RNS Number:2952Q
European Diamonds PLC
29 September 2003
EUROPEAN DIAMONDS PLC
PRESS RELEASE
Proposed acquisition of Minegem Inc
#1 million private placement
Finland Exploration update
29 September 2003
Minegem Inc.:
European Diamonds PLC ("EPD") is pleased to announce its intention to acquire
all the issued common shares of Minegem Inc ("Minegem") a Canadian company
listed on the Toronto TSX Venture Exchange. Minegem owns interests in two
proven diamond bearing kimberlite ore bodies located in the Kingdom of Lesotho
in Southern Africa.
EPD is offering one ordinary 5p share for every 10 Minegem common shares. Based
on EPD's closing price in London on 26 September 2003 of 70.5p per share, the
offer values Minegem at #3.5m (Cdn$7.9), a premium of 111% to Minegem's closing
price in Canada on 26 September 2003. In the event of full acceptance of the
offer, EPD will issue a total of approximately 4.99 million of its ordinary 5p
shares, which will represent approximately 20% of the enlarged EPD issued share
capital. The offer for Minegem ("Offer") is subject to the approval of EPD's
shareholders, a minimum level of acceptances by Minegem's shareholders of 50.01%
of Minegem's common shares, the admission to AIM of the EPD shares to be issued
pursuant to the Offer as well as other conditions generally applicable to the
takeover of Canadian listed companies.
Minegem has interests in a mining lease from the Government of Lesotho (GOL) for
exploitation of a high-grade diamondiferous kimberlite pipe designated as the
"Satellite Pipe Project", as well as an exclusive prospecting licence for a
larger diamond bearing kimberlite adjacent to the Satellite Pipe and designated
the "Main Pipe Project". The Satellite Pipe, in which Minegem has a 65%
economic interest, is projected to produce 290,000 carats per year and subject
to the provision of the necessary funding, could be operational within nine
months from the start of construction, which is expected to be in early 2004.
Revenues from the Satellite Pipe are projected at US$12 million per annum with
an initial life of mine of 5 years. The "Main Pipe Project", in which Minegem
has a 100% economic interest, is a 9.5 hectare kimberlite pipe, which has
already been the subject of a 13,500 tonne bulk sample that confirmed its
potential to generate 700,000 carats per year providing annual cash flow of
around US$45 million.
Minegem is required by the GOL to raise the required finance to develop the
Satellite Pipe by 12 December 2003 in order to avoid the loss of its mining
lease on that project. EPD has arranged a US$10m credit facility to fund the
development of the Satellite Pipe, subject to the acquisition of Minegem by EPD,
which it believes will satisfy the requirements of the GOL.
EPD commissioned A C A Howe International Limited, independent geological
consultants, to provide an independent technical review of the Lesotho
kimberlites of Minegem. This review will be included in the circular, referred
to below, which will be issued to EPD's shareholders shortly.
For further details of Minegem see Appendix 1.
For further details of the Offer see Appendix 2.
Financing:
In relation to the acquisition of Minegem, EPD has arranged a US$10m debt
financing facility (the "Facility") to fund the construction of the initial
diamond production operation at Minegem's Satellite Pipe project in Lesotho. The
Facility, which will be available for drawdown on completion of the acquisition
of Minegem by EPD, has been arranged with Rowland Capital (CI) Limited. In
connection with the Facility EPD is issuing 100,000 ordinary 5p shares in
settlement of #75,000 of the set up fee payable to Rowland Capital (CI) Limited.
Another fee and the issue of one million share warrants will become due to
Rowland Capital (CI) Limited, on initial drawdown of the Facility.
