News Column

Board Changes & Transfer of Convertible Loan Agreement

August 26, 2014

Paragon Diamonds Limited / Index: AIM / Epic: PRG / Sector: Resources 27 August 2014Paragon Diamonds Limited ("Paragon Diamonds"or the "Company") Transfer of Convertible Loan Agreement Board Changes Paragon Diamonds Limited, the AIM quoted diamond development and production company in Africa announces that Obtala Resources Limited ("Obtala"), the holder of £1,996,000 loan notes in the Company (the "Notes"), as well as 27.33% of the Company's issued share capital, has entered into an agreement to sell the Notes (the "Agreement") to Titanium Capital Investments Limited ("Titanium Capital") for a total consideration of £998,000. The Notes are not currently convertible into Ordinary Shares. Paragon has entered into a new convertible loan note agreement with Obtala, in advance of the transfer of the Notes to Titanium Capital (the "Convertible Loan Note Agreement"). As this will occur before Titanium Capital's acquisition of the Notes, and Obtala is a substantial shareholder in the Company, this constitutes a related party transaction under Rule 13 of the AIM Rules for Companies. Having consulted with its nominated adviser Sanlam Securities UK Limited ("Sanlam"), the directors of the Company (all of whom are independent in this matter) consider that the terms of the Convertible Loan Note Agreement are fair and reasonable insofar as shareholders of the Company are concerned. Paragon has also undertaken to Obtala that any future funding through the issue of new shares will be carried out a placing price of not less than 4 pence per share until the time that the call option granted by Obtala to Titanium Capital (as detailed below) is exercised. This also constitutes a related party transaction under Rule 13 of the AIM Rules, and having consulted with Sanlam, the directors of the Company consider that these terms are also fair and reasonable insofar as shareholders of the Company are concerned. Key points of the Agreement and the Convertible Loan Note Agreement: * The Notes are freely transferrable including to Titanium Capital * The holder of the Notes ("Loan Note Holder") is able to convert the Notes into ordinary shares of 1 pence each in the Company ("Ordinary Shares") at a price of 2.75 pence a share; * The Notes will have a five year term from today's date and shall not bear any interest; * The Loan Note Holder is entitled to nominate an Executive Chairman and Non-Executive Director to the Board of the Company. * Titanium Capital granted a call option to purchase 60,000,000 Ordinary Shares in the Company from Obtala at a price of 3.25 pence at any time up to 1 December 2014; * All shares from either the conversion of the convertible loan note or from the exercise of the call option are subject to a lock in for a period to 31 December 2014; and * As part of the negotiations Titanium Capital and Paragon intend to establish a sales and marketing company of which Paragon will hold an initial 25% interest, rising to a maximum of 50% once fully established. This entity will seek to buy and sell diamonds globally and its establishment is conditional upon the call option granted by Obtala being exercised by Titanium Capital. Further to the Agreement, the Company announces that it has appointed Philip Falzon Sant Manduca (aged 56), as a representative of Titanium Capital, to the Board as Executive Chairman with immediate effect. Martin Doyle, currently Executive Chairman, will continue as a non-executive director. Philip Falzon Sant Manduca is Chief Executive Officer of Titanium Capital, a private equity investment group of companies, focused on executing strategic hard asset investments. He has achieved capital gains for shareholders through the realisation of enterprise value growth in a number of asset management businesses over the last 25 years, including Titanium Capital LLP, an alternative investment manager, which by the time it was sold in 2007 to two investment banks had close to US$1bn assets under management; Paragon's Chairman, Philip Falzon Sant Manduca said, "I am delighted to be joining Paragon Diamonds at a time when production is on course to commence in the near term at our 80% owned Lemphane kimberlite mine, which is located close to the world class Letseng pipe in Lesotho. I am assuming the responsibility to procure for Paragon Diamonds its funding needs in both Stage 1, and within two years, Stage 2 of its development of the Lemphane mine, whilst concurrently exploring further options, including the Company's assets in Botswana and Zambia, that can accelerate Paragon's revenue profile. "I am extremely optimistic about the diamond sector as a hard asset currency alternative to paper money which is witnessing a severe debasement in most major countries. Diamonds as a currency are mobile, lack storage costs, have excellent demand/supply conditions for additional price appreciation in the future, and I believe will increase in value whether the major central