FIRESTONE
DIAMONDS plc
Update
on Botswana operations and placing
LONDON: 8 July,
2009
Firestone
Diamonds plc ("Firestone" or "the Company"), the
AIM-quoted diamond mining and exploration company (ticker: AIM:FDI), today announces that it has conditionally
placed 35,873,480 new ordinary shares ("Ordinary Shares")
of 20 pence each (the "Placing Shares") at 20 pence
per share (the "Placing Price") to raise gross proceeds
of approximately 7.2 million (the "Placing"). In
addition, the Company announces an update on its BK11 and Jwaneng Tailings projects in Botswana.
Placing Summary
|
Placing
of 35,873,480 Ordinary Shares at a price of 20 pence
per share to raise gross proceeds of approximately 7.2 million.
|
|
Net
proceeds of the Placing to be used to develop and commission a mine
at BK11, commence resource development at BK16 and provide general working
capital for the Company.
|
|
Placing
Price represents a discount of 24.5 per cent. to
the closing middle market price of 26.5 pence per Ordinary Share on
7 July 2009, being the last practicable date prior to this announcement.
|
|
Placing
Shares will represent approximately 36.75 per cent. of the Company's enlarged
issued ordinary share capital immediately following Admission.
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Operational Highlights
BK11
|
BK11
diamond value increased 11% to $135/carat since March 2009
|
|
Final
phase of evaluation focused on KWU area
|
|
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Approximately
3 million tonnes at expected revenue of
$17-20/tonne
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|
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Operating costs of
$6.50/tonne
|
|
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Potential
revenue of up to $30M per annum at expected margins of 60-70%
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Mine development
planning continuing
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Production plant being
readied for transport from South Africa
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Production
could commence in mid 2010
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Development
costs of ?4.6 million fully funded by proceeds of Placing
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Jwaneng Tailings Project
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Negotiations
with Debswana on toll treatment agreement on
schedule for contract to be signed in H2 2009
|
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Plant
design work under way and on schedule
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Project
finance discussions progressing we
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Philip
Kenny, CEO of Firestone Diamonds, commented: "The Company has made
significant progress on BK11 since March and we continue to be
encouraged by the results of our work. We believe that we will be able to make
a decision to develop a new mining operation on BK11 following completion of
the final phase of evaluation work, with production commencing in
mid 2010. We have also made good progress with
the Jwaneng Tailings Project, which provides an
excellent opportunity for the Company to further expand its
operations in Botswana. We are very pleased to have had such
a positive response to our fundraising from both existing and new investors.
With the Company now fully financed to develop
and commission a mine at BK11, and with prices in the rough
diamond market continuing to recover from their lows in Q1
2009, we remain confident about Firestone's prospects."
A
circular containing a notice of General Meeting is expected to be posted to
Shareholders today. The General Meeting will be held
at 11.00 a.m. on 24 July 2009 at the offices of
Lawrence Graham LLP, 4
More London Riverside, London SE1 2AU.
Your
attention is drawn to the end of this announcement, which sets out further
information in relation to the projects and the placing and the definitions contained
therein.
For
further information, visit the Company's web site at www.firestonediamonds.com, or contact:
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Philip Kenny, Firestone Diamonds
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+44 20 8834 1028/+44 7831 324 645
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Simon
Edwards / Tim Redfern, Evolution Securities (Joint
Broker)
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+44 20 7071 4330 / 4312
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Rory
Scott, Mirabaud Securities (Joint Broker)
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+44 20 7878 3360
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Alexander
Dewar, Brewin Dolphin
(Nominated
Adviser)
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+44 131 529 0276
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Jos Simson / Leesa
Peters, Conduit PR
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+44 20 7429 6603/+44 7899 870 450
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Background
information on Firestone Diamonds:
Firestone
Diamonds plc ("FDI.L") is an international diamond mining and
exploration company with operations in Botswana and South
Africa. Botswana is the world's largest and lowest cost producer of diamonds,
with annual production worth over $2.5 billion, and is considered to be one of
the most prospective countries in the world to explore for diamonds.
Firestone
is the largest holder of mineral rights in Botswana's diamondiferous kimberlite fields, controlling over 29,000 square kilometres around the major Orapa
and Jwaneng mines and the entire Tsabong
kimberlite field. Firestone has 95 kimberlites in its portfolio, of which 24 have been proven
to be diamondiferous. Sixteen of Firestone's kimberlites
are at the bulk sampling stage, of which BK11 is the most advanced.