In addition, EPD is arranging a private placement of up to 1.5 million new
ordinary shares of 5p each ("New Ordinary Shares") at 70p per share to raise
gross proceeds of up to #1.05 million, which will be used to further explore
EPD's properties and for general corporate purposes. Subscribers for the New
Ordinary Shares will also receive free warrants to subscribe for further new
ordinary shares on the basis of one warrant for every two New Ordinary Shares
subscribed. The warrants will be exercisable at any time up until 31 October
2004 at an exercise price of 80p per share. To date EPD has received
subscription agreements for a total of approximately #800,000 from institutional
and other investors in respect of 1,150,000 New Ordinary Shares which are
conditional on admission to trading on AIM by 31 October 2003.
The issue price of 70p represents a discount of approximately one per cent to
the closing mid-market price of 70.5p per ordinary share on 26 September 2003,
being the last dealing day prior to the date of this announcement.
For further details of the Debt Financing and Private Placement see Appendix 3.
EGM:
The Board expects to convene an Extraordinary General Meeting of EPD's
shareholders for 28 October 2003 ("EGM") to seek shareholder approval for the
acquisition of Minegem and for the issue of certain of the New Ordinary Shares
pursuant to the private placement. A circular convening the EGM, containing
further details of the Offer, the financing and other matters referred to in
this press release, is to be despatched to shareholders on or about 6 October
2003.
Finland Update:
Lentiira: The source rocks for the large numbers of high quality G10 pyropes
and a large 1mm diamond, discovered in the eastern Lentiira project (Railway
Anomaly), have not yet been discovered. The mini bulk sample from the F3
Kimberlite fissure (Press Release 17/06/2003) yielded a large number of
prospective indicator minerals but no diamonds. However, the company's
independent geologists, ACA Howe International Ltd ("Howe"), have recently
reviewed the work carried out at Lentiira and state "the work at Lentiira to
date confirms the diamond prospectivity of the Lentiira region as a whole and
more specifically the target areas currently identified." Howe goes on to say
"the kimberlite fissure system... does not appear to be the source of the KI
(Kimberlite Indicator) train termed the Railway Anomaly" and "the train width
indicates a source width... at least an order of magnitude higher than the dykes
so far identified". Howe recommends that further close spaced geophysics be
carried out over selected targets and drill tested with larger diameter
mechanisms. Howe concludes " the understanding of transport systems and
geophysical responses gained during the exploration to date suggests that there
is a strong likelihood that EPD will locate diamondiferous source rocks at
Lentiira". EPD is planning further geophysics and drilling this winter to
complete the recommended work.
Regional Projects:
The regional projects have also been reviewed by Howe who have noted that
"several strong targets have been outlined". EPD have recovered diamond
prospective indicator mineral from six areas in several glacial trains. A follow
up programme of ground geophysics and drilling has begun.
For an update and summary for Finland see Appendix 4.
Interim results to 31 March 2003
In order to comply with certain Canadian regulatory requirements in relation to
the acquisition of Minegem, EPD has produced unaudited interim results for the
nine month period ended 31 March 2003.
The results are set out in Appendix 5.
Management comment:
Tony Williams, Chairman of EPD, in summing up the future strategy for EPD said
"In Finland we believe we have some of the best geological real estate for
diamonds remaining in the world, in a diamond province in North West Europe
proven to contain world class diamond deposits. Our exploration will continue
apace and we continue to be confident of eventual commercial success.
The acquisition of Minegem provides a significant opportunity to create a
mid-tier diamond company owning near term production potential approaching
200,000 carats annually, potentially expanding towards 1 million carats annually
in a few years time, as evidenced in earlier pre-feasibility studies by Fluor
Daniel Southern Africa. Exploration potential in both Lesotho and Finland is in
our opinion exceptional. More importantly we have the finance in place to
rapidly bring the Lesotho Satellite Pipe diamond project into production and
thus accelerate our goal of becoming the mid-tier diamond producer of choice.
We believe the acquisition of Minegem represents an excellent opportunity for
both EPD and Minegem shareholders to participate in an exciting growth story in
the diamond sector".
European Diamonds PLC is listed on the Alternative Investment Market (AIM) of
the London Stock Exchange and its shares trade under the symbol EPD.
