Sale of Majority Interest in DiamonEx Botswana Limited
March 19 2009 - 9:26PM
UK Regulatory
TIDMDON
DiamonEx Limited
AIM Release
20 March 2009
SALE OF MAJORITY INTEREST IN DIAMONEX BOTSWANA LIMITED
BACKGROUND
On Friday, 27 February 2009 DiamonEx Limited (DiamonEx) announced
that its wholly owned subsidiary Diamonex Botswana Limited (DBL) had
been placed under Judicial Management pursuant to orders granted by
the High Court of Botswana. This order provided DBL with a period of
immunity from claims from its creditors.
Since the granting of the orders, DiamonEx has investigated numerous
alternatives to position DiamonEx for the future.
DiamonEx is pleased to advise it has finalised the key terms of a
conditional agreement for the sale of 80% of the shares in DBL
(Acquisition Agreement). The agreement is with Fleming Asset
Management Botswana (FAMB) acting on behalf of the DiamonEx
Convertible Bond Holders (Bondholders).
The agreement provides for the transfer by DiamonEx of 80% of the
shares in DBL. Additionally DiamonEx will transfer its diamond
exploration tenure in the USA to the purchasers.
KEY TERMS OF THE ACQUISITION AGREEMENT
Transfer of DiamonEx Limited Loans
DiamonEx will effect the novation of all receivable loans and
advances made by DiamonEx to DBL to an entity nominated by FAMB.
These loans and advances amount to approximately A$23,000,000 (as
recorded in the company's annual report for 2007/08).
Convertible Bonds
As disclosed in the company's annual report for 2007/08, the
convertible bonds are a loan to DiamonEx under which DiamonEx has
been required to pay a fixed rate of interest to the Bondholders.
The bonds up until recently have been listed on the Botswana Stock
Exchange. The obligations under the convertible bonds are equivalent
to BWP 50,000,000 (approximately A$10,000,000). The bonds terms also
included a right to convert up to 10% of the bonds to DiamonEx shares
(with shareholder approval obtained for this feature of the bonds at
the 2007 Annual General Meeting of DiamonEx).
The purchasers will assume DiamonEx's obligations and liabilities
under the terms of the convertible bonds. This will mean that
DiamonEx is released from any future obligation to repay the capital
value of the bonds, interest or convert up to 10% of the bonds to
DiamonEx shares.
European Investment Bank Loan to Diamonex Botswana Limited
As stated in the company's annual report for 2007/08, DBL entered
into a loan with the European Investment Bank to the value of
EUR5,000,000 (approximately A$10,000,000). The purchasers have
undertaken to effect the total release of the deed of share pledge
given by DiamonEx to the European Investment Bank for the loan to DBL
as security for this loan. On completion of the Acquisition
Agreement, DiamonEx will not be liable under any security or similar
instrument in relation to this loan. DBL will still be liable as the
borrower under the European Investment Bank loan notwithstanding this
change.
Stanbic Bank Loan to Diamonex Botswana Limited
The purchasers have also undertaken to settle with the Stanbic Bank
of Botswana the loan of approximately A$2,000,000 provided to DBL.
Loan to DiamonEx Limited
The purchaser will loan A$500,000 to DiamonEx. The loan will be for a
term of 24 months with 15% interest charged. Interest will be
calculated as simple interest on the balance of the loan outstanding
and the interest owed will payable at the end of the term of the
loan. This loan is to be secured by a mortgage of DiamonEx's DBL
shares.
Investment in Diamonex Botswana Limited
In addition, FAMB and/or the Bondholders will invest up to
approximately A$6,500,000 into DBL. Whilst the total debt of DBL can
not be determined at this stage due to factors which are yet to be
finalised under the judicial management process, this should enable
DBL to settle its immediately owing debts (other than the European
Investment Bank loan) and provide sufficient working capital to
enable DBL's main asset, the Lerala Diamond Mine, to either stay on
care and maintenance for at least two years, or to commence
production if and when a commercially attractive diamond off - take
contract is secured.
Conditions Precedent
The company confirms that the Acquisition Agreement includes the
following conditions precedent:
1. DiamonEx shareholder approval.
1. Approvals of the Bondholders.
1. DiamonEx obtaining a release from the European Investment Bank of
securities granted in its favour over DBL shares.