Notes:
1.
The information in this statement has been reviewed by Mr. Tim Wilkes, BSc, Pr Sci Nat, who is a
qualified person for the purposes of the AIM Guidance Note for Mining, Oil and
Gas Companies.. Mr. Wilkes is Chief Operating Officer
of Firestone Diamonds plc and has over 27 years' experience in diamond
exploration, mineral resource management and mining. Mr. Wilkes is a member of
the sub-committee for diamonds of the South African Mineral Resource Committee
(SAMREC).
2.
All grades and diamond values are based on a bottom cut off of 1mm.
3.
The resource estimates in this statement have been compiled in accordance with
the SAMREC code.
This
summary should be read in conjunction with, and is subject to, the full text of
the attached announcement.
DISCLAIMER
Brewin Dolphin Limited ("Brewin Dolphin") is acting as nominated adviser
to the Company for the purpose of the AIM Rules. Evolution Securities
Limited and Mirabaud Securities LLP,
which are both authorised and regulated in the
United Kingdom by the Financial Services Authority, are acting exclusively
for the Company in relation to the Placing. Neither Evolution nor
Mirabaud are acting for any other person in
connection with the matters referred to in this announcement and they will
not be responsible to anyone other than the Company for providing the
protections afforded to clients of Evolution and Mirabaud or
for giving advice in relation to the matters referred to in this announcement.
This
announcement has been issued by the Company and is the sole responsibility of
the Company.
This
announcement does not constitute a prospectus relating to the Company and has
not been approved by the UK Listing Authority, nor does it constitute or form
any part of any offer or invitation to purchase, sell or subscribe for, or any
solicitation of any such offer to purchase, sell or subscribe for, any securities
in the Company under any circumstances, and in any jurisdiction, in which such
offer or solicitation is unlawful. Accordingly, copies of this announcement,
including the appendix, are not being and must not be mailed or otherwise
distributed or sent in or into or from the United States, Canada,
Australia or Japan or any other jurisdiction if to do so would constitute a
violation of the relevant laws of, or require registration thereof in, such
jurisdiction or to, or for the account or benefit of, any United States,
Canadian, Australian or Japanese person and any person receiving this
announcement, (including, without limitation, custodians, nominees and
trustees) must not distribute or send it, in whole or in part, in or into or
from the United States, Canada, Australia or Japan.
BK11 Update
On
30 March 2009 the Company announced an Inferred Resource at BK11 of
12 million tonnes containing approximately 830,000
carats with an overall modelled value of $123/carat.
Evaluation and development work on BK11 has been accelerated since then and
considerable progress has been made.
Diamond
valuation increased
Diamonds
recovered from sampling on BK11 were valued in March 2009 by Johan Erikson, an
independent diamond valuator with 28 years' experience in diamond valuation.
With overall rough diamond prices having increased by about 15%
since then, the Company has undertaken an updated valuation of BK11
diamonds. The same parcel of diamonds was revalued in June 2009 by Johan
Erikson, resulting in the raw value increasing 15% to $106 per carat.
The
Company's diamond mineral resource consultants, Zstar
Mineral Resource Consultants ("Zstar"),
have updated their modelling of the BK11 diamond
population grade and value of diamonds based on the June 2009 valuation. Overall
modelled diamond values have increased 11% to $135,
with 90% upper and lower confidence limits of US$236 and US$48 per carat,
respectively. Diamond values in the KW area, which is the area currently being targeted for development, increased 10% to $144
per carat.
The
updated Zstar modelling
provides the following results:
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KWU Zone (3 million tonnes)
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Modelled results
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Grade (cpht)
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12
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Diamond value ($ per carat)
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$144
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Revenue ($ per tonne)
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$17
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KW Area (7 million tonnes)
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Modelled results
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Grade (cpht)
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9
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Diamond value ($ per carat)
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$144
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Revenue ($ per tonne)
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$13
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Based
on the estimated operating costs at BK11 of $6.50/t, these results increase the
Company's confidence that BK11 will support a commercial mining operation
following the completion of the final phase of evaluation.
Final
phase of evaluation under way
Significant
progress has been made on the planned 20,000 tonne
bulk sample trench. Earth moving vehicles were transported from South
Africa in early May and are currently stripping overburden, following which
mining of the kimberlite sample will take
place.