On behalf of the board
A.J. Williams
Chairman
R.G.S. Spencer
Chief Executive Officer
For further information please contact:
Anthony J Williams - Chairman
or
Alex Chapman - Investor Relations
European Diamonds PLC
22 Grosvenor Square
London, W1K 6LF
Tel: +44 (0) 20 7529 7502
Fax: +44 (0) 20 7491 2244
e-mail: enquiries@europeandiamondsplc.com
website: www.europeandiamondsplc.com
Appendix 1
Minegem Inc.
Overview
Minegem is a Canadian company, listed on the Toronto TSX Venture Exchange with
proven diamond bearing kimberlite in its Satellite Pipe and Main Pipe deposits
in the Kingdom of Lesotho in Southern Africa.
Since 1996 Minegem has invested over US$8 million in several hard rock diamond
projects in northern Lesotho. Currently it holds a mining lease from the
Government of Lesotho (GOL) for exploitation of the high-grade diamondiferous
kimberlite pipe designated as the "Satellite Pipe Project" which is close to
production. Approximately US$10 million is required to develop the Satellite
Pipe, which is projected to produce 290,000 carats per year. The Satellite Pipe,
in which Minegem holds a 65% economic interest, could be operational within nine
months from the start of construction, (expected to be in early 2004) generating
revenues of US$12 million per annum with an initial life of mine of 5 years.
Minegem also holds a comprehensive prospecting and development licence for a
larger diamond bearing kimberlite adjacent to the Satellite Pipe and designated
the "Main Pipe Project". This 9.5 hectare kimberlite pipe, in which Minegem
holds a 100% economic interest, has already been the subject of a 13,500 tonne
bulk sample which confirmed its potential to generate 700,000 carats per year
providing annual cash flow of around US$45 million.
The Projects
Satellite Pipe Project
Minegem, through its subsidiary Liqhobong Mining Development Company (Pty) Ltd
(LMDC), owns a 65% interest in this diamond bearing kimberlite. The Government
of Lesotho owns a 25% interest and the Industrial Development Corporation of
South Africa a 10% interest.
Bateman Engineering Limited and SRK Consulting, two large international
consulting organisations, through their South African based companies, completed
a positive bankable feasibility study for the Satellite Pipe in March 2001 and
the following project parameters have been extracted from the study:
Kimberlite Grade: 69 carats per hundred tonnes
Diamond Value: US$42/carat
Revenue per tonne mined: US$28.5/tonne
Initial mineable reserve: 1.9 million tonnes
Mining rate: 420,000 tonnes/year
Diamond Production: 290,000 carats/year
Initial Mine Life: 5 years
Capital Cost: US$9.5 million
Operating Cost per tonne: US$14.0 /tonne treated
Operating Margin: US$14.5 /tonne treated (51%)
First Revenue: 9 months from construction start
Net cash flow: US$6 million/year
Following the acquisition of Minegem, EPD plans to utilise the US$10 million
credit facility to commence mine construction early in 2004.
Main Pipe Project
Minegem, through its wholly owned subsidiary Maluti Diamonds Limited, owns 100%
of this diamond bearing kimberlite. Minegem has completed an in-house scoping
study for the development of the Main Pipe based on a pre-feasibility study
undertaken by Fluor Daniel Southern Africa. The study indicates that the Main
Pipe at Liqhobong is an attractive project based on the results of an initial
bulk sampling grade as follows:
Diamond Grade: 16.2 carats per hundred tonnes
Diamond Value: US$64/carat
Reserves: 37 million tonnes
Capital Cost: US$62 million
Production Rate: 4.3 million tonnes/year
Diamond Production: 700,000 carats/year
Annual Revenue: US$45 million/year
Following the acquisition of Minegem, EPD plans to investigate the Main Pipe in
detail to complete the bulk sampling programme and produce a bankable
feasibility study.