banks continue with their multi-year monetary policies of paper currency debasement and/or commence with a period of high inflation and trade protectionism. This is in addition to the grave deterioration we are witnessing in the current geopolitical environment. "Our vision over the next three years is to develop Paragon into a vertically integrated diamond house, with established production from majority owned mines, starting with Lemphane of which we own 80% in conjunction with the Kingdom of Lesotho holding the remaining 20%. Through related business ventures and joint ventures in diamond mining, trading, manufacturing and sales, investors will be able to participate in down-stream commercialisation activities `from the mine to the high street'. Laterally, via fractional ownership through collateralised investment funds, investors will benefit from the entire value chain inherent to diamond production and sales. I am committed to ensuring that shareholders benefit substantially from Paragon's future success. To this end, I will seek to ensure that management and shareholders will be aligned through ownership of the Company." Paragon's Managing Director, Dr Stephen Grimmer, said "Philip is joining Paragon at an exciting time as we look to bring Lemphane into production. Philip's experience in financial markets and extensive network of contacts within the financial sector and amongst high net worth individuals will prove invaluable, as we focus on ensuring Paragon is best placed to maximise the benefits from the growing stature of diamonds among the global investment community for our shareholders. "I would like to take this opportunity to thank Martin for his contribution and support over the years in his role as Chairman. Martin has been instrumental in acquiring and developing our portfolio of highly prospective diamond projects in Africa, as a result of which we are in a strong position to deliver on our objectives and transform Paragon into a cash generative diamond company in Africa." Obtala Resources Chairman Francesco Scolaro said, "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." Disclosures under Schedule 2 of the AIM Rules Philip Falzon Sant Manduca is currently interested in 700,000 Ordinary Shares (equal to approximately 0.21% of the issued share capital), via a pension scheme, and is or has been a director of the following companies during the previous five years: Current Directorships Directorships held in the last five years Titanium Capital Investments Ltd The ECU Group Plc Radiant Diamond Trading DMCC Sporting Balance Ltd Titanium Sports Group Ltd. There are no other matters, which are required to be announced with regard to the appointments under paragraph (g) of Schedule 2 of the AIM Rules. **ENDS** For further information please visit www.paragondiamonds.com or contact: Philip Falzon Sant Paragon Diamonds Limited +44 (0) 20 7099 1940 Manduca Simon Retter Paragon Diamonds Limited +44 (0) 20 7099 1940 Lindsay Mair Sanlam Securities UK +44 (0) 20 7628 2200 James Thomas Sanlam Securities UK +44 (0) 20 7628 2200 Felicity Edwards St Brides Media and Finance Ltd +44 (0) 20 7236 1177 Frank 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 world-class sized kimberlite to be developed in Lesotho. Among the stones recovered in the Company's 2013 bulk sampling programme were several large high value stones of up 8.9 carats in size and individual diamond values in excess of US$2,400/ct have been achieved, demonstrating the potential for Lemphane to hold large and valuable diamonds. The first of a two stage production programme is currently expected to commence late 2014 (subject to financing) which will further define the resource at Lemphane. As increased tonnages of kimberlite are processed the proportion of larger diamonds recovered will improve, increasing the average value of diamonds recovered at the project, as was the case at Letšeng. Stage 1 production will cover a two year period during which approximately 1 Mt of kimberlite will be mined and processed out of the currently estimated 48.6Mt of kimberlite (to 350m depth) at the site, using a 75 tonne per hour processing plant. The Company is targeting 20,000 carats during Stage 1 production with an estimated minimum value of US$930 per carat that is expected to generate revenues in excess of US$9m per annum. Cash flow will be reinvested to further develop Lemphane and complete a bankable feasibility study, a 3D geological model and a substantial inferred resource ahead of commencing the Stage 2 production phase. Stage 2 will see production ramped up to 3Mt/year with peak production 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 company maximizing the margins gained from being exposed from the mining to selling of diamonds. END The content and accuracy of news releases published on this site and/or distributed by PR Newswire or its partners are the sole responsibility of the originating company or organisation. 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