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Paragon raises £500 000, may initiate share buyback

18th June 2015

By: Creamer Media Reporter

  

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JOHANNESBURG (miningweekly.com) – Aim-listed Paragon Diamonds has raised £500 000 of unsecured debt financing from an investment company that may be used for a share buyback programme.

The funding would also be used for short-term working capital requirements, while Paragon progresses the acquisition of the Mothae diamond project, in Lesotho, from TSX-listed Lucara Diamond Corporation.

The deal still had to be approved by the Lesotho Ministry of Mines and Paragon chairperson Philip Falzon Sant Manduca would, on June 22, meet with the Lesotho Mines Minister Lebohang Thotanyana to request the immediate approval of the acquisition.

Paragon MD Dr Stephen Grimmer had previously briefed the Minister on the company’s mining strategy for the Mothae project, as well as its Lemphane kimberlite project, also in Lesotho. The company believed there were compelling cost efficiencies for operating both mines simultaneously.

“The Paragon board anticipates that the Minister will grant approval promptly, especially as the company has, as previously announced, agreed, in principle, to a $26-million funding package with International Triangle General Trading (ITGT) and can, therefore, demonstrate its ability to fund both mining projects simultaneously,” the diamond miner said in a statement on Thursday.

It added that the two projects would create significant employment opportunities and generate substantial revenues for the Lesotho government.

SHARE BUYBACK
Paragon noted that the loan also provided it with an option to initiate a share buyback programme should any existing shareholders wish to exit.

The company believed its stock was undervalued and not reflective of the true value of its asset portfolio.

“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 while we await completion of the Mothae acquisition and the associated release of the ITGT funding package, so that production can commence later this year,” commented Manduca.

He added that the company’s share price should already be in the double digits. 

“I am also aware that poor price action can fuel rumours and negative perceptions among existing and prospective investors and I am determined that this is not going to happen while 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,” he stated.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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