DCP.L Regulatory News (DCP)

15 Aug 2007 08:30

Diamondcorp Plc15 August 2007 AIM Release 15 August 2007 DIAMONDCORP PLC (AIM:DCP) OPTION TO ACQUIRE MAJOR ALLUVIAL DIAMOND MINING COMPANY IN SOUTH AFRICA Highlights • Option agreement entered into to acquire Sonop Diamond Mining (Pty) Limited ("Sonop") for US$45 million cash and 7.5 million ordinary shares of 3 pence each ("Shares") in the capital of DiamondCorp plc ("DiamondCorp"). • Large-scale alluvial diamond mining operations along the Vaal River and Middle Orange River in South Africa • Mining fleet of over 200 excavators, loaders and dump trucks. • Sonop produced over 93,000 carats of high-quality gem diamonds during the year ended 28 February 2007 and currently achieves in excess of US$700 per carat at tender. • Unique knowledge of the Sonop assets via Mr Alistair Holmes, current operations manager of the Lace mine and ex-operations manager of Sonop. • Potential to be a significant Southern Africa diamond producer when Sonop's production is combined with DiamondCorp's current estimated 144,000 carats per annum, and more than an estimated 400,000 carats per annum when Phase 2 underground mining at DiamondCorp's Lace mine commences. Mr Paul Loudon, Managing Director and CEO of DiamondCorp, said: "The acquisitionof Sonop is in keeping with the strategy of DiamondCorp to expand its operationsin South Africa and will immediately transform DiamondCorp into one of thelargest AIM-listed diamond producers, with the combined production and scale tocreate a recognised diamond producer in the Southern African market." For further information, please contact: Paul LoudonManaging Director & CEO, DiamondCorp plc+44 20 7256 2651 Jane Stacey/Arabella HobbsConduit PR+44 20 7429 6606/+44 792 292 3306 Joe Nally/Simon SouthwoodCenkos Securities plc+44 20 7397 8900 Robert Smith/Cindy StoutjesdykInvestec Bank Limited+27 11 286 7662 Background DiamondCorp plc ("DiamondCorp" or "the Company"), the AIM-listed emergingdiamond producer, has entered into an option agreement (the "Option") to acquireSonop Diamond Mining (Pty) Limited ("Sonop"), South Africa's largest privatealluvial diamond mining company. Sonop was established by Mr Christiaan Potgieter in 1994, and has grown into thelargest privately-owned diamond mining company in South Africa, operatinglarge-scale alluvial diamond mining operations along the Vaal River and MiddleOrange River in South Africa's Northern Cape province. Mr Potgieter is theformer owner of the Lace mine and a current 2.45% shareholder in DiamondCorp, asa result of shares he received when DiamondCorp purchased the Lace mine from himin March 2006. DiamondCorp's chief operating officer in South Africa, MrAlistair Holmes, was previously Operations Manager at Sonop and has a uniqueworking knowledge of Sonop's mining operations. Sonop diamonds are typically high quality alluvial gems and are currentlyachieving in excess of US$700 per carat at tender and, in the year ended 28February 2007, Sonop mined more than 200Mt of overburden and 20Mt of alluvialgravel utilising its own mining fleet of more than 200 excavators, loaders anddump trucks. Treatment of this gravel through modern dense media separationplants resulted in the recovery of more than 93,000 carats of gem diamonds andunaudited revenue in excess of ZAR369 million (US$50 million). The acquisition of Sonop complements DiamondCorp's existing Lace mine, which islocated in South Africa's Free State province, where processing of 3.6Mt ofdiamondiferous tailings commenced in July 2007. Simultaneously, refurbishment ofthe existing shaft at Lace has begun to enable the collection of a 20,000t bulksample from a depth of 360m below surface. This bulk sample is required to allowcompletion of a bankable feasibility study on the recommencement of Phase 2underground mining at Lace. Terms of the Option Under the terms of the Option, DiamondCorp has the right to acquire the entireissued and to be issued share capital of Sonop for an aggregate consideration ofUS$45 million in cash and 7.5 million Shares (the "Purchase Price"). The Optionmay be exercised on 3 March 2008, and