January 26, 2010 Trading Update and Development MOU
Kopane Diamond Developments Plc. today announces a trading update and strategic outlook following the recent £5.7m fundraising conducted by the Company. The Company has signed a non-binding MOU with an established mining company to co-develop the Liqhobong kimberlite project in Lesotho. Details of the proposed development partner are currently commercially sensitive but if binding agreements are reached full information will be disclosed to shareholders.
Highlights
MOU development entered into
Recommencement of production at Liqhobong:
Focus on Main Pipe recovery
High value pipe facets to be targeted
Main and satellite pipe previously recovered high value fine white and yellow stones
Capital investment of $64 million for 51% of 75% of Kopane Diamond Development equity in Liqhobong
Completion of DFS for full Main Pipe production
Investment in Liqhobong
The Company has entered into a non-binding Memorandum of Understanding ("MOU") with an established mining company to develop its Liqhobong assets in Lesotho. It is planned that the parties will proceed to finalise terms of a binding joint venture agreement as soon as practicable.
The principal terms of the MOU are as follows:
The mining company will fund and operate the recommencement of production at Liqhobong with processing of kimberlite through the Satellite Plant. Mining focus will be on the K5 and K2 facies of the Main Pipe, where we have previously found large and bonanza stones and will seek to recover approximately 200,000 carats over an 18 month period. Revenues generated from sales of diamonds in excess of costs will be shared between the parties.
Kopane and the mining company will jointly fund the completion of the remaining work on the Definitive Feasibility Study ("DFS") into the Main Pipe.
Following successful completion of the DFS and recovery of diamonds as noted above, the mining company may exercise an option to acquire 51% of the Company's interest in the Main Pipe in return for raising 80% of the cost of developing Liqhobong to production of in excess of one million carats per annum, such 80% funding being in the form of equity and non-recourse loans at asset level.
The balance of 20% funding to be provided by Kopane in the form of non-recourse loans at asset level.
Subject to confirmation of plant design identified in the DFS, the mining company estimates that the cost of constructing new plant will be approximately $80 million.
The financial commitment and operating ability of the mining company will considerably remove risk factors in bringing Liqhobong into major production. Under the MOU, funding for the project is substantially secured and operating risks reduced. On the basis of the $80 million capital cost as noted above, the mining company would provide $64 million for a 51% of the Company's interest in Liqhobong, which is currently 75% of the project, the other 25% being owned by the Government of Lesotho.
As indicated in the trading update on 15 December 2009, the Company believes the outlook for 2010 to be very positive. The market price for rough diamonds has substantially recovered from falls in late 2008 and early 2009 and progress is being made towards the funding and commencement of construction of a power line to connect Liqhobong to the Lesotho electricity grid by mid 2011.
Frank Scolaro, Chairman of Kopane said today "The signing of the MOU with the mining company is a significant step in the development of our Liqhobong assets. Our MOU partner proposes to fund 80% of the cost of new plant and the recommencement of production, which substantially reduces risks of funding and implementation, and avoids dilution for Kopane's shareholders. Our company has a healthy cash balance with low costs and no debt. I look forward to progressing Kopane into a major diamond producing company."
About Kopane
Kopane Diamond Developments Plc ("Kopane") is a diamond producer, developer and explorer with core projects at Liqhobong in Lesotho, Southern Africa. The Liqhobong operations are operated by Liqhobong Mining Development Company ("LMDC") which is 75% owned by Kopane and 25% by the Government of Lesotho ("GoL").
LMDC has to date produced over 350,000 carats of diamonds since operations commenced at the end of 2005. The principal development project is the Main Pipe which has the potential to produce at a rate of one million carats per annum.
Kopane Diamond Developments Plc
Frank Scolaro, Chairman
James Cable, Finance Director
+44 (0) 20 7963 9590
FinnCap
Matthew Robinson/Ed Frisby, Corporate Finance