The
25 tonne per hour pilot production plant that will
process the bulk sample has been transported from South Africa and is
currently being erected on site. Processing of the sample is expected to
commence in July 2009 and be completed in H2 2009, following
which independent valuation of the diamonds recovered and modelling of grades and diamond values will be carried out.
The Company expects to be in a position to make a decision to commence mine
development based on the results of this work.
Mine
development planning continuing
The
Company is continuing with its plans to relocate the production plant and
infrastructure from the Company's Bonte Koe Mine in South Africa to BK11, subject to results from
trench sampling. Development costs are estimated to be approximately 4.6 million
and production could commence in mid 2010 with an initial capacity of
approximately 1.5 million tonnes per annum.
An Environmental Impact Statement has been
completed and submitted to the Botswana Department of
Environmental Affairs and is expected to be approved shortly. Negotiations
are also under way with the Botswana Power Corporation for the construction of
a 14 km long power line from Orapa to BK11.
Jwaneng Tailings Project Update
In
February 2009, Firestone announced that it had been selected by Debswana Diamond Company ("Debswana")
as the preferred bidder to supply, construct and operate a modular tailings
treatment plant at the Jwaneng Mine
in Botswana on a toll treatment basis. Debswana
is a joint venture between the Government of the Republic of Botswana and De
Beers and is the world's leading diamond producer by value. Jwaneng
is the largest diamond mine in the world by value and in 2008 produced
approximately 13 million carats with an estimated value of $1.8 billion.
The
Jwaneng plant is intended to serve as a pilot
facility to demonstrate the economics and capability of the modular plant
concept on the Jwaneng tailings resource,
which is estimated to be in excess of 30 million tonnes. The
plant is being designed by ADP Projects, with whom Firestone has a strategic
alliance to jointly design, build and operate modular diamond tailings
processing plants. Detailed design work commenced in April 2009 and is
currently on schedule.
Based
on contract rates from the Company's previous toll treatment operations
in South Africa, the Directors anticipate that this project has the
potential to contribute approximately $150 million in toll
treatment revenue for the Company. The successful implementation of
this project could potentially lead to the deployment by Firestone of
similar plants to exploit additional tailings resources at Debswana's
other mines at Orapa and Letlhakane.
With the total tailings resources at Debswana's mines
estimated to be approximately 300 million tonnes, the
Directors estimate that they represent a very
significant potential toll treatment revenue opportunity for the
Company.
Since
February, Firestone and Debswana have established a
joint steering committee for the project to negotiate and agree detailed
technical and commercial provisions for the project. This work is proceeding
towards the agreed target of finalising and signing
contracts in H2 2009.
Firestone
intends to finance the project through a special purpose vehicle which will
arrange debt finance for the whole of the project against the
contract with Debswana. The estimated capital cost
for the project is $40 million. Discussions are progressing well with a number
of interested lenders and investors, and the Company expects to be in position
to finalise these arrangements shortly after the Debswana contract is signed.
BK16 Update
In
June 2008, the Company entered into an agreement under which it can earn an
87.5% interest in the BK16 kimberlite, which is
located 20 kilometres from BK11. The Company believes
that BK16 has similar economic potential to BK11. BK16 was discovered by De
Beers in the 1970's and a grade of 15 cpht was
reported from bulk sampling. Diamonds recovered by the limited historical
sampling carried out were predominantly high quality, white gemstones,
which indicates that they are likely to have a high average
value, possibly similar to BK11. Based on a review of drilling and
geophysical surveys undertaken on BK16, Company estimates indicate that it
contains approximately 17 million tonnes of
kimberlite to a depth of 200 metres. The Company intends to carry out an initial
phase of evaluation and resource development work on BK16. This work will
comprise large diameter drill bulk sampling in order to provide an estimate of
grade and diamond value.
South
Africa Update
With
the Company's operations now focused exclusively on Botswana, the Company
is reviewing the prospects for its South African assets. These assets are
considered by the Company to be non-core and were placed on care and
maintenance in December 2007 (as announced at that time). The
Company has since then been seeking to either sell or joint venture the
assets. As a result of the ongoing review of the carrying value of these
assets, it is possible that the Company will be required to make further
impairment charges over and above the total charges made to date of
approximately 4.8 million.