1. Settlement with the Stanbic Bank of Botswana of the finance
provided to DBL for plant and equipment of the Lerala Mine.
1. Completion of due diligence in respect of DiamonEx's Sloan
Mineral Rights in the United States of America.
DiamonEx expects to execute the formal Acquisition Agreement shortly
and hold the shareholders meeting seeking approval of the transaction
(Transaction) within 3 months, with completion to be effected 2 weeks
after shareholder approval has been given.
In summary, on completion the following outcomes will result:
* DiamonEx will transfer its right to receipt of approximately
A$23,000,000 from DBL to an entity nominated by the purchaser;
* DiamonEx will be released from approximately A$10,000,000 of debt
owed to the Bondholders under the convertible bonds (and interest
payments due in the future);
* DiamonEx will not be liable under any security or similar
instrument in relation to the European Investment Bank loan to
DBL;
* The settlement of the loan from the Stanbic Bank to DBL; and
* DiamonEx will retain 20% ownership in DBL.
THE FUTURE
The Directors' intention is to ensure that DiamonEx's stake in DBL
will be protected from dilution. This will be done through either a
contractual undertaking or by an amendment to DBL's constitution and
will provide DBL shareholders, in the event of future capital
raisings by DBL, the right to purchase additional equity pro-rata to
their proportion of shareholdings.
On successful completion of the Transaction, DiamonEx will manage its
20% investment in DBL, continue exploration and evaluation of
remaining tenements and will restructure the company to pursue other
exploration and development opportunities. DiamonEx's remaining
tenements are set out below:
+-----------------------------------------------+
| Tenement Name | Tenement | DiamonEx |
| | Number | Interest |
| | | |
|-----------------------+------------+----------|
| Botswana - Tuli Block | PL 06/2006 | 100% |
| | PL 07/2006 | 100% |
| | PL 08/2006 | 100% |
| | PL 09/2006 | 100% |
| | PL 10/2006 | 100% |
| | PL 11/2006 | 100% |
| | PL 12/2006 | 100% |
| | PL 13/2006 | 100% |
| | PL 14/2006 | 100% |
| | PL 21/2006 | 100% |
| | PL 22/2006 | 100% |
| | PL 23/2006 | 100% |
| | PL 24/2006 | 100% |
| | PL 25/2006 | 100% |
| | PL 26/2006 | 100% |
| | PL 27/2006 | 100% |
| | PL 28/2006 | 100% |
| | PL 29/2006 | 100% |
|-----------------------+------------+----------|
| Botswana -Jwaneng | PL 15/2006 | 100% |
| | PL 16/2006 | 100% |
| | PL 17/2006 | 100% |
| | PL 19/2006 | 100% |
| | PL 20/2006 | 100% |
+-----------------------------------------------+
Once the Transaction has been completed it is the Directors'
intention to seek re-instatement to trading of DiamonEx's shares on
the ASX, the Botswana Stock Exchange and the Alternative Investment
Market of the London Stock Exchange, however this will be subject to
DiamonEx having complied with the relevant exchange's requirements.
ASX has advised that prior to re-instatement it will require DiamonEx
to disclose its future plans and strategy for its continued operation
as a viable business and demonstrate that it has met all ASX Listing
Rules requirements.
More detailed information will be provided to shareholders in the
explanatory memorandum to be provided with the notice of meeting
seeking shareholder approval for the Transaction. DiamonEx
anticipates that this material will be despatched shortly.
Yours faithfully
Paul Crawford
Company Secretary
For further information contact:
Dan O'Neill
Managing Director
Tel: +61 7 3720 8944
Mob: +61 407 596 942
Email: diamonex@diamonex.com.au
Greg King
Chairman
Tel: +61 7 3720 8944
Mob: +61 41 473 730
Email: diamonex@diamonex.com.au
Will Souter or Rob Adamson
RFC Corporate Finance Ltd (Nomad)
Tel: +61 2 9250 0050
+61 2 9250 0041
Email: will.souter@rfc.com.au
rob.adamson@rfc.com.au
Fox-Davies Capital Ltd (AIM Broker)
Tel: +44 20 7936 5200
=--END OF MESSAGE---
This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.
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