MIDDLE EAST DIAMOND RESOURCES LIMITED - Specific issue of shares for cash to a related party and cautionary announcement

Specific issue of shares for cash to a related party and cautionary announcement

MIDDLE EAST DIAMOND RESOURCES LIMITED
(formerly Sable Metals and Minerals Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2001/006539/06)
(JSE code: MED ISIN: ZAE000211876)
(“MEDR” or “the company”)


SPECIFIC ISSUE OF SHARES FOR CASH TO A RELATED PARTY AND CAUTIONARY
ANNOUNCEMENT


1.     Introduction and rationale

1.1      Shareholders are advised that the company has decided to raise capital to improve its
         liquidity position, for working capital and to support growth by acquisitions in the diamond
         sector.

1.2.     The board is pleased to announce that an agreement (“the Agreement”) has been entered
         into on 10 October 2016 with Sheikh Addulla Khalfan Nassersheikh Addulla Khalfan
         Humaid Nasser, the non-executive chairman (“the Subscriber”), in terms of which he will
         subscribe for approximately 120 million shares (“Subscription Shares”) at 10 cents each
         in the share capital of MEDR for an aggregate amount of approximately R12 million on
         certain terms and conditions (“the Specific issue”) summarised below.

2. Subscription and conditions precedent

2.1.     The Subscriber will subscribe for shares upon fulfilment of the following conditions
         precedent:


         2.1.1. the shareholders of the company approving the Specific Issue in terms of section
                5.51(g) of the JSE’s Listings Requirements;

         2.1.2. approval in principle by the JSE of the listing of the Subscription Shares after they
                had been issued, as contemplated by this Agreement;

         2.1.3. the Subscriber providing the Company with a bank guarantee referred to in
                paragraph 3 below by not later than noon on 14 October 2016.

2.2.     On the date of fulfilment of the conditions precedent (“Subscription Date”) the Subscriber
         will subscribe in cash for the Subscription Shares at 10 cents per share.

2.3.     The number of Subscription Shares to be issued will be dependent on the exchange rate
         between the US Dollar and the ZA Rand at the close of business in South Africa on the
         last business day before the Subscription Date, and will be determined as follows:

         2.3.1. $873 000 (eight hundred and seventy-three thousand United States dollars) will be
                converted into ZA Rand on the Subscription Date and the resultant Rand amount
                divided by 10 cents to determine the number of Subscription Shares to be issued.
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         2.3.2. There will be a cap of 125 000 000 (one hundred and twenty-five million)
                Subscription Shares to be issued. Should the Rand amount exceed R12 500 000
                (twelve point five million rand), the excess amount will be returned to the
                Subscriber, unless the parties agree that the Subscriber may apply such excess to
                subscribe for additional shares at 10 cents per share within 20 business days.

         2.3.3. Should the Rand strengthen against the Dollar, and the resultant Rand amount is
                less than R12 000 000 (twelve million rand), the number of Subscription Shares
                arrived at by dividing the converted Rand amount by 10 cents, will be issued to the
                Subscriber.

         2.3.4. Should 2.3.3 take place, the Subscriber will have an option for 20 business days
                after the Subscription Date, to increase his shareholding to 120 000 000 (one
                hundred and twenty million) shares as envisaged, by injecting further capital into
                the Company and subscribing for the additional shares (“Additional Shares”) at 10
                cents per share.

2.4.     The Subscriber shall be entitled to receive a share certificate on the Subscription Date
         which shall constitute prima facie evidence of the Subscription Shares held by the
         Subscriber. Alternatively, the Subscription Shares shall be issued in dematerialised form.
         This shall also apply to the Additional Shares.

2.5.     The Subscriber shall not be entitled to dispose of, cede or transfer the Subscription Shares
         for a period of 18 (eighteen) months after the Subscription Date. This shall also apply to
         the Additional Shares.


3. Cash confirmation

       By not later than noon on 14 October 2016, the Subscriber shall provide the Company with
       an irrevocable bank guarantee which is enforceable in South Africa, in respect of $873 000
       (eight hundred and seventy-three thousand United States dollars) for purposes of
       subscribing for the Subscription Shares in terms of this Agreement.


4. Issue of shares

4.1. It is proposed that MEDR issues approximately 120 000 000 shares to the Subscriber at 10
     cents per share on the terms set out in the Agreement.
4.2. The issue price of 10 cents per share was determined by the board on 7 October 2016 and
     is at a discount of 33% to the volume weighted average traded price of MEDR for the 30
     business days preceding 7 October 2016 of 14.82 cents per share.
4.3. A fairness opinion by an independent expert is therefore required by section 1.51(f) of the
     JSE Listings Requirements.
4.4. The shares to be issued will represent approximately 23% of MEDR’s issued shares after
     the Specific issue.
4.5. The new shares will be issued in terms of the current Memorandum of Incorporation of
     MEDR. On listing, all the issued shares, including the new shares, will be of the same class
     and will rank pari passu in all respects.
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5. Pro forma financial effects

  The pro forma financial effects of the Specific Issue will be released in due course.


6. Circular and general meeting

    A circular containing inter alia full details of the Specific issue will be posted to shareholders
    in due course. The circular will contain a notice of general meeting of shareholders to vote
    on the Specific Issue to the related party.

7. Cautionary announcement

   Shareholders are advised to exercise caution when dealing in the securities of the company
   until a further announcement is made.


Johannesburg

10 October 2016

Sponsor and Corporate Adviser

Exchange Sponsors

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