Botswana Diamonds - Acquisition of control of the Thorny River Project
29/09/2021 06:59
RNS Number : 2862N
Botswana Diamonds PLC
29 September 2021
29th September 2021
Botswana Diamonds PLC
("Botswana Diamonds" or the "Company")
Botswana Diamonds acquires control of the Thorny River Project
Highlights
· Botswana exercises it's pre-emption right to acquire control of Vutomi
· Control of Vutomi gives BOD the opportunity to develop the Thorny River Project
· Thorny River is an advanced stage kimberlite exploration property located at the eastern side of a kimberlite dyke and blow system spanning Klipspringer Mine, 15km to west, and the iconic Marsfontein Mine, 4km to the west.
· Plans are in place to re-activate the mining of the Marsfontein gravels and dumps which are also controlled by Vutomi.
Following outside interest in acquiring Vutomi Mining the South African associate company of Botswana Diamonds, the board of Botswana has today exercised its pre-emptive right to acquire the outstanding third-party interests in Vutomi Mining (Proprietary) Limited ("Vutomi Mining") and Razorbill Properties 12 (Proprietary) Limited ("Razorbill") (together "Vutomi") (the "Acquisition").
Vutomi holds the mineral rights to the Thorny River Diamond Project ("Thorny River" or the "Project") as well as other exploration assets.
The consideration for Vutomi comprises 56,989,330 new ordinary shares in the Company which, at the closing mid-market price on 28th September 2021 of 1.10p per share, is valued at £627k.
The Company has agreed that immediately on completion of the Acquisition, the Company will sell 26% of Vutomi for a deferred consideration of US$316,333 to the Company's local South African Empowerment partner, Baroville Trade and Investments 02 Proprietary Limited ("Baroville"), in order to comply with South African requirements on empowerment ownership, which will be funded by a loan from Botswana Diamonds. On completion, the Company will own 76% of Vutomi.
The acquisition of Vutomi is conditional on, inter alia, customary regulatory and competition authority approvals in South Africa, including MPRDA Section 11 approval for the transaction, which are expected to complete during the first half of 2022.
Vutomi and Razorbill are currently owned by, among others, James Campbell (a director of the Company) and the other directors of Vutomi. These shareholders are related parties as defined by the AIM Rules and accordingly, the transaction has been treated as a related party transaction pursuant to AIM Rule 13.
James Campbell, Managing Director, commented:
"Since working on Thorny River thirty years ago, we recognised potential for discoveries on a kimberlite system spanning 20km. Recent drilling vindicated this view and indicates potential for additional nearby discoveries."
"Following a third party offer for Vutomi, Botswana Diamonds has exercised its pre-emption rights. This transaction streamlines exploration activities and involves the local community as supportive stakeholders in this development."
John Teeling, Chairman, commented:
"We are very positive on the production opportunities for the Thorny River properties owned by Vutomi. An outside company made an offer for Vutomi. Rather than accept the offer we exercised our pre-emptive right to acquire the outstanding shares. In turn we then sold sufficient shares to a local South African group to ensure compliance with black empowerment regulations. The unsolicited outside offer reinforced our belief that there is something worthwhile in Thorny River. We acted to preserve shareholder value".
Background on Vutomi's projects
Vutomi's South African projects will be advanced in tandem with ongoing Botswana-based exploration programmes, and may have potential for early commercial diamond mining.
Vutomi's flagship project, Thorny River, spans the Frischgewaagt and Hartbeesfontein farms, which are located within the Limpopo Province of South Africa approximately 300km north of Johannesburg. The Project area encompasses the eastern extent of a kimberlite blow/dyke complex, along which the former Marsfontein and Klipspringer diamond mines occur. Both operations were once mined by a De Beers / SouthernEra joint venture. Thorny River is 4km east of the Marsfontein Mine, whose diamond grade and quality returned the entire capital investment in only four days.
Thorny River consists of a 4km long kimberlite blow/dyke system, where Vutomi has undertaken detailed ground geophysics, macrodiamond and microdiamond sampling and extensive core and percussion drilling programmes over the project area. We encountered Kimberlite intersections in the blow/dyke system of between 1 and 19 metres.
A sample equivalent to 305.38 dry tonnes of kimberlite and host rock was taken from Thorny River in December 2017 from a 42-metre trench on Frischgewaagt, along the strike of the dyke. 512 diamonds weighing 62.883 carats were recovered from this sample following treatment through an independent integrated processing facility, which comprised crushing and re-crush circuits, a Dense Media Separation ('DMS') plant and grease and x-ray technology for final recovery.
