DON Diamonex

 
TIDMDON 
 
DiamonEx Limited 
AIM Release 
 
 
20 March 2009 
 
 
SALE OF MAJORITY INTEREST IN DIAMONEX BOTSWANA LIMITED 
BACKGROUND 
 
On Friday, 27 February 2009 DiamonEx Limited (DiamonEx) announced 
that its wholly owned subsidiary Diamonex Botswana Limited (DBL) had 
been placed under Judicial Management pursuant to orders granted by 
the High Court of Botswana.  This order provided DBL with a period of 
immunity from claims from its creditors. 
 
Since the granting of the orders, DiamonEx has investigated numerous 
alternatives to position DiamonEx for the future. 
 
DiamonEx is pleased to advise it has finalised the key terms of a 
conditional agreement for the sale of 80% of the shares in DBL 
(Acquisition Agreement).  The agreement is with Fleming Asset 
Management Botswana (FAMB) acting on behalf of the DiamonEx 
Convertible Bond Holders (Bondholders). 
 
The agreement provides for the transfer by DiamonEx of 80% of the 
shares in DBL.  Additionally DiamonEx will transfer its diamond 
exploration tenure in the USA to the purchasers. 
 
KEY TERMS OF THE ACQUISITION AGREEMENT 
 
Transfer of DiamonEx Limited Loans 
 
DiamonEx will effect the novation of all receivable loans and 
advances made by DiamonEx to DBL to an entity nominated by FAMB. 
These loans and advances amount to approximately A$23,000,000 (as 
recorded in the company's annual report for 2007/08). 
 
Convertible Bonds 
 
As disclosed in the company's annual report for 2007/08, the 
convertible bonds are a loan to DiamonEx under which DiamonEx has 
been required to pay a fixed rate of interest to the Bondholders. 
The bonds up until recently have been listed on the Botswana Stock 
Exchange. The obligations under the convertible bonds are equivalent 
to BWP 50,000,000 (approximately A$10,000,000).  The bonds terms also 
included a right to convert up to 10% of the bonds to DiamonEx shares 
(with shareholder approval obtained for this feature of the bonds at 
the 2007 Annual General Meeting of DiamonEx). 
 
The purchasers will assume DiamonEx's obligations and liabilities 
under the terms of the convertible bonds. This will mean that 
DiamonEx is released from any future obligation to repay the capital 
value of the bonds, interest or convert up to 10% of the bonds to 
DiamonEx shares. 
 
European Investment Bank Loan to Diamonex Botswana Limited 
 
As stated in the company's annual report for 2007/08, DBL entered 
into a loan with the European Investment Bank to the value of 
EUR5,000,000 (approximately A$10,000,000).  The purchasers have 
undertaken to effect the total release of the deed of share pledge 
given by DiamonEx to the European Investment Bank for the loan to DBL 
as security for this loan.  On completion of the Acquisition 
Agreement, DiamonEx will not be liable under any security or similar 
instrument in relation to this loan.  DBL will still be liable as the 
borrower under the European Investment Bank loan notwithstanding this 
change. 
 
Stanbic Bank Loan to Diamonex Botswana Limited 
 
The purchasers have also undertaken to settle with the Stanbic Bank 
of Botswana the loan of approximately A$2,000,000 provided to DBL. 
 
Loan to DiamonEx Limited 
 
The purchaser will loan A$500,000 to DiamonEx. The loan will be for a 
term of 24 months with 15% interest charged.  Interest will be 
calculated as simple interest on the balance of the loan outstanding 
and the interest owed will payable at the end of the term of the 
loan. This loan is to be secured by a mortgage of DiamonEx's DBL 
shares. 
 
Investment in Diamonex Botswana Limited 
 
In addition, FAMB and/or the Bondholders will invest up to 
approximately A$6,500,000 into DBL.  Whilst the total debt of DBL can 
not be determined at this stage due to factors which are yet to be 
finalised under the judicial management process, this should enable 
DBL to settle its immediately owing debts (other than the European 
Investment Bank loan) and provide sufficient working capital to 
enable DBL's main asset, the Lerala Diamond Mine, to either stay on 
care and maintenance for at least two years, or to commence 
production if and when a commercially attractive diamond off - take 
contract is secured. 
 
Conditions Precedent 
 
The company confirms that the Acquisition Agreement includes the 
following conditions precedent: 
 
 
 1. DiamonEx shareholder approval. 
 
 
 
 1. Approvals of the Bondholders. 
 
 
 
 1. DiamonEx obtaining a release from the European Investment Bank of 
    securities granted in its favour over DBL shares. 
 
 
 
 1. Settlement with the Stanbic Bank of Botswana of the finance 
    provided to DBL for plant and equipment of the Lerala Mine. 
 