Exploration Properties
There are a number of diamondiferous kimberlite exploration targets within the
existing Minegem licence area and in the surrounding areas. It is anticipated
that a significant exploration programme will be undertaken in due course.
Appendix 2
Offer Terms
EPD is offering Minegem shareholders one EPD share for every 10 Minegem shares
now in issue or to be issued (the "Offer"). If the current issued and
outstanding shares of Minegem are fully assented to the Offer, this will result
in the issue of approximately 4.99 million new EPD ordinary shares of 5p each
and Minegem shareholders will own approximately 20% of the enlarged issued share
capital of EPD (excluding any New Ordinary Shares to be issued in connection
with the private placement referred to in this press release or in respect of
any Minegem shares that may be subsequently issued on exercise of outstanding
stock options). The Offer is conditional, inter alia, upon EPD's shareholders
approving the acquisition and acceptances from Minegem shareholders in respect
of a minimum of 50.01% of Minegem's issued common shares
Minegem currently has outstanding options, held by directors and officers of
Minegem, to acquire up to 2,665,000 Minegem common shares which, if exercised,
would be capable of being tendered under the Offer.
A J Williams, Executive Chairman of EPD, is a non executive director of Minegem
and holds an indirect beneficial interest in 4,339,870 Minegem shares as well as
options in respect of a further 250,000 Minegem shares. Assuming exercise of all
250,000 options, Mr Williams' interest would represent 9.2% of the issued and
outstanding shares of Minegem.
EPD currently anticipates that the Offer will close on 4 November 2003.
The Directors of EPD, consider the terms of the Offer and private placement to
be in the best interests of EPD and its shareholders as a whole. Accordingly,
the Directors of EPD (excluding A J Williams (in relation to the Offer only) by
virtue of his interest in Minegem) intend unanimously to recommend EPD
Shareholders to vote in favour of the resolutions to be proposed at the
Extraordinary General Meeting, as they intend to do in respect of their own
beneficial holdings of EPD Shares amounting, in aggregate, to approximately
23.23 per cent of the existing issues share capital of EPD.
Appendix 3
Debt Financing and Private Placement
Private placement
EPD is arranging a private placement of up to 1.5 million New Ordinary Shares at
70p per share to raise gross proceeds of up to #1.05 million, which will be used
to further explore EPD's properties and for general corporate purposes.
Subscribers for the New Ordinary Shares will also receive free warrants to
subscribe for further new ordinary shares on the basis of one warrant for every
two New Ordinary Shares subscribed. The warrants will be exercisable at any
time up until 31 October 2004 at an exercise price of 80p per share. EPD has to
date received subscription agreements for a total of approximately #800,000 from
institutional and other investors in respect of 1,150,000 New Ordinary Shares.
The issue of the New Ordinary Shares under the placement is conditional on
admission to trading on AIM by 31 October 2003. Furthermore the Board requires
the approval of EPD shareholders in respect of the issue of approximately
350,000 of the New Ordinary Shares. Such approval will be sought at the EGM.
Credit facility
EPD has arranged a US$10m debt financing facility (the "Facility") to fund the
construction of the initial diamond production operation at Minegem's Satellite
Pipe project in Lesotho. The Facility, which will be available for drawdown on
completion of the acquisition of Minegem by EPD, has been arranged with Rowland
Capital (CI) Limited. In connection with the Facility, EPD is issuing 100,000
new ordinary shares in settlement of #75,000 of the set up fee payable to
Rowland Capital (CI) Limited. Another fee of US$100,000 and the issue of one
million share warrants will become due to Rowland Capital (CI) Limited, on
initial drawdown of the Facility. The warrants, which will become exercisable
only on receipt of all regulatory approvals, will have an exercise price of 75p
each and a term of two years.
The Facility has been arranged with Rowland Capital (CI) Limited which is a
member of a privately controlled investment finance group within the Rowland
family interests, who are also shareholders of EPD.