Placing
of New Ordinary Shares
The
Company today announces that it has raised approximately 7.2 million
(gross) by way of a placing of 35,873,480 New Ordinary Shares at a
price of 20 pence per share.. The net
proceeds of the Placing will be used to develop and commission a mine at BK11,
subject to the results of the final phase of evaluation on BK11, which is
currently under way, to undertake evaluation and resource development work at
BK16, and to provide general working capital for the Company. The Placing,
which has been arranged by Evolution and Mirabaud, is
conditional upon, inter alia, Shareholder
approval and Admission.
The
funds raised (net of expenses) of approximately ?6.8 million are
planned to be used for the following purposes:
BK11
-5.0 million
Since
the Company announced an Inferred Resource of 12 million tonnes at BK11 on 30 March 2009, work has been accelerated
in order to complete the final phase of evaluation on the project.
A 20,000 tonne bulk sample is currently being
excavated and will be processed using a pilot plant that has
been transported from the Company's Avontuur
Mine in South Africa. A mine development decision is expected to be made during
H2 2009 subject to the results of this work. The Company plans to use the
production plant from its Bonte Koe
Mine in South Africa at BK11 and estimates that it will cost ?5 million to
modify and erect this plant, establish power, water and other required site
infrastructure and complete commissioning. This work is expected to take
approximately nine months from the date of the development decision.
BK16
- 0.5 million
The
Company intends to carry out an initial phase of evaluation and resource
development work on BK16. This work will comprise large diameter drill bulk
sampling in order to provide an estimate of grade and diamond value, at an
estimated cost of ?0.5 million.
General
Working Capital and other purposes - 1.3 million
The
balance of funds raised, net of expenses, being 1.3 million, will be used
for general working capital and other purposes.
Details
of the placing
The
Placing Agreement
Pursuant
to the terms of the Placing Agreement, Evolution and Mirabaud have conditionally
agreed to use their reasonable endeavours,
as agents for the Company, to place the Placing Shares at the Placing
Price with certain institutional and other investors. The Placing Agreement is
conditional upon, inter alia, Shareholder approval
and Admission becoming effective on or before 8.00 a.m.
on 27 July 2009 (or such later time and/or date as the
Company, Evolution and Mirabaud may
agree, but in any event by no later than 8.00 a.m. on
31 August 2009).
The
Placing Agreement contains warranties from the Company in favour
of Evolution and Mirabaud in relation
to, inter alia, the accuracy of the information contained
in the announcement and certain other matters relating to the
Group and its business. In addition, the Company has agreed to indemnify
Evolution and Mirabaud in relation to
certain liabilities it may incur in respect of the Placing. Evolution and Mirabaud have the right to terminate the Placing
Agreement in certain circumstances prior to Admission, in particular, for force majeure or in the event
of a material breach of the warranties set out in the Placing Agreement.
Admission and
dealings
Application has been made
to the London Stock Exchange for the Placing Shares to be admitted to trading
on AIM. It is expected that such Admission will become effective and that
dealings will commence on 27 July 2009.
The
Placing Shares will, when issued, rank pari passu in all respects
with the existing Ordinary Shares, including the right to receive dividends and
other distributions declared following Admission. It is expected that CREST
accounts will be credited on the day of Admission and that share certificates
(where applicable) will be dispatched by first class post by or
on 30 July 2009.
General
Meeting
A General Meeting is
to be held on 24 July 2009 at the offices
of Lawrence Graham LLP at 4 More London Riverside, London
SE1 2AU, at 11.00 a.m., at which
the following Resolutions will be proposed for the purposes of
implementing the Proposed Placing:
Specific
authorities
Following
the passing of resolutions 5 and 6 at the Company's annual general meeting held
on 29 January 2009 (the "AGM") the Directors were empowered
to disapply pre-emption rights in relation to
30,000,000 Ordinary Shares. However, this authority alone is insufficient to
issue the Placing Shares. Accordingly, the Directors are seeking additional
authority pursuant to Resolution 1 in the Notice of General Meeting to disapply pre-emption rights in respect of a further
5,873,480 Ordinary Shares so as to complete the Placing..
In
the opinion of the Directors and assuming the completion of the Placing, the
working capital available to the Company is sufficient for the Company's
present requirements, that is for at least 12 months
following Admission. However, in the event that Shareholders do not approve
Resolution 1, the Placing will not proceed and the Board will need to consider
alternative sources of funding, which may or may not be forthcoming.
