Paragon Diamonds Limited, the AIM quoted diamond development company in Lesotho, Africa, said it has agreed to purchase, conditional on shareholder approval, 63,000,000 ordinary shares in the company, representing 18.9% of Paragon’s entire issued share capital, from Lanstead Capital L.P. at a price of 3p per share (‘the Transaction’) in an off market purchase.
“The shares so purchased will be cancelled. The Transaction is in line with management’s focus on generating significant value for shareholders, as it looks to commence Stage 1 production of large high value stones at its flagship Lemphane kimberlite diamond project, in Lesotho, in the near term.”
In addition the Company has agreed to settle all outstanding equity swaps held with Lanstead over the share capital of the Company (‘the Equity Swap’). The amount settled under equity swaps is anticipated to be approximately £553,000 and will be offset against the purchase price for the Purchase Shares.
Titanium Capital Investments Ltd (‘Titanium Capital’), a private equity investment company managed by Paragon’s Chairman Philip Falzon Sant Manduca is providing a loan of approximately £1.3million to Paragon (‘the Loan’) in order to complete the Transaction and EquitySwap. The Loan provided by Titanium Capital is repayable on demand, carries no interest and is convertible into shares at a price of 3pence per share. Following completion of the Transaction and Equity Swap, Lanstead will no longer have an interest in the shares of Paragon.
The Company is also working towards funding its Stage 1 production and all efforts are being addressed to ensure minimum dilution for existing shareholders. This includes the provision of debt finance to ensure maximum value is created for Paragon’s shareholders.
By virtue of being a substantial shareholder (as defined in the AIM Rules) the Transaction and Equity Swap constitutes a Related Party Transaction under AIM Rule 13. The directors consider, having consulted Northland Capital Partners Limited (the Company’s Nominated Adviser) that the terms of the Transaction and the Equity Swap are fair and reasonable insofar as the Company’s shareholders are concerned.
The Loan also constitutes a Related Party Transaction under AIM Rule 13. The directors, excluding Philip Falzon Sant Manduca consider, having consulted Northland Capital Partners Limited (the Company’s Nominated Adviser) that the terms of the Loan are fair and reasonable insofar as the Company’s shareholders are concerned.
A notice of general meeting is being prepared by the Company and will be circulated to shareholders shortly requesting the authority to execute the Transaction. Paragon’s Chairman, Philip Falzon Sant Manduca said, “The acquisition of Lanstead’s interest highlights management’s commitment to building a vertically integrated diamond company, while ensuring the issued share capital is kept to a minimum so that shareholders capture as much of the value generated via positive share price performance.
Since becoming Executive Chairman of Paragon, my conviction in the wider management team, the quality of Lemphane’s diamond resource, and in Lesotho itself, have all increased from already elevated levels, and this lies behind the financing provided by Titanium Capital. The on-going support of Titanium increases Paragon’s options with regards to funding Stage 1 production, which will help ensure existing shareholders’ exposure to the considerable upside on offer is maximised.
“Stage 1, which is targeted to commence in Q1 2015, will involve 1 million tonnes of ore mined which, according to an independent report, is expected to result in the recovery of over 100 diamonds larger than 9 carats, including stones up to 100 carats. In addition to generating significant revenues, we are highly confident the near term commencement of Stage 1 will confirm Lemphane’s credentials as the next world class pipe in Lesotho. Finally I would like to thank Lanstead for their support during what was a difficult time for Paragon. The Company is now well placed to attract long term investment from strategic shareholders who will support management’s ambition to build Paragon into one of the most cost-efficient and successful large diamond production and distribution businesses look forward to providing further updates on our progress in the near future.”