Appendix 4
FINLAND UPDATE AND SUMMARY
Introduction
Work undertaken by the Geological Survey of Finland and European Diamonds Pty
Ltd (EPD) over the last 2 years has firmly established the Archaean-aged
Karelian Craton of Finland as prospective for hard rock diamond deposits. The
fact that diamondiferous kimberlites and lamproitic rocks have been located in a
number of places right across the craton both in Finland and western Russia and
that 2 potentially large economic diamond deposits have been located in the
Arkhangelsk region supports the prospectivity of this craton. The
diamond-prospective part of the craton that occurs in Finland has been shown to
be over 300,000 square kilometres in extent, at least as large as the better
known Slave Craton in Canada. Extensive work by scores of explorers in the Slave
Craton over the last 14 years have shown that such a cratonic area can be
expected to contain at least 6 clusters of kimberlites and possibly as many as
15. Each cluster could contain up to 20 individual kimberlites.
It has been recognised that the Karelian Craton has undergone extensive and
repeated deep and extensive weathering since at least the Proterozoic and this
has had the effect of increasing the degree of difficulty experienced by diamond
explorers searching for the fragile kimberlite indicator minerals which are used
to trace the dispersion trains from buried kimberlites. This feature is believed
to be responsible for the lack of success experienced by earlier explorers such
as De Beers and Rio Tinto, prior to EDP's interest in the region.
Results
EPD started work in Finland in the late nineties, following glacial trains and
structural targets identified earlier. It became obvious very quickly that the
Company would have to develop its own exploration techniques if it was not to
repeat the failures of previous explorers. To this effect the Company
collaborated with the Geological Survey of Finland to develop cost-effective
laboratory and glacial sampling techniques appropriate for the environment. This
collaboration has been extremely productive. To date, the Company has identified
seven separate areas over a distance of some 500 kilometres within central and
northern Finland where positive kimberlite indicator minerals have been
discovered.
Lentiira
The flagship area has been the Lentiira Project where the Company has discovered
high quality indicator minerals, diamonds and more recently, kimberlites as
well. Detailed exploration at Lentiira has traced many of the indicator minerals
back to 2 suites of kimberlite fissures and dykes which have been sampled and
shown to contain only trace amounts of diamonds. However, the source of the most
important train, the Railway train, has proved elusive and remains to be found.
The Railway train is some 250 metres in width and has been traced over
approximately 3 kilometres. Large numbers of high quality G10 pyrope garnets
have been discovered within this train together with a large, 1mm diamond.
Airborne and ground geophysical surveys have been carried out over the general
Lentiira area and numbers of anomalies traced back to their sources. Indeed this
is how the kimberlite fissures were originally discovered. Within the area of
the Railway train, approximately 40 geophysical anomalies of various types have
been identified to date. Of these, about 20 have been drilled without commercial
success leaving some 20 anomalies still unresolved.
The Company's independent geologists, A C A Howe International Limited, have
recently reviewed the work carried out at Lentiira and have this to say; "the
kimberlite fissure system ...... does not appear to be the source of the KI train
termed the Railway Anomaly" and "the train width indicates a source width ..... at
least an order of magnitude higher than the dykes so far identified". Howe have
also recommended additional geophysical techniques to apply over the Railway
area.
The Company is planning a drilling programme for this winter to complete the
recommended work on the Railway Anomaly.
Regional Projects
The regional projects have also been reviewed by Howe, who have noted that;
"several strong targets have been outlined". In all 6 areas, EPD have recovered
kimberlite indicator minerals classified as either diamond-prospective G10
pyropes, eclogitic garnets or diamond inclusion-type chromites. Several glacial
trains have been defined in the project areas and a follow up programme of
ground geophysics and drilling has begun.
General
EPD has shown that the Karelian Craton has very significant diamond potential
that has been overlooked in the past and the Directors consider that the Company
has established itself as the most successful of grass roots diamond explorers
to work in the craton and in Finland in particular. Over the last 3 years, the
Company has completed first pass exploration over much of the diamond
prospective part of Finland, has developed appropriate exploration techniques
and put together a first class exploration team.
