REG - BlueRock DiamondsPLC - Teichmann Financing Update

Bluerock DiamondsAnnouncement

05/07/2022 13:30

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RNS Number : 3966R  BlueRock Diamonds PLC  05 July 2022

BlueRock Diamonds PLC / AIM: BRD / Sector: Natural Resources

5 July 2022

BlueRock Diamonds PLC ('BlueRock' or the 'Company')

Teichmann Financing Update

 

BlueRock Diamonds PLC, the AIM listed diamond producer, announces the signing
of a loan note subscription agreement ("Subscription Agreement")
with Teichmann Company Limited ("TCL"), T-Three-Drilling Limited and three
Teichmann employees, (together, "Teichmann") for an aggregate £1.6 million
("Teichmann Financing"). Under the Subscription Agreement, and similar to the
structure of the financing announced on 27 August 2021,  the Company will
initially issue a £1 million simple loan note ("SLN") to Teichmann alongside
the provision of a debt funding facility of up to ZAR 30m to its Kareevlei
diamond mine ("Kareevlei") with the intention that, subject to independent
shareholder approval, further details of which are set out below, the SLN will
be redeemed for equity in the Company and be followed by the issue of a new
convertible loan note of £0.6 million ("New CLN") and an amendment to the
existing convertible loan note ("Existing CLN"), subject to the conditions set
out in the Subscription Agreement and summarised below.

 

Mike Houston, Executive Chairman said, "The need for financing has arisen as
a result of the excessive and extended rainy season this year which has
delayed the ramp up of production and the development of our main pit leading
to significantly lower production levels and lower grades than expected.  As
announced earlier, we have been exploring how to finance the financial hole
left by the lower than expected revenue at a time when we are investing
heavily in developing the mine.  Having explored these options, the only
source of funds available to BRD in the form and magnitude required was that
offered by Teichmann albeit on terms that dilute existing shareholders
significantly. Teichmann has demonstrated a strong ongoing commitment to the
company and their closer involvement in the management of Kareevlei is
expected to assist the company during this critical phase of development."

 

Gary Teichmann, Non-Executive Director said, "We are fully committed to the
success of BRD and Kareevlei for all shareholders and the fair treatment of,
all shareholders. Our further investment in BRD and Kareevlei demonstrates
this.  Going forward we will be taking a more active role in the management
of BRD and Kareevlei and I look forward to updating the market on progress."

 

Teichmann Financing

 

As announced on 1 July 2022, the Company's cash resources have been depleted
 due, in particular, to the impact of continued wet weather on production and
mine development during Q2 2022 in what continues to be a period of heavy
investment in mining development. The Teichmann Financing will provide funding
to invest in continued mining development, repay trade creditors (principally
Teichmann South Africa Proprietary Limited that is currently owed between
approximately ZAR 22m and ZAR 24m), repay an existing loan note maturing in
October 2022 and to provide general working capital to the Company.

 

SLN

 

Under the Teichmann Financing, the SLN has a principal amount of £1,066,412
and a redemption date of 31 August 2022 ("SLN Redemption Date") with zero
interest payable. It is expected that the SLN will be redeemed for 15,234,437
ordinary shares in the Company at a price of 7 pence per share at the SLN
Redemption Date, subject to the Company having received approval from The
Panel on Takeovers and Mergers for a waiver of the obligation that will arise
for Teichmann (and its concert party) under Rule 9 of the Takeover Code to
make a mandatory offer for the Company, and subject to the approval of
independent shareholders in accordance with Appendix 1 of the Takeover Code
(the "Waiver"). If approved, the Teichmann concert party's shareholding would
increase from a current aggregate 17.4% (without any conversion of the
Existing CLN in issue) to approximately 51% at which point the Teichmann
concert party would be free to make further share purchases or conversions
into ordinary shares of the Company.

 

New CLN and Existing CLN

 

In addition, and also subject to the Waiver being granted, a New CLN of
£583,475 will be issued to Teichmann, with a conversion price of 7 pence and
a maturity date of 30 November 2025.  The New CLN will, subject to regulatory
approval in South Africa, be secured by a charge over the Company's shares in
Kareevlei Mining Pty Limited.

 

Furthermore, the Existing CLN of £1,610,000 million, the terms of which were
set out on 27 August 2021, will be amended to provide for redemption and to
run to an extended term of 30 November 2025. It will also remove applicable
interest to its maturity and amend the conversion price from 40 pence to 24.9
pence (the commercial effect among the parties being the same due to the
treatment of interest and will not alter the maximum number of shares to be
issued under the Existing CLN, being 6,465,247 ordinary shares).

 

Should the Waiver for the SLN redemption, issue of the New CLN and amendment
to the Existing CLN be granted, relevant shareholder authorities be obtained
and the New CLN and Existing CLN be converted, and assuming that no further
shares are issued prior to conversion, the Teichmann Concert Party's
shareholding would further increase to approximately 65.5%.

