Diamondcorp Plc Lace Mine Loan Funding Update (7996M)

TIDMDCP

RNS Number : 7996M

Diamondcorp Plc

21 September 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')

Lace Mine Loan Funding Update

DiamondCorp plc, the African diamond mine development and exploration company, is pleased to announce that its 74%-owned subsidiary, Lace Diamond Mines (Proprietary) Limited (the "Borrower" or "Lace") and the Industrial Development Corporation of South Africa Limited ("IDC") have reached agreement and signed loan documentation whereby the 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.

Following due diligence and discussions with the Lender's executive committee, it has been agreed that the IDC shall provide a project loan facility for the amount of R220 million (approximately $26.7 million), representing approximately 77% of the forecast R285 million peak funding requirement for the 47 Level block cave development, which includes a 15% contingency.

Further, it has been agreed that DiamondCorp shall arrange additional funding of R100 million for Lace prior to the initial drawdown of the IDC facility. The total funding available for the project will then be R320 million, representing a 33% contingency on the Company`s forecast peak funding requirement.

The principal amount of the loan and the initial drawdown condition differ from the original term sheet signed with the IDC in May and result from agreement between the parties that increasing the total funding available for the project would be prudent in light of challenging macroeconomic conditions. In other respects, the major commercial terms of the loan are unchanged. The loan is secured over the assets of the Borrower and is guaranteed by the Company. The agreement includes representations and warranties from the Borrower and the Company which are usual for transactions of this nature. The term of the loan is 7 years with an interest rate of 2% over the South African Prime Rate (which is currently 8.5%), such interest to be capitalised for the first two years from the initial drawdown date (which is any time up to 31 July 2014) and payable semi-annually in arrears thereafter. There will also be a two year moratorium on loan repayments from the initial drawdown date.

In order to complete the total financing for the Lace mine development, DiamondCorp is considering a number of options and is pleased to announce that Rand Merchant Bank and PSG Capital have been engaged as advisers and arrangers in South Africa to raise up to R150 million of additional funding through the issuance of convertible bonds. It is envisaged that the convertible bonds will be settled in either cash or shares in DiamondCorp plc, at the sole discretion of the Company, thereby utilising the significant potential cashflow from the Lace mine and minimising dilution for existing DiamondCorp shareholders.

In order that investors outside of South Africa may participate, the Company's UK brokers Fairfax I.S. plc and Ocean Equities Limited have also agreed to market an issue of convertible bonds denominated in UK sterling, which are expected to be on the same terms as the South African bond issue.

Commenting on the signing of the IDC loan, DiamondCorp chief executive officer Paul Loudon said: "I am very pleased that the terms of the IDC loan facility have been finalised amid difficult market conditions. This represents a major milestone for our Company's transition from developer to a medium-sized diamond mining company, and we look forward to finalising the balance of our project funding requirements as soon as possible."

London

21 September 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

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