Acquisition by Paragon Diamon

RNS Number : 6374X

Obtala Resources Limited

09 December 2010

 



Obtala Resources Limited

("Obtala" or the "Company")

 (AIM:OBT)

Paragon Diamonds Limited to acquire 44.3% of International Diamond Consultants Limited

The Board of Obtala Resources Limited, the resources investment, development and production company, today announces that its majority owned subsidiary, Paragon Diamonds Limited has acquired 44.3% of the issued share capital of International Diamond Consultants Limited from Grandinex International Corp.

Grandinex International Corp. is a company controlled by Frank Scolaro. It is therefore deemed to be a related party transaction under the AIM Rules for Companies. Accordingly, the independent directors of Obtala, that is the directors of the Company excluding Frank Scolaro, having consulted with their nominated adviser, ZAI Corporate Finance Limited, consider that the terms of this transaction are fair and reasonable insofar as the Company's shareholders are concerned.

The full text of the announcement released by Paragon Diamonds Limited is set out below.

Contact:

Obtala Resources Limited
Simon Rollason - Managing Director Frank Scolaro - Chairman www.obtalaresources.com	[phone]
ZAI Corporate Finance Limited
Richard Morrison / Sarang Shah	[phone]
Threadneedle Communications
Laurence Read	[phone]

Paragon Diamonds Limited

("Paragon" or the "Company")

(AIM: PRG)

Acquisition of 44.3% of International Diamond Consultants Limited ("IDC")

Highlights:

·     Paragon has acquired 44.3% of IDC, a sub Saharan African focused mining group with 
interests in  diamond projects in Lesotho, Zambia and Botswana  

·     Paragon has entered into the joint venture agreement with IDC's subsidiary,  Meso 
Diamonds, in respect of the Lemphane Kimberlite project announced on  10 
November 2010

·     Consideration of £5.7 m to be satisfied by the issue of 23,397,894 new ordinary shares in the 
Company at a market price of 24.5 pence per share

Paragon Diamonds Limited, the African focused diamond development and production company today announces that it has acquired 44.3% of the issued share capital of International Diamond Consultants Limited ("IDC") from Grandinex International Corp (the "Acquisition"). The Acquisition increases Paragon's interest in the Lemphane Kimberlite Project ("Lemphane") and gives Paragon a significant interest in the Kabale Licence, a diamond kimberlite exploration project in Zambia. 

IDC is a private British Virgin Islands registered company focussed on evaluating and developing diamond projects in sub Saharan Africa. IDC is the holding company of four subsidiaries, two in Lesotho, one in Zambia and one in Botswana. Through these subsidiaries IDC holds the following licences:

Country	Holder	IDC Interest	Licence Name / No.	Licence Type	Area Km2	Expiry
Lesotho	Meso Diamonds Pty Ltd*	85%	Lemphane	Prospecting	2.25	June 2012
Zambia	Tamarisk Investments Pty Ltd	100%	Kabale River Properties	Prospecting	34.22	March 2012

* The remaining 15 % of the Lesotho subsidiaries are owned by local partners

Description of the assets

IDC's 85% owned subsidiary, Meso Diamonds Pty Ltd ("Meso"), holds the Lemphane Prospecting Licence which covers a known Kimberlite pipe in the world renowned diamondiferous region of the Kingdom of Lesotho.

The Lemphane Prospecting Licence lies within the Botha-Buthe district of northern Lesotho, 29 km west of the Letseng Diamond Mine and 5 km north west of the Liqhobong Deposit. Following expiration of the Prospecting Licence and positive completion of the exploration programme Meso has the right to apply for, and negotiate, a Mining Lease on all, or part, of the licence area.

Technical work on Lemphane is underway with construction of the exploration camp and access roads having been completed. To date, around 90 samples have been collected for indicator mineral and caustic fusion analysis in Johannesburg and petrological examination in Finland. Meso is waiting the grant of the requisite export permits.   In addition, a total of approximately 300 tonnes of kimberlitic material and gravel from 29 locations around the pipe area and the adjacent Lemphane stream has been stockpiled. These stockpiles will be processed once the construction and delivery of a 5 tonne per hour pilot plant has been completed.  Processing of the samples is expected to commence at the end of January.

A NI 43-101 compliant competent person's report by the MSA Group, an independent geological consultancy firm based in Johannesburg on the Lemphane Kimberlite Project dated 22 October 2010 indicated that because of the near vertical pipe-basalt contacts, the Lemphane pipe may contain some 30 million tonnes of kimberlite to a depth of 200 metres from surface.

