Listing of Paragon Diamonds L

RNS Number : 4991U

Obtala Resources Limited

18 October 2010

 



Obtala Resources Limited

 ("Obtala" or "the Company") (AIM:OBT)

Listing of Paragon Diamonds Limited on AIM

Obtala Resources Limited the resources investment, development and production company, is pleased to announce the proposed AIM listing ("Admission") of its wholly owned subsidiary Paragon Diamonds Limited ("Paragon").

Conditional on Admission, Paragon will acquire the entire issued share capital of Sierra Leone Hard Rock Limited ("SLHR") from Obtala for a total consideration of £17.5 million satisfied through the issue of 87,500,000 new ordinary shares in Paragon. Paragon will also acquire African Rock Resources Ltd ("ARR"), a private company which holds the Mabuki Diamond licence and two further coloured gemstones licences in Tanzania for a total consideration of £2.5 million satisfied through the issue of 12,500,000 new ordinary shares in Paragon. The Acquisition of ARR is conditional on Admission, the renewal of the Mabuki Diamond Licence and consent from the relevant Tanzanian licensing to its change of control.

Paragon will raise over £3 million through the issue of new ordinary shares in Paragon to new institutional and private investors. Admission to AIM is expected to commence on Monday, 1^st November. Following the listing on AIM and the acquisition of ARR, Paragon will remain a subsidiary of Obtala, and will retain an interest of approximately 70% of the issued share capital of Paragon.

Acquisition of SLHR

SLHR, through its local subsidiary SLHR (SL) owns and operates the established Konoma Mine in Kono, Sierra Leone. The mining operations comprise four mining licences, ML001/06, ML002/06, ML003/06 and ML004/06 covering a total area of 164.2km² along the Bafi River in Sierra Leone. The entire processing plant, heavy earth moving equipment and camp will be acquired from Obtala, including the data from the extensive exploration work undertaken by African Minerals Limited prior to Obtala's purchase of SLHR in January 2010.

The exploration licences (EXPL 001/04, EXPL 006/06, EXPL 004/06, EXPL 008/06 and EXPL 001/07) held by SLHR covering a total area of 1,613km2 were not renewed during the year as the Company has been focused on increasing production from the Konoma Mine. Following Admission, Paragon will review these licences and may submit applications to regain the licences in due course. There is however, no guarantee that once an application is submitted a renewed licence will automatically be granted, but the Company has no reason to believe they would be unsuccessful if applications were submitted.

Acquisition of ARR

ARR owns the Mabuki diamond licence area in Tanzania. The licence area is situated in North West Tanzania, approximately 81km southeast of the city of Mwanza. The licence area covers 64km2 and is situated in a region where evidence indicates that known diamond deposits are currently being worked by artisanal miners. Although no exploration work has been undertaken to date, the geological setting of the licence indicates the area may have the potential for, as yet, undiscovered diamond deposits. In the year ended 31 December 2009, ARR had an operating profit of $25 and as at 30 June 2010 net assets of $151. In addition, ARR owns the Ndunda and the Kalalani coloured gemstones Licences in Tanzania. Set out below is a summary table of ARR's exploration licences:

Licence Number	Holder	Interest (%)	Locality	Status	Area (km2)	Expiry	Interest
Mabuki Diamond Prospect Tanzania PL4806/2007	ARR	100	Shinyanga	Exploration Licence (Exclusive)	64.4	Oct. 2010	Diamonds
Ndudu, Rufiji PL5052/2008	ARR	100	Rufiji	Exploration Licence	67.8	June 2011	Coloured Gemstones
Kalalani, Korogwe PML0011742	ARR	100	Korogwe	Mining Licence	0.05	June 2013	Coloured Gemstones

The Ndudu and Kalalani licences will be acquired as part of the purchase of ARR. They are deemed non-core to Paragon's strategy and the board may relinquish them due course or farm out an interest in them to other mining exploration groups. As ARR is not Tanzanian owned and controlled, there is a risk that the Kalalani primary mining licence may be revoked by the Ministry of Energy and Minerals.

The Acquisition of ARR is conditional on admission to AIM, the renewal of the Mabuki Diamond Licence and consent from the relevant Tanzanian licensing to its change of control. The acquisition is due to complete approximately two months following Admission.

Related Party Transaction

Grandinex International Corp. and Stockton Continental Inc., two companies controlled by Frank Scolaro, collectively own 90 per cent. of ARR with the remaining 10 per cent. being owned by Gribben Enterprises Ltd, a company controlled by Simon Rollason. As ARR is owned by companies controlled by Frank Scolaro or Simon Rollason, directors of Obtala, the acquisition is classified as a related party under the AIM Rules. The independent directors of Obtala, that is the directors of the Company excluding Simon Rollason and 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.

Lock in arrangements

Obtala, Frank Scolaro and Simon Rollason (together in each case with their related parties) have undertaken to Paragon Diamonds and to ZAI that they will not dispose of any ordinary shares in Paragon for a period of 12 months following admission and, other than through the Company's broker so as to preserve an orderly market, they will not sell any ordinary shares for the period of 12 months thereafter.

Strategy 

Paragon's objective will be to step up production from the established operating Konoma Mine in Sierra Leone, with the intention subsequently of increasing the value of its diamond assets through the development of its resource estimates and, where appropriate, commencing production of other economically feasible diamond assets.

Frank Scolaro, Chairman of Obtala, commented: "I am delighted to announce the proposed listing of our diamond operations and am confident that with its own funding and Board of Directors, Paragon will enhance shareholder value for both investors of Obtala and Paragon, through increased production in Sierra Leone and our capability to identify further value opportunities in selective areas of Africa which will place our diamond company in a strong position in a growth market."

Contact:

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

 

END

 

 

MSCKKPDDQBDDFKD