 

If the Waiver is not granted or if the relevant shareholder authorities are
not obtained, then BlueRock will be required to redeem the SLN at the amount
invested by the noteholders plus the greater of:

 

a)    £1 million; and

b)    The market value of the 15,234,437 ordinary shares in the Company,
less £1,066,412 allocated across the SLN pro rata, where the "market value"
is the mid market closing price of the Company's ordinary shares on the SLN
Redemption Date.

 

Debt funding facility

 

The Company has also entered into a new extended credit facility with the
Company's mining contractor, Teichmann South Africa Proprietary Limited, for
up to ZAR30 million which reduces to ZAR20 million after the first 180 days.
Subject to South African regulatory approvals, where relevant, the facility
will be secured over the plant, machinery, equipment and other moveable assets
of Kareevlei Mining Pty Limited.

 

Further arrangements

 

In addition to the financing agreements above, the Company and Teichmann have
entered into a new Relationship Agreement reflecting the right for Teichmann
to appoint up to three directors (as long as this number is matched by
independent directors who will retain the casting vote) and to participate in
future fundraisings to maintain its shareholding. This agreement includes
typical clauses on the ability of the Company to operate independently of
Teichmann.

 

The Company, Kareevlei Mining Pty Limited, Teichmann Company Limited and
Teichmann South Africa Proprietary Limited  have also entered into a
Governance Agreement which sets out a framework under which Teichmann and
other material shareholders of BlueRock and Kareevlei can appoint directors at
the Kareevlei level subject to BlueRock retaining control of the operation of
Kareevlei through a casting vote. Bluerock and Teichmann are to agree terms of
reference for a management committee of Kareevlei, such committee to include
an independent technical expert.

 

Shareholder participation

 

The Board is conscious of the dilutive effect of the Teichmann Financing and
is exploring with Teichmann the possibility of offering a limited number of
new ordinary shares to shareholders as at the SLN Redemption Date at the same
price of 7p per share while allowing Teichmann to maintain its intended
holdings as at that time following SLN redemption.  Further details of this
possible offer will be provided in due course.

 

General meeting

 

The Company intends to convene a General Meeting as soon as practicable to
consider and, if thought fit, approve a Rule 9 waiver and the grant of the
authorities necessary for the equity redemption of the SLN, the New CLN, the
amendment of the Existing CLN for which a circular is expected to be issued in
due course.

Current trading

The operation is seeing steady progress with drier conditions in June
,following the impact of the extreme weather conditions through to May (200%
more rain Feb to May in 2022). With development mining behind plan the feed to
the plant is still a mixture of pure kimberlite and lower grade material
through higher than planned dilution. It is anticipated a material portion of
the main pit will be opened up during Q3 and with that a more composite feed
and improved grade.

Despite the difficult weather conditions the developed tonnes mined in first
half of 2022 was 1,165,336t versus 645740t in 2021 clearly demonstrating the
Company's commitment to the critical capital development in its mining
operations that will ensure consistent throughput in the plant and allow
better preparation for the 2023 wet season.

The Company expects to issue its Q2 production update on 11 July 2022.

Related Party Transaction

TCL (together with certain parties connected with TCL or its group companies
("Teichmann Group") and/or the owners of the Teichmann Group), as a
substantial Shareholder of the Company, is considered to be a "related party"
as defined under the AIM Rules and accordingly, the Teichmann Financing, the
Relationship Agreement and the Governance Agreements (the "Teichmann
Agreements") constitute a related party transaction for the purposes of Rule
13 of the AIM Rules.

The Directors independent of the Teichmann Agreements, being Michael Houston,
David Facey, Tim Leslie, and Rob Croll, consider, having consulted with the
Company's nominated adviser, that the terms of the Teichmann Financing are
fair and reasonable insofar as the Company's Shareholders are concerned.

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018 ('MAR'). Upon the publication of this
announcement via Regulatory Information Service ('RIS'), this inside
information is now considered to be in the public domain.

 

**ENDS**

 

For further information, please visit BRD's
website www.bluerockdiamonds.co.uk (http://www.bluerockdiamonds.co.uk/)  or
contact:

 

 BlueRock Diamonds PLC

 Mike Houston                           m.houston@bluerockdiamonds.co.uk

 David Facey, FD                        dfacey@bluerockdiamonds.co.uk
 SP Angel (NOMAD and Broker)

 Stuart Gledhill / Caroline Rowe        Tel: +44 (0)20 3470 0470
 St Brides Partners Ltd (Financial PR)

 Isabel de Salis / Oonagh Reidy         bluerock@stbridespartners.co.uk

 

Notes to editors:

BlueRock Diamonds is an AIM-listed diamond producer which operates the
Kareevlei Diamond Mine near Kimberley in South Africa which produces diamonds
of exceptional quality and ranks in the top ten in the world in terms of
average value per carat. The Kareevlei licence area covers 3,000 hectares and
hosts five known diamondiferous kimberlite pipes with a combined inferred
resource of 10.4 million tonnes / 516,200 carats (February 2021); based on its
planned production of 1 million tonnes per annum, this provides a minimum
10-year life of mine.

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