PRG.L Regulatory News (PRG)

Paragon Diamonds Limited / Index: AIM / Epic: PRG / Sector: Resources 5 December 2014 Paragon Diamonds Limited ("Paragon" or the "Company") Issue of Equity Paragon Diamonds Limited, the AIM quoted diamond development company, ispleased to announce it has raised £256,825 before expenses through a privateplacement of 5,707,227 new ordinary shares in the Company at a price of 4.5p. The funds will be used to assist with further development of Lemphane,Paragon's Lesotho mine and to meet working capital requirements. In addition to the private placement, the Company will be issuing 250,000 newordinary shares in the Company to advisers for services rendered, also at aprice of 4.5p per share. Therefore, the total number of new ordinary sharesbeing issued is 5,957,227 ("the New Ordinary Shares"), representingapproximately 1.8 per cent per cent. of the enlarged issued share capital. The New Ordinary Shares will rank pari passu with the existing ordinary sharesin the Company. Application will be made for the New Ordinary Shares to beadmitted to trading on AIM ("Admission"). Admission is expected to occur on oraround 10 December 2014.Total voting rights Following Admission, the Company's enlarged issued share capital will comprise338,524,654 ordinary shares. The Company does not hold any ordinary shares intreasury. Therefore, the total number of ordinary shares with voting rightswill be 338,524,654. This figure may be used by shareholders in the Company asthe denominator for the calculations by which they will determine if they arerequired to notify their interest in, or a change in their interest in, theshare capital of the Company under the FCA's Disclosure and Transparency Rules. Paragon's Chairman, Philip Falzon Sant Manduca said, "Today's small placementwith senior management and new shareholders has been undertaken to incentiviseand retain senior management and encourage a wider share base as we buildParagon into a leading global vertically integrated diamond house. Thesediscussions were held over the last few weeks during a sustained rise in theshare price to the current level which I believe still significantlyundervalues the Company. Indeed, when funding for Stage 1 production isfinalised on terms that could demonstrate minimal share dilution, I expect theshare price to more accurately reflect the extraordinary opportunity thatParagon possesses with Lemphane. "We are firmly committed to commencing production at Lemphane by the end of Q12015 (subject to financing) and we feel strongly that this is a highlyopportune time thanks to favourable diamond market fundamentals. In addition toincreasing demand for diamond jewellery, investment demand for larger stones israpidly growing against a backdrop of diminishing supply of diamonds generally,and larger stones in particular. I believe that diamond prices will strengthensignificantly over the next five plus years and that structural changes in thediamond sector will also see a reduced market share for Antwerp, as diamondcentres in other parts of the world including Asia and Dubai grow. By buildingour own distribution arm for Lemphane's production, Paragon will be fit forpurpose to capitalise on these emerging trends. "Power in the diamond sector is shifting from buyers to producers as thestruggle to secure supply intensifies. In Lemphane we believe we have a worldclass kimberlite on our hands, similar to the nearby large stone/high valuedeposit at Letšeng. As a result, Paragon is perfectly positioned to benefitfrom this secular shift, particularly aided by your Board's provenunderstanding of both mining production and sales distribution which can securemuch more of the value chain than mining companies typically have in the past.As I have said in previous releases, I have never been more positive or excitedabout any prior investment as I now am with Paragon." **ENDS** For further information please visit www.paragondiamonds.com or contact: Philip Falzon Sant Paragon Diamonds Limited +44 (0) 20 7182 1920ManducaSimon Retter Paragon Diamonds Limited +44 (0) 20 7182 1920 Edward Hutton/Gerry Northland Capital Partners +44 (0) 20 7382 1100Beaney Limited (Nominated Adviser) John Howes/Charles Northland Capital Partners +44 (0) 20 7382 1100Laughton Limited (Sales and broking) Felicity Winkles St Brides Media and Finance Ltd +44 (0) 20 7236 1177Frank Buhagiar St Brides Media and Finance Ltd +44 (0) 20 7236 1177 Notes Paragon Diamonds has a pipeline of projects in Lesotho, Botswana and Zambia,the most advanced of which is its 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. Among thestones recovered in the Company's 2013 bulk sampling programme were severallarge high value stones of up 8.9 carats in size and individual diamond valuesin excess of US$2,400/ct have been achieved, demonstrating the potential forLemphane to hold large and valuable diamonds. The first of a two stageproduction programme is currently expected to commence Q1 2015 (subject tofinancing) which will further define the resource at Lemphane. As increasedtonnages of kimberlite are processed the proportion of larger diamondsrecovered will improve, increasing the average value of diamonds recovered atthe project, as was the case at Letšeng. Stage 1 production will cover a two year period during which approximately 1 Mtof kimberlite will be mined and processed out of the currently estimated 48.6Mtof kimberlite (to 350m depth) at the site, using a 75 tonne per hour processingplant. The Company is targeting 20,000 carats during Stage 1 production with anestimated minimum value of US$930 per carat that is expected to generaterevenues in excess of US$9m per annum. Cash flow will be reinvested to furtherdevelop Lemphane and complete a bankable feasibility study, a 3D geologicalmodel and a substantial inferred resource ahead of commencing the Stage 2production phase. Stage 2 will see production ramped up to 3Mt/year with peakproduction expected to hit 65,000 carats per year of high value diamonds. It is the intention of the Company to become a fully integrated diamond companymaximizing the margins gained from being exposed from the mining to selling ofdiamonds.