Firestone Diamonds PLC Bank and Bondholder Support for Covenant Waiver (0489E)
July 01 2019 - 7:16AM
UK Regulatory
TIDMFDI
RNS Number : 0489E
Firestone Diamonds PLC
01 July 2019
1 July 2019
Firestone Diamonds plc
("Firestone" or the "Company")
Bank and Bondholder Support for Covenant Waiver
Firestone is pleased to announce that, with the support of its
Bondholders, Pacific Road Resources Fund II L.P., Pacific Road
Resources Fund II and Resource Capital Fund VI L.P.
("Bondholders"), its 75% owned subsidiary Liqhobong Mining
Development Company (Pty) Ltd ("Liqhobong"), has received a waiver
from ABSA Bank Limited ("ABSA") for certain of its covenants
measured as at 30 June 2019 in terms of the US$82.4 million Senior
Secured Term Facility Agreement. The waiver is supported by the
Export Credit Insurance Corporation of South Africa ("ECIC"), which
has provided commercial and political risk insurance to ABSA. The
next measurement date will be 30 June 2020.
Background
Mining operations at the Liqhobong Mine have performed well, as
detailed in the quarterly operational updates reported for the
first nine months of the current financial year. Tonnes mined and
treated were in line with the Company's plans and operating costs
remained below budget.
However, despite the recovery of several higher value diamonds
at the Liqhobong Mine during the 2019 financial year, and an
average value realised for the third quarter of US$80 per carat,
the average value realised for the three quarters ended 31 March
2019 remained below expectation at US$74 per carat. The lower
average value was impacted mainly by lower prices realised for the
smaller, lower value goods, which has also affected many other
diamond mining companies and the wider diamond industry.
Certain of the ABSA covenants are forward looking and require
forecast assumptions to be made. In light of the current pricing
climate, lower average dollar-per-carat values have been employed
by Firestone in these covenant calculations, which has adversely
affected the covenant measurement and given rise to the need for
waivers in respect of two of the six covenants.
Despite these factors, the mine continued to generate positive
cash flows after finance costs and the Group continues to be in a
strong liquidity position with a cash balance of US$26.2 million as
at 30 June 2019. The cash balance is stated after the first capital
repayment to ABSA of US$1.9 million, following an 18 month capital
grace period which came to an end on 30 June 2019.
Waiver condition
As a condition to ABSA's covenant waiver, the Company has
obtained an undertaking from the Bondholders to waive the
requirement for the Company to pay quarterly interest in cash or in
shares on the Series A Eurobonds for the 12 month period from 1
July 2019 to 30 June 2020, subject to an agreement on alternative
arrangements being reached with the Bondholders.
Previously the Company has issued ordinary shares to pay
quarterly interest amounts due. However, due to consequences of the
UK takeover Code, in the absence of shareholder approval to permit
the Bondholders to receive ordinary shares thereby increasing their
shareholding to above 30% without triggering a mandatory offer to
minorities, the Company would be unable to issue further ordinary
shares at the next interest due date, being 30 September 2019.
The Company has undertaken to work collaboratively with the
Bondholders and other stakeholders including minority shareholders
to agree a means through which the Company can continue to fulfil
its obligations to service interest on the Eurobonds and satisfy
the requirements of all its lenders.
Paul Bosma, Chief Executive Officer, commented:
"We are grateful for the strong support we have received from
ABSA, the ECIC and our Bondholders in what is a tough period for
the smaller stone segment of the diamond market. Operations
continue to perform well, and we aim to ensure that we remain in a
strong position to benefit from an improvement in the pricing
environment in the future."
For more information please visit: www.firestonediamonds.com or
contact:
+44 (0)20 8741
Firestone Diamonds plc 7810
Paul Bosma
Grant Ferriman
Macquarie Capital (Europe) Limited
(Nomad and Broker)
Nick Stamp +44 (0)20 3037
Alex Reynolds 2000
+44 (0)20 7920
Tavistock (Public and Investor Relations) 3150
Jos Simson
Gareth Tredway
Annabel de Morgan
Background information on Firestone
Firestone is an international diamond mining company with
operations in Lesotho. Firestone commenced commercial production in
July 2017 at the Liqhobong Diamond Mine. Liqhobong is owned 75% by
Firestone and 25% by the Government of Lesotho. Lesotho is one of
Africa's significant new diamond producers, hosting Gem Diamonds'
Letšeng Mine, Firestone's Liqhobong Mine, Namakwa Diamonds' Kao
Mine and Lucapa's Mothae Mine.
This information is provided by RNS, the news service of the
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of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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