The Company believes that with the Lentiira area and the six regional targets
identified thus far, EPD has identified the most prospective parts of Finland
and the Company will launch a major follow-up field programme next year.
The Company's target remains a large economic diamond deposit in Finland and it
believes that it is ideally positioned to locate such a deposit in the near
future.
Appendix 5
UNAUDITED INTERIM RESULTS TO 31 MARCH 2003
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNTS
Nine Nine
Months Months
Ended Ended
31 March 31 March
2003 2002
#'000 #'000
Turnover - -
Cost of sales - -
Gross profit - -
-------- --------
Administrative expenses 485 590
-------- --------
Operating loss (485) (590)
Interest receivable and similar income 22 34
-------- --------
Loss on ordinary activities before taxation (463) (556)
Tax on loss on ordinary activities - -
-------- --------
Loss for the period after taxation (463) (556)
Deficit brought forward (923) (455)
Exchange movement on reserves 239 (3)
-------- --------
Deficit carried forward (1,147) (1,014)
-------- --------
Loss per share
- undiluted 2.7p 3.4p
-------- --------
All amounts reflected above relate to continuing operations.
UNAUDITED CONSOLIDATED BALANCE SHEETS
As at As at
31 March 31 March
2003 2002
#'000 #'000
Fixed assets
Tangible assets 9 9
Intangible assets 4,455 2,425
Investments - -
--------- --------
4,464 2,434
--------- --------
Current assets
Debtors and prepayments 47 77
Cash at bank and short term deposits 1,397 877
--------- --------
1,444 954
Creditors
Amounts falling due within one year (261) (353)
--------- --------
Net current assets 1,183 601
--------- --------
Total assets less current liabilities 5,647 3,035
Provision for liabilities and charges - 133
Deferred income 115 103
--------- --------
Net assets 5,532 2,799
--------- --------
Capital and reserves
Called up share capital 961 821
Share premium account 5,690 2,964
Merger reserve 28 28
Profit and loss account (1,147) (1,014)
--------- --------
Equity shareholders' funds 5,532 2,799
--------- --------
UNAUDITED CONSOLIDATED CASH FLOW STATEMENTS
Nine Nine
months months
ended ended
31 March 31 March
2003 2002
#'000 #'000
Net cash (outflow) from operating activities
Operating loss (485) (590)
Depreciation 3 1
Decrease in debtors 73 34
Increase/(decrease) in creditors 96 (37)
----------- ------------
(Decrease)/increase in provision for liabilities and
charges (107) 133
----------- ------------
(420) (459)
Returns on investment and servicing of finance 22 34
----------- ------------
Capital expenditure and financial investment
(1,359) (974)
----------- ------------
Net cash (outflow) before management of liquid
resources and financing (1,757) (1,399)
Management of liquid resources (100) 1,198
Financing 1,422 294
----------- ------------
(Decrease)/increase in cash during the period (435) 93
----------- ------------
Reconciliation of cash flow to movement in net
funds
(Decrease)/increase in cash (435) 93
Decrease in short term deposits 100 (1,198)
----------- ------------
Decrease in net funds arising from cash flows
(335) (1,105)
Translation differences 88 (8)
----------- ------------
Change in net funds (247) (1,113)
Net funds brought forward 1,644 1,990
----------- ------------
Closing net funds 1,397 877
----------- ------------
Notes:
These interim accounts were approved by the directors on 26 September 2003. The
Group's principal accounting policies remain as stated in the Annual Report for
the year ended 30 June 2002.
The financial information set out above does not constitute statutory accounts
as defined in section 240 of the Companies Act 1985. Statutory accounts for the
year ended 30 June 2002, on which the report of the auditors was unqualified and
did not contain a statement under section 237 of the Companies Act 1985, have
been filed with the Registrar of Companies.
No dividend is being declared or paid for the period.
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACQPUURCBUPWGCB