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Lace Mine Loan Funding Update
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
Date: 21/09/2012 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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