PRG.L Regulatory News (PRG)

27 August 2014

Obtala Resources Limited

("Obtala" or the "Company")

(AIM: OBT)

Update on Investment in Paragon Diamonds Limited

Obtala Resources Limited (AIM:OBT), the emerging agri-processing, farming and timber company, is pleased to announce that it has concluded agreements with Titanium Capital Investments Limited ("Titanium") for the sale of the outstanding loan note ("Loan Note") held with Paragon Diamonds Limited ("Paragon") and agreed to grant a call option for an 60 million shares held in Paragon by the Company. Obtala currently holds 90,470,582ordinary shares (resulting in a holding of 27.33%) in Paragon.

The key points from the agreements with Titanium are:

· Obtala is the holder of £1,996,000 Loan Notes in Paragon. Prior to this agreement with Titanium, the Loan Notes were not convertible; however, the Company has entered into a new agreement with Paragon to enable the Loan Notes to become convertible and transferable.

· Titanium or any future holder of the Loan Note may convert the notes into ordinary shares of 1 pence each in Paragon at a price of 2.75p. The loan note will have a 5 year term from today's date and shall bear no interest.

· Obtala has agreed to sell its outstanding loan of £1,996,000 to Titanium at a 50% discount to realise £998,000 cash which is receivable immediately.

· Obtala has further agreed to grant Titanium a call option, exercisable any time up to 1 December 2014, for Titanium to purchase 60 million shares of Paragon at 3.25p from the Company. In the event that Titanium exercises the call option in full, Obtala will realise a further £1,950,000 gross proceeds in cash. Moreover, in the event that the call option is exercised in full Obtala will hold 30,470,582 ordinary shares in Paragon (resulting in a holding of 9.20% based on the current issued share capital of Paragon)

· All shares from either the conversion of the convertible loan or from the exercise of the call option are subject to a lock in for a period up to 31 December 2014.

· Paragon will appoint Philip Manduca, Chief Executive Officer of Titanium as Executive Chairman with immediate effect.

· Titanium has agreed to take responsibility for funding the Phase 1 mine development at the Lemphane Diamond Mine in Lesotho. Phase 1 will be a period of up to 2 years of open pit mining targeting 1 million tonnes per annum to produce 20,000 carats (2,500 carats per quarter), together with the completion of a bankable 3D geological model supported by additional resource definition drilling

· Paragon has undertaken that any future funding through the issue of new shares will be carried out a placing price of no less than 4p per share.

· As part of the negotiations Titanium and Paragon will establish a separate sales and marketing company of which Paragon will hold a minimum 25% interest, rising to a maximum of 50% once fully established. This entity will seek to buy and sell diamonds globally and is conditional upon the call option granted by Obtala being exercised in full by Titanium

Chairman's comment

Francesco Scolaro, Chairman of the Board, commented: "The board of Obtala is very pleased to have reached this agreement with Titanium as it allows the Company to reduce its financial risk with regard to the loan notes and immediately enhance the balance sheet of Obtala by approximately £1m. We will look to devote the new funds to deliver our principal business being agri- forestry in Africa. Also, if the call option is exercised in full then Obtala will receive further funds of approximately £2m which will allow us to accelerate our business plan. We continue to be substantial and supportive shareholders of Paragon and look forward to the new impetus from the team led by Philip Manduca and the potential funding his group may be able to deliver and transforming Paragon to a diamond producer. This transaction allows both Obtala and Paragon to prosper over the longer term".