the Eskom approval has now been received. This allows final loan documentation and terms to be prepared for approval and signature by the Lender and the Borrower. External counsel has been appointed for this purpose and the process is underway. The process has taken slightly longer than originally anticipated by the Board and the final loan agreement, security documentation and terms are now expected to be completed and signed by mid September 2012.

Commenting on the progress, DiamondCorp's Chief Executive Officer Paul Loudon said:

"I am very pleased by the advances being made towards finalising our IDC loan facility. Further, in light of the positive involvement of the IDC in funding the Lace mine development, the Company has been approached by a number of diamond groups with respect to securing diamond off-take agreements for the future Lace production and commercial South African banks looking to work alongside the Company and the IDC in providing additional subordinated funding facilities. The Company is actively pursuing these avenues with a view to further strengthening the funding arrangements for the Lace mine development in a manner that will provide significant cushion and comfort for shareholders in the current challenging macroeconomic environment."

The recent decision by the Reserve Bank of South Africa to cut the repo rate by 0.5% has resulted in a reduction in the South African Prime Rate from 9% to 8.5%. If the South African Prime Rate remains unchanged when DiamondCorp commences drawdowns from the proposed IDC facility, the Company would be paying an interest rate of 10.5% (i.e. the South African Prime Rate plus 2%).

London

23 July 2012

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 tonnes ("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.

Contact details:

DiamondCorp plc - Paul Loudon +27 56 212 2308/ Euan Worthington +44 775 3862 097

Fairfax I.S. plc (AIM Nomad & Joint Broker) - Ewan Leggat/Laura Littley +44 207 598 5368

Ocean Equities Ltd (AIM Joint Broker) - Guy Wilkes +44 207 786 4370

PSG Capital (Pty) Ltd (JSE Sponsor) - John-Paul Dicks +27 21 887 9602

Russell & Associates (Public Relations advisers) - Charmane Russell +27 11 880 3924

This information is provided by RNS

The company news service from the London Stock Exchange

END

MSCLLFSEDFIIFIF

Diamondcorp (LSE:DCP)
Historical Stock Chart
From Jun 2024 to Jul 2024