 
 
 1. Completion of due diligence in respect of DiamonEx's Sloan 
    Mineral Rights in the United States of America. 
 
 
DiamonEx expects to execute the formal Acquisition Agreement shortly 
and hold the shareholders meeting seeking approval of the transaction 
(Transaction) within 3 months, with completion to be effected 2 weeks 
after shareholder approval has been given. 
 
In summary, on completion the following outcomes will result: 
 
 
  * DiamonEx will transfer its right to receipt of approximately 
    A$23,000,000 from DBL to an entity nominated by the purchaser; 
  * DiamonEx will be released from approximately A$10,000,000 of debt 
    owed to the Bondholders under the convertible bonds (and interest 
    payments due in the future); 
  * DiamonEx will not be liable under any security or similar 
    instrument in relation to the European Investment Bank loan to 
    DBL; 
  * The settlement of the loan from the Stanbic Bank to DBL; and 
  * DiamonEx will retain 20% ownership in DBL. 
 
 
THE FUTURE 
 
The Directors' intention is to ensure that DiamonEx's stake in DBL 
will be protected from dilution.  This will be done through either a 
contractual undertaking or by an amendment to DBL's constitution and 
will provide DBL shareholders, in the event of future capital 
raisings by DBL, the right to purchase additional equity pro-rata to 
their proportion of shareholdings. 
 
On successful completion of the Transaction, DiamonEx will manage its 
20% investment in DBL, continue exploration and evaluation of 
remaining tenements and will restructure the company to pursue other 
exploration and development opportunities.  DiamonEx's remaining 
tenements are set out below: 
 
 
+-----------------------------------------------+ 
| Tenement Name         | Tenement   | DiamonEx | 
|                       | Number     | Interest | 
|                       |            |          | 
|-----------------------+------------+----------| 
| Botswana - Tuli Block | PL 06/2006 | 100%     | 
|                       | PL 07/2006 | 100%     | 
|                       | PL 08/2006 | 100%     | 
|                       | PL 09/2006 | 100%     | 
|                       | PL 10/2006 | 100%     | 
|                       | PL 11/2006 | 100%     | 
|                       | PL 12/2006 | 100%     | 
|                       | PL 13/2006 | 100%     | 
|                       | PL 14/2006 | 100%     | 
|                       | PL 21/2006 | 100%     | 
|                       | PL 22/2006 | 100%     | 
|                       | PL 23/2006 | 100%     | 
|                       | PL 24/2006 | 100%     | 
|                       | PL 25/2006 | 100%     | 
|                       | PL 26/2006 | 100%     | 
|                       | PL 27/2006 | 100%     | 
|                       | PL 28/2006 | 100%     | 
|                       | PL 29/2006 | 100%     | 
|-----------------------+------------+----------| 
| Botswana -Jwaneng     | PL 15/2006 | 100%     | 
|                       | PL 16/2006 | 100%     | 
|                       | PL 17/2006 | 100%     | 
|                       | PL 19/2006 | 100%     | 
|                       | PL 20/2006 | 100%     | 
+-----------------------------------------------+ 
 
 
Once the Transaction has been completed it is the Directors' 
intention to seek re-instatement to trading of DiamonEx's shares on 
the ASX, the Botswana Stock Exchange and the Alternative Investment 
Market of the London Stock Exchange, however this will be subject to 
DiamonEx having complied with the relevant exchange's requirements. 
ASX has advised that prior to re-instatement it will require DiamonEx 
to disclose its future plans and strategy for its continued operation 
as a viable business and demonstrate that it has met all ASX Listing 
Rules requirements. 
 
More detailed information will be provided to shareholders in the 
explanatory memorandum to be provided with the notice of meeting 
seeking shareholder approval for the Transaction.  DiamonEx 
anticipates that this material will be despatched shortly. 
 
Yours faithfully 
Paul Crawford 
Company Secretary 
 
 
 
For further information contact: 
 
Dan O'Neill 
Managing Director 
Tel: +61 7 3720 8944 
Mob: +61 407 596 942 
Email: diamonex@diamonex.com.au 
 
Greg King 
Chairman 
Tel: +61 7 3720 8944 
Mob: +61 41 473 730 
Email: diamonex@diamonex.com.au 
 
Will Souter or Rob Adamson 
RFC Corporate Finance Ltd (Nomad) 
Tel: +61 2 9250 0050 
        +61 2 9250 0041 
Email: will.souter@rfc.com.au 
            rob.adamson@rfc.com.au 
 
Fox-Davies Capital Ltd (AIM Broker) 
Tel: +44 20 7936 5200 
 
=--END OF MESSAGE--- 
 
 
 
 
This announcement was originally distributed by Hugin. The issuer is 
solely responsible for the content of this announcement. 
 

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