Data generated from the sample was assessed together with the results of a 2015 sampling campaign, as well as microdiamond work, to derive an estimated (modelled) macro grade. The modelling considered host rock dilution, metallurgical process efficiencies and the various diamond size frequency distributions with the result being an estimated Total Content grade range of 46-74 carats per hundred tonne (cpht - at a bottom cut-off ('BCOS') of +1 mm). These correlate with the published resource grade of the neighbouring Klipspringer Mine of 49 cpht (BCOS of +1mm).
The valuation of the diamonds recovered indicated the parcel average to be US$89/ct in the +11 diamond sieve class, which compares favourably with US$77/ct achieved in the same diamond sieve class from the 2015 sampling campaign. The average published diamond values achieved by Klipspringer were US$130/ct (at a BCOS of +1mm). However, the diamonds recovered were insufficient to produce a modelled diamond valuation; therefore the 2016 modelled diamond value of US$259/ct (at a BCOS of +2mm) continues to apply.
Gem quality diamonds comprised approximately two thirds of the value of the parcel. Less than 40% of the parcel illustrated medium or high fluorescence and less than 10% of the stones were chipped or broken. Yellow stones were also present and there was a small population of unusual colours which were near fancy.
Geophysics and drilling programmes on Frischgewaagt over the last twelve months, including a 9-hole drilling campaign, have uncovered two interconnected blows (named the River and River Extension), and the thickest kimberlite intersection to date of 19m was encountered in these programmes.
Background to the Acquisition
The Acquisition was triggered by an external offer to the third-party shareholders in Vutomi. As the Company is the largest shareholder in Vutomi and the operator and recent exploration results have been particularly encouraging, the Board considered that Thorny River is a key asset which it did not want to cede control over. Under the existing shareholder agreements, the Company had the right to match any offer made for the third-party owned interest in Vutomi. The Company agreed to match the external offer which valued the third-party shareholders interest in Vutomi at US$640,000 assuming full dilution of the third-party shareholders on conversion of the Company's outstanding convertible funding which it had provided to Vutomi. The final diluted interest of the third-party shareholders in Vutomi, some of whom subsequently matched the Company's convertible funding, was 54.06% and the external offer was pro-rata adjusted for this interest.
The number of Consideration Shares was fixed at an issue price of .85p per new ordinary share and which valued the third-party interests at £484k. The Company's share price has subsequently continued to reflect the progress at Thorny River and, based on the current price of 1.10p per ordinary share, values the Consideration Shares at £627k.
Share Sale Agreement
Under the Share Sale Agreement entered into between the Company and its partners in Vutomi, the Company's wholly-owned subsidiary Kukama Diamonds Investments Limited ("Kukama") has today conditionally agreed to acquire the outstanding third-party interests in Vutomi Mining and Razorbill.
The consideration for Vutomi comprises 56,989,330 new ordinary shares in the Company which, at the closing mid-market price on 28th September 2021 of 1.10p per share, is valued at £627k. There are no lock-in arrangements, but the consideration shares will be issued in two equal tranches (three months apart) following Completion. Completion is subject to a number of conditions (with a long stop date of 22 September 2022 unless otherwise agreed between the parties) including:
· Section 11 regulatory approval for the transaction in terms of the South African MPRDA
· the Takeover Regulation Panel of South Africa granting an exemption in terms of section 119(6) of the South African Companies Act for the sale of the empowerment partner's shares by Kukama to Baroville.
· the Financial Surveillance Department of the South African Reserve Bank granting the necessary approvals pursuant to South African Exchange Control Regulations.
· Conclusion of a contract exploration agreement between the Company and Vutomi in consultation with the sellers covering site activities between the signature and closing date.
BOD expects the conditions to be fulfilled and the transaction to complete during Q2 2022.
The Company has further agreed that, immediately on completion of the Acquisition, the Company will sell 26% of Vutomi for a deferred consideration of US$316,333 to the Company's local South African Empowerment partner, Baroville, in order to comply with South African requirements on empowerment ownership, which will be funded by a loan from Botswana Diamonds.
On completion, the Company will own 76% of Vutomi.
The Company has separately agreed to sell its interests in Evoid to Red Sky Trust ("Red Sky"). Evoid is currently dormant and holds the Mooikloof prospecting licence and Palmietgat prospecting licence on which very limited work has been carried out to date. Red Sky has agreed that as soon as Evoid has the available cash to do so, Evoid will settle the outstanding shareholder loans provided by the Company to Evoid and which amounts to ZAR320,374 (equivalent to approximately £16,000). There is no further consideration payable. Any consideration received from the sale to Baroville and Red Sky will be retained for working capital.
