PRG.L Regulatory News (PRG)

PARAGON DIAMONDS LTD - Corporate and Mothae acquisition update

PR Newswire

London, October 6

Paragon Diamonds Limited / Index: AIM / Epic: PRG / Sector: Resources

 7 October 2015

Paragon Diamonds Limited (‘Paragon’ or the ‘Company’)

Corporate and Mothae acquisition update

Paragon Diamonds Limited, the AIM quoted diamond development company, announces an update and progress regarding the proposed acquisition from Lucara Diamond Corporation (‘Lucara’) of the Mothae Kimberlite Resource (‘Mothae’), which is only 5 km from the world class Letšeng le Terai Diamond Mine in Lesotho, and the Company’s nearby Lemphane Kimberlite Pipe Project (‘Lemphane’).

Lucara has agreed to extend exclusivity based upon an appropriate timetable for Paragon to complete their US$15 million funding package with Acrux Resources Proprietary Limited (‘Acrux’), announced on 2 October 2015, and Lucara reserves its rights to terminate exclusivity based upon any deviation from this schedule. Upon completion of the financing Paragon will pay Lucara an initial US$2 million of the US$6.5 million due.

In addition the Company has agreed an extension to the short term £500,000 loan facility to 18 November 2015 in order for the proposed Acrux funding package to be executed. If Paragon repays the loan after the 14 October 2015 then it will issue the provider a further 3,571,428 detachable call warrants with a strike price of 7 pence per share.

These extensions place the Company in a good position to execute its strategy and complete the acquisition of Mothae on the terms previously announced. The Company will make further announcements regarding the Acrux funding package and the acquisition of Mothae as soon as practicable.

Paragon Diamonds Finance Director Simon Retter said: “Both Acrux and Paragon are committed to concluding the funding arrangements which we announced on 2 October 2015, subject to the conditions of the Term Sheet, as soon as practicable. The Company is progressing activity at both Lemphane and Mothae and there should be no delays in bringing plant and other equipment, including the use of two technologically advanced XRT machines to site. We currently have no plans to procure additional funding in order to commence production nor to cover existing overheads.

“With the reduction in the purchase price for Mothae, revised terms of payment with Lucara, and other working capital and capital expenditure efficiencies identified, we are well placed to deliver on our strategy. Our mining plan at Mothae has been independently reviewed by MSA and indeed improved on our original estimation of the economics of the project.

“We have also secured a letter of commitment for funding for the majority of stage two financing for both projects as announced on 30 September 2015. So, the Board believes that Paragon is now in an exceptionally strong position, looking forward to production in 2016 at both assets. I believe we have made a large amount of progress over the last 12 months and that significant value has been added to the Company over this time.”

**ENDS**

For further information please visit www.paragondiamonds.com or contact:

Notes

Paragon Diamonds has an 80% interest in the Lemphane Kimberlite Pipe project in Lesotho, located close to the world class Letšeng mine, Lesotho’s largest diamond mine. Lemphane is the last known kimberlite to be developed in Lesotho. The first of a two stage production programme is expected to commence in 2015 which will further define the resource at Lemphane. As increased tonnages of kimberlite are processed the proportion of larger diamonds recovered will improve, increasing the average value of diamonds recovered at the project, as was the case at Letšeng. In addition to Lemphane, Paragon Diamonds has signed a Memorandum of Understanding with Lucara Diamond Corporation, a TSX quoted mining company, to acquire a 75% interest in and operate the defined Mothae Kimberlite Resource, which is located only 5 km from the world class Let?eng le Terai diamond mine in Lesotho.