General
Share Issuance Authorities
Following
the issue of the Placing Shares the Directors will have exhausted nearly all
of their authority granted at the AGM to allot Ordinary Shares and
will not have any general authority to disapply
pre-emption rights. Accordingly, the Directors are also seeking renewal
of, and an increase in, their general authorities to issue Ordinary Shares and/or
other securities and disapply pre-emption rights.
Resolutions 2 and 3 contained
in the Notice of General Meeting are in similar form to the resolutions passed
by Shareholders at the AGM, but the value of the nominal amounts of Ordinary
Shares to be available for issue has been increased to take account of the
increase in the total issued share capital of the Company following
the Placing.
Resolution 2 will
be proposed as an ordinary resolution to authorise
the Directors pursuant to section 80 of the Act to allot relevant securities
generally up to an aggregate nominal value of 6,507,045 which
represents approximately one third of the number of Ordinary Shares in issue
following the Placing. This authority will expire at the next annual general
meeting to be held in 2010 or 15 months after the passing of the
resolution, whichever is the earlier.
Resolution
3 will be proposed as a special resolution to empower the Directors
pursuant to section 95 of the Act to allot equity securities for cash otherwise
than on a pro rata basis: (i) where a pro rata offer
has effectively been made, but subject to exclusions or arrangements to avoid
logistical, regulatory or legal issues; and (ii) generally up to an
aggregate nominal value of 1,952,114 which represents approximately 10 per
cent. of the number of Ordinary Shares in issue
immediately following the Placing. This authority will expire on the earlier of
15 months after the passing of the resolution or on the conclusion of the
Annual General Meeting of the Company to be held in 2010.
PLACING STATISTICS
|
Placing Price
|
20 pence
|
|
|
|
Number
of existing Ordinary Shares
|
61,732,194
|
|
|
|
Number
of Placing Shares being placed on behalf of the Company
|
35,873,480
|
|
|
|
Estimated net proceeds
receivable by the Company
|
?6..8 million
|
|
|
|
Number
of Ordinary Shares in issue following Admission
|
97,605,674
|
|
|
|
Number
of Placing Shares as a percentage of the enlarged issued ordinary share
capital following Admission
|
36.75 per cent.
|
|
|
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
|
Latest
time and date for receipt of Forms of Proxy
|
11.00 a.m.
on 22 July 2009
|
|
|
|
General Meeting
|
11.00 a.m..
on 24 July 2009
|
|
|
|
Admission
and dealings in the Placing Shares expected to commence
|
8.00 a.m.
on 27 July 2009
|
|
|
|
Expected
date for CREST stock accounts to be
credited
for Placing Shares in uncertificated form
|
27 July 2009
|
|
|
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Posting
of share certificates for Placing Shares on or by
|
30 July 2009
|
|
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DEFINITIONS
The
following definitions apply throughout this announcement, unless the
context requires otherwise.
|
"Admission"
|
admission
of the Placing Shares to AIM
|
|
"AIM"
|
a
market of that name operated by London Stock Exchange
|
|
"Board" or
"Directors"
|
the
board of directors of the Company
|
|
"Circular"
|
the
circular to Shareholders dated 8 July 2009 incorporating the Notice of
General Meeting
|
|
"Company" or
"Firestone"
|
Firestone Diamonds plc
|
|
"Evolution"
|
Evolution Securities Limited
|
|
"General Meeting"
|
the
general meeting of the Company convened for 11.00 a.m. on
24 July 2009 by the notice set out in the Circular (and
any adjournment thereof)
|
|
"Joint Brokers"
|
Evolution and Mirabaud
|
|
"London Stock Exchange"
|
London Stock Exchange plc
|
|
"Mirabaud"
|
Mirabaud Securities LLP
|
|
"Notice of General Meeting"
|
the
notice of General Meeting, set out in the Circular
|
|
"Ordinary Shares"
|
ordinary
shares of 20 pence each in the capital of the Company
|
|
"Placing"
|
the
placing of the Placing Shares pursuant to the terms of the Placing
Agreement
|
|
"Placing
Agreement"
|
the
conditional agreement dated 8 July 2009 relating to the
Placing, between the Company and the Joint Brokers
|
|
"Placing
Price"
|
20 pence per new Ordinary
Share
|
|
"Placing Shares"
|
the 35,873,480 new
Ordinary Shares to be issued pursuant to the Placing
|
|
"Resolutions"
|
the
resolutions set out in the Notice of General Meeting
|
|
"Shareholders"
|
the
persons who are registered as the holders of Ordinary Shares
|
This information is provided by RNS
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