Related Party transaction
Vutomi Mining and Razorbill are currently owned by, among others, James Campbell (a director of the Company) and the directors of Vutomi Mining and Razorbill. Furthermore, the beneficial owner of Red Sky is Charl Nienaber, a director of Evoid. These individuals are related parties as defined by the AIM Rules and accordingly, the transaction has been treated as a related party transaction pursuant to AIM Rule 13.
The related parties, and the consideration shares to be issued to them, are set out in the following table:
Table 1: Related Party Consideration Shares to be issued on the Acquisition of Vutomi Mining and Razorbill
| Related Party | Status | Number of Consideration Shares | Value of Consideration Shares (Note 1) | Consideration shares as a % of the current issued share capital |
| James Campbell | Director of the Company and Vutomi | 9,491,955 | £104,412 | 1.2% |
| John Shelton | Director of Vutomi | 9,491,955 | £104,412 | 1.2% |
| Charl Nienaber | Director of Vutomi | 11,559,044 | £127,149 | 1.46% |
| Dennis Kekana | Director of Vutomi | 11,334,161 | £124,676 | 1.43% |
| As at 28 February 2021 | Vutomi Mining (ZAR'000) | Razorbill (ZAR'000) | Evoid (ZAR'000) (Note 2) |
| Total assets | 6,876 | 1,652 | 538 |
| Net assets / (liabilities) (Note 1) | 6,874 | 1,445 | 533 |
| Profit / (loss) before taxation | 2,059 | nil | nil |
| Botswana Diamonds PLC John Teeling, Chairman James Campbell, Managing Director Jim Finn, Director | +353 1 833 2833 +27 83 457 3724 +353 1 833 2833 |
| Beaumont Cornish - Nominated Adviser Michael Cornish Roland Cornish | +44 (0) 020 7628 3396 |
| Beaumont Cornish Limited - Broker Roland Cornish Felicity Geidt | +44 (0) 207 628 3396 |
| First Equity Limited - Joint Broker Jason Robertson | +44 (0) 207 374 2212 |
| Blytheweigh - PR Megan Ray Rachael Brooks Said Izagaren Naomi Holmes | +44 (0) 207 138 3206 +44 (0) 207 138 3553 +44 (0) 207 138 3206 +44 (0) 207 138 3206 +44 (0) 207 138 3206 |
| Teneo Luke Hogg Alan Tyrrell Ciara Wylie | +353 (0) 1 661 4055 +353 (0) 1 661 4055 +353 (0) 1 661 4055 |
| 1 | Details of the person discharging managerial responsibilities / person closely associated | ||||||||||||
| a) | Name | James Campbell | |||||||||||
| 2 | Reason for the notification | ||||||||||||
| a) | Position/ status | Managing Director | |||||||||||
| b) | Initial notification /Amendment | Initial Notification | |||||||||||
| 3 | Details of the issuer, emission allowance market participant, auction platform, auctioneer or auction monitor | ||||||||||||
| a) | Name | Botswana Diamonds PLC | |||||||||||
| b) | LEI | 213800UEF1WVQZIZRA91 | |||||||||||
| 4 | Details of the transaction(s): section to be repeated for (i) each type of instrument; (ii) each type of transaction; (iii) each date; and (iv) each place where transactions have been conducted | ||||||||||||
| a) | Description of the financial instrument, type of instrument | Ordinary Shares of 0.025p each ("Ordinary Shares") | |||||||||||
| Identification code | GB00B5TFC825 | ||||||||||||
| b) | Nature of the transaction | Issued as consideration | |||||||||||
| c) | Price(s) and volume(s) |
| |||||||||||
| d) | Aggregated information | ||||||||||||
| - Aggregated volume | 9,491,955 Ordinary Shares | ||||||||||||
| - Price | [1.10p] | ||||||||||||
| e) | Date of the transaction | 28th September 2021 | |||||||||||
| f) | Place of the transaction | Outside a trading venue | |||||||||||
Recent news on Botswana Minerals
See all newsBotswana Minerals - Director Resignation
Botswana Minerals - Appointment of Non-Executive Director
Brief: Botswana Minerals Reports Joe & Mary O'farrell Hold 4.9% Of Its Issued Share Capital
Botswana Minerals - Botswana Minerals Identifies Priority Targets
Brief: Botswana Minerals Commences First Phase Work Programme On Copper Licenses In Ngamiland, North West Botswana