PRG.L Regulatory News (PRG)

PARAGON DIAMONDS LTD - GBP500,000 debt financing & Share buyback programme

PR Newswire

London, June 18

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

18 June 2015

Paragon Diamonds Limited (“Paragon” or the “Company”)

£500,000 debt financing, Acquisition update and Share buyback programme

Paragon Diamonds Limited, the AIM quoted diamond development company, is pleased to announce that it has raised £500,000 of unsecured debt financing (the “Loan”), from an investment company (the “Lender”). The proceeds of the fundraise may be used to initiate a share buyback programme and to support short term working capital requirements whilst the Company progresses the acquisition of the Mothae Diamond Project in Lesotho from Lucara Diamond Corporation (the “Mothae Acquisition”) which was announced on 5 May 2015.

The Loan will mature on 30 September 2015 and carries a fixed monthly interest rate of 1.25%. The Loan also carries a 3% arrangement fee and a total of 3,571,428 detachable call warrants with an issue price of 7p (the “Warrants”) will be granted to the Lender over new ordinary shares in the Company of 1p each. The Warrants are valid for five years and may be exercised, at the holder’s discretion, by paying the cash exercise price or surrendering the Loan principal on a pro rata basis.

Mothae Acquisition update

The Mothae Acquisition is currently awaiting approval from the Lesotho Ministry of Mines. Paragon Chairman, Philip Falzon Sant Manduca, is scheduled to meet the Lesotho Minister of Mines on the 22 June 2015, specifically to request immediate approval for the Mothae Acquisition, so that the Company can commence production promptly. This meeting follows multiple meetings between the Minister and Paragon’s Managing Director, Dr. Stephen Grimmer, who has fully briefed the Minister on the Company’s prospective mining strategy for both Mothae and its Lemphane kimberlite project (‘Lemphane’) also in Lesotho and underlined the compelling cost efficiencies in operating both mines simultaneously.

The Paragon board anticipates the Minister will grant approval promptly, especially as the Company has, as previously announced, agreed in principle a US$ 26 million funding package with International Triangle General Trading LLC (“ITGT”) and can therefore demonstrate its ability to fund both mining projects simultaneously. The funding package with ITGT remains subject to contract. Additionally, Paragon believes that the Lesotho Minister of Mines recognises that the two projects will create significant employment opportunities and will generate substantial revenues for the Government following the granting of approval and the prompt commencement of production. A further announcement will be made following the meeting in Lesotho on 22 June 2015.

Share buyback programme

The Loan will also give Paragon the option of initiating a share buyback programme if any existing shareholders wish to exit. The Board believes that the Company’s stock is currently undervalued following the progress which has been made during the last 12 months, and in particular given the pending Mothae Acquisition which, if approved, may contribute significantly to Paragon’s enterprise value when added to the Company’s existing nearby Lemphane asset. Furthermore, having removed Lanstead from the shareholder register, re-positioned Paragon as a vertically integrated diamond company and agreed in principle the US$26 million funding package with ITGT of Dubai with minimal dilution to existing shareholders, the Board believes that the share price should be trading at significantly higher levels than it currently is and be reflective of the true value of the Company’s asset portfolio.

Additionally, the Board wants to ensure that the trading of its shares is orderly and that the share price is not overly volatile in the lead up to the completion of the Mothae Acquisition. The Company currently has the authority to repurchase up to 33,106,743 ordinary shares of 1p each in the Company (“Ordinary Shares”). The minimum price (excluding expenses) which the Company may pay for each Ordinary Share is 1p and the maximum price (excluding expenses) which the Company may pay for any Ordinary Share must not exceed 5% of the Company’s average closing price per Ordinary Share on the London Stock Exchange for the five business days prior to the date of purchase. The Company will seek to renew its authorities to repurchase shares at the forthcoming Annual General Meeting.

Paragon’s Executive Chairman, Philip Falzon Sant Manduca said, “We wish to ensure that our share price more accurately reflects the growing value of the Company and if necessary the Board can now take action to ensure that the share price remains orderly. This is particularly important whilst we await completion of the Mothae Acquisition and the associated release of the ITGT funding package, so that production can commence later this year.

“Paragon’s share price, in my opinion, should already be in double digits, and I have no doubt that it will be shortly after production commences. I am also aware that poor price action can fuel rumours and negative perceptions amongst existing and prospective investors, and I am determined that this is not going to happen whilst I am involved with Paragon. Shareholders and the market should view this short term debt facility principally as a mechanism for the Board to remove any shareholders if they wish to exit, promote positive sentiment around the share price at this important time and ensure that the Board transition the share price in a strong and proper manner during the coming weeks, thereby enabling a more efficient share price valuation to emerge.”

**ENDS**

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

Notes

Paragon Diamonds, in addition to the proposed Acquisition of Mothae, has a project in Lesotho, the Lemphane Kimberlite Pipe Project, 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.