Kabale Licence, Zambia

The Kabale licence in Zambia is deemed prospective for kimberlites. Initial evaluation work is underway on this licence and results are anticipated to be available in the future.

Details of the Acquisition

Paragon has acquired 18,000,000 shares in IDC (representing 44.3% of the issued share capital of IDC) at a value of $0.50 cents per share from Grandinex International Corp., a company controlled by Frank Scolaro. The consideration is being satisfied by the issue of 23,397,894 new ordinary shares in the Company at a price of 24.5 pence per share, being the market price at the close of business on 07 December 2010 and equates to an aggregate consideration of £5,732,484.

As a result of the Acquisition, Paragon will be the largest shareholder in IDC. The other principal shareholders of IDC are Dragon Equities Limited (24.6%), a 100% subsidiary of Dragon Group Limited, private overseas investors (29.6%) and Obtala Services Limited, a wholly owned subsidiary of Obtala Resources Ltd (1.5%).

The Company has also entered into a shareholders' agreement with certain of the shareholders in IDC, being Dragon Equities Limited and Obtala Services Limited, pursuant to which such shareholders agreed to:

·     give certain warranties in favour of the Company relating to IDC and its subsidiaries (the 
"Group") and the licences held by the Group;

·     procure that certain decisions are not taken by the Group without the consent of the 
Company;

·     procure that certain financial information relating to the Group is provided to the Company;

·     not transfer their shares in IDC without following a pre emption procedure under which 
such shares are offered to existing shareholders first;

·     permit the Company to appoint a director to the board of IDC; and

·     use all reasonable endeavours to procure that the remaining shareholders in IDC agree to 
be bound by the obligations contained in the shareholders' agreement.

All activities carried out by the Group are in the exploration and analysis stages. As such, the Group has not produced any profits to date.

Related Party Transaction with Grandinex International Corp

Grandinex International Corp. is a company controlled by Frank Scolaro. It is therefore deemed to be a related party under the AIM Rules for Companies. Accordingly, the independent directors of Paragon, that is the directors of the Company excluding Frank Scolaro, having consulted with their nominated adviser, ZAI Corporate Finance Limited, consider that the terms of this transaction are fair and reasonable insofar as the Company's shareholders are concerned.

Joint Venture Agreement with Meso

Paragon has signed the joint venture agreement with Meso, details of which were previously announced on 10 November 2010. The principal terms of the joint venture allow Paragon to acquire a 10% interest in Meso for $2,000,000. This investment will fund the exploration work to take the Lemphane project to pre-feasibility status.

The terms are in line with those previously announced except it has been agreed that the second instalment of $500,000 payment to IDC may be settled, at the option of IDC, by the transfer of plant and equipment instead of cash and the option will be for 1,500,000 shares in IDC at $0.60 cents totalling $900,000 (equating to 3.7 per cent. of IDC's existing share capital).

Issue of Equity

The Company is issuing 23,397,894 new ordinary shares of 1p each, pursuant to the Acquisition at 24.5 pence per share (being the market price at the close of business on 07   December 2010).

The new shares will rank pari passu with all existing ordinary shares, and dealings on AIM are expected to commence in the new ordinary shares on 15 December 2010.

Following the issue of the new ordinary shares as described above, the Company's issued share capital now consists of 130,182,819 ordinary shares of 1p each.

Director Dealings

Director	Shares Issued	Share Price	Resultant Holding	Resulting %
Frank Scolaro*	23,397,894	£0.245	110,897,894	85.2

Frank Scolaro is interested in:

·      23,397,894 Ordinary Shares (representing 18% of the enlarged share capital) owned by Grandinex International Corp. issued as a result of the Acquisition due to him beneficially owning the entire issued share capital of such company

·      87,500,000 Ordinary shares (representing 67.2% of the enlarged share capital) owned by Obtala Resources, as a result of beneficially owning 32.06% of the issued share capital of such company (including through his ownership of Grandinex International Corp.)

Following completion of the acquisition of African Rock Resources Limited by Paragon, Grandinex will be issued a further 12,500,000 new Ordinary Shares in the Company.

Commenting today Stephen Grimmer, Managing Director, said: "I am pleased to announce the acquisition of this significant interest in IDC and look forward to expanding our operations into different regions of Africa. With phase one of the initial exploration and sampling work firmly underway at Lemphane this acquisition will give Paragon great potential to increase shareholder value from the anticipated results of bulk sampling."

 

END

 

 

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