remains conditional, inter alia, oncompletion of satisfactory due diligence, various regulatory approvals andshareholder approval at an Extraordinary General Meeting of DiamondCorp. As consideration for the Option, DiamondCorp will pay Mr. Potgieter anon-refundable deposit of US$2.0 million and 1.25 million Shares at the exercisedate ("the Option Fee"). This amount will be deducted from the aggregateconsideration for the acquisition of Sonop, with the balance payable oncompletion of the Acquisition. On the condition that Sonop's new operations onthe Middle Orange River achieves average revenues of US$3 million per month andoperating profits of US$1 million per month for the three months endedSeptember, October and November 2007, DiamondCorp is obligated to pay MrPotgieter the Option Fee if it does not exercise the Option, but all otherconditions other than shareholder approval have been satisfied. On completion of the Acquisition, it is anticipated that Mr Potgieter will holdapproximately 20 per cent. of the enlarged share capital of DiamondCorp, and hasagreed to join the group as its South African-based Operations Director for aminimum of three years. DiamondCorp has had preliminary discussions with several potential debtproviders with respect to the Acquisition, and initial indications suggest thatthe nature of the Sonop balance sheet and cashflows may allow for a significantproportion of the cash consideration for the Acquisition to be financed via newdebt facilities. At the time the option becomes exercisable, DiamondCorp expects to havecompleted listing its shares on the Johannesburg exchange (JSE). If the option is exercised, it is anticipated that the transaction will be areverse takeover for the purposes of the AIM Rules. Accordingly it is expectedthat trading of the Company's shares on AIM will be suspended pendingpublication of an Admission Document, Notes to Editors DiamondCorp PLC listed on AIM in February 2007. Phase One mining at Lace willinvolve the treatment of 3.6 million tonnes of diamondiferous tailings over a27-month period. Revenues from the tailings are estimated to be US$6.50 pertonne with operating costs of US$2.50 per tonne. Approximately 360,000 carats ofdiamonds are expected to be recovered from tailings during Phase One. Simultaneously with Phase One, a bankable feasibility study will be completed onrecommencement of underground mining operations at Lace. This Phase Twodevelopment will involve a potential 20-year mine life to extract approximately35 Mt of diamondiferous kimberlite in the main Lace pipe between the 100m leveland 855m level. Scoping studies completed on the project estimate a block cavemining operation has the potential to produce more than 400,000 carats per annumfrom the Lace kimberlite. DiamondCorp has 34,753,742 shares in issue, and a market capitalisation of£32.66M at a share price of 94p. Sonop Diamond Mining (Pty) Limited was incorporated in September 2006 to holdthe private diamond mining operations of Mr Christiaan Potgieter. Since 1994,the operations previously traded under the name Sonop Delwery, based inWolmaransstad in the North-West province of South Africa. In recent years, Sonop has grown on the back of large-scale alluvial diamondoperations on the Vaal River between Windsorton and Sidney-on-Vaal. Theseoperations are now reaching maturity and Sonop's future production will comefrom new operations being established on more than 4,500ha of mineral propertieson the Middle Orange River between Douglas and Prieska in the Northern Capeprovince. A new 300tph dense media separation plant is currently beingcommissioned on Sonop's Middle Orange River properties. Alluvial diamonds from Sonop's Vaal River operations currently averageapproximately US$700 per carat at tender. Diamonds from the Middle Orange Riverarea currently fetch prices in excess of US$1700 per carat at tender. Sonop operates one of the largest private earth moving fleets in the southernhemisphere, comprising more than 200 dump trucks, loaders and excavators. This information is provided by RNS The company news service from the London Stock Exchange