BRD.L Regulatory News (BRD)

BlueRock Diamonds PLC / AIM: BRD / Sector: Natural Resources

11 April 2023

BlueRock Diamonds PLC ('BlueRock' or the 'Company')

Corporate Update

BlueRock Diamonds (BRD), the AIM listed diamond producer, which owns and operates the Kareevlei Diamond Mine in the Kimberley region of South Africa, announces the following update regarding (a) its principal operating subsidiary, Kareevlei Mining (PTY) Limited ("Kareevlei"), being placed into Business Rescue on or around 24 February 2023 and (b) the consequent impact on the Company.

Kareevlei

As the Business Rescue Practitioners ("BRPs") of Kareevlei control Kareevlei and its operations, the Board has been in discussions with them on the status of the business and the likely outcome of the business rescue process, as well as the impact of this on the Company, given that the major assets of the Company are the loan owed by Kareevlei and the shares the Company owns in Kareevlei.

The first meeting of creditors held by the BRPs was on Monday 13th March 2023 where the BRPs gave feedback on the reasons why Kareevlei was placed in business rescue by its board of directors. The BRPs reported that the assets of Kareevlei are unlikely, in a liquidation scenario, to realise sufficient proceeds to settle the secured creditor, Teichmann South Africa ("TSA"), and that there is unlikely to be any distribution to preferred and unsecured creditors. The BRPs believe that Kareevlei can only be rescued if its debt is extinguished or brought to a manageable level, capital is invested to comply with the conditions of the mining license and to upgrade the plant, working capital funding is obtained, and that the mine is owner-managed and operated.

Post Commencement Financing ("PCF": being capital provided to Kareevlei following the commencement of business rescue proceedings) was secured from TSA, which exercised its security over the Kareevlei bank account prior to Kareevlei going into business rescue, for essential expenses only. Operations are restricted to the processing plant which is drawing material from the Run of Mine ("ROM") stockpile. There has been no mining activity since the commencement of business rescue proceedings.

The BRPs exercised their rights to suspend the obligations of Kareevlei. The impact on the Company is the immediate suspension of the Management Agreement and Loan Agreements under which interest accrues on outstanding balances. As a consequence, the Company has no source of income from Kareevlei.

The BRPs asked the Company, as the majority and controlling shareholder, to provide all or part of approximately ZAR 150 million to recapitalise the mine and fund working capital. The Board has considered and explored the possibility of the Company being able to raise sufficient further finance to fund Kareevlei and has concluded that it is unlikely to be able to do so at the current time. Accordingly, the Company has notified the BRPs that it is unable to contribute any further funding to Kareevlei.

The Company has approached its loan note holders to ascertain their response to a possible restructuring of the capital structure of the Company and has not received a reply to date.

The BRPs, at the second meeting of creditors held on 24th March 2023, reported that they were in discussions with three parties that had expressed an interest in acquiring the Kareevlei Diamond Mine, either through purchasing the shares in Kareevlei or the assets and business of Kareevlei. The business rescue plan has not been finalised as the outcome of these discussions is material to the final assessment of the BRPs regarding the ability to either rescue or liquidate Kareevlei.

Trading Update

Production for the period preceding the commencement of business rescue proceedings was in line with management expectations, with 2,350 carats produced during the four weeks to 4th March 2023. This included three diamonds, the final prices for which achieved USD 393,888, USD 342,000 and USD 57,888, with total sales of USD 1.550 million.

Mining operations stopped immediately after business rescue proceedings commenced and production has been from material on the ROM stockpile. This production has been poor in grade and size of stones. The ROM stockpile had material for 18 days' processing plant requirements as at 31st March 2023. Significant waste stripping is required for the mine to be able to supply acceptable material to the plant, and the cost of this is included in the funding requirement of ZAR 150 million calculated by the BRPs.

The BRPs have suspended non-essential activities to minimise the amount of PCF which is required and are in discussions with those parties that have expressed an interest in Kareevlei. Until these discussions are concluded and a viable business rescue plan is approved, activities at Kareevlei will be limited.

TSA continues to provide PCF using the funds in the bank account over which security is held. TSA has removed some equipment from the mine site and the resumption of mining, particularly the drill and blast operations, to enable waste stripping to access ore to feed the plant is critical to avoid closure of the mine.

Solvency and going concern

The Board had consulted with the Company's lawyers and an insolvency practitioner regarding their responsibilities and the options available to the Company given the significant uncertainty after Kareevlei was placed into business rescue.

The Board has explored numerous options to minimise the potential loss to stakeholders. In the absence, however, of any distribution from Kareevlei or new capital being raised it is unlikely that the Company can be considered to be a going concern. The absence of certainty about Kareevlei in the near future, either from the business rescue plan or a viable offer to purchase its operations or assets, increases the uncertainty about the prospects for the Company. 

A further announcement will be made in due course.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ('MAR'). Upon the publication of this announcement via Regulatory Information Service ('RIS'), this inside information is now considered to be in the public domain.

**ENDS**

For further information, please visit BlueRock's website www.bluerockdiamonds.co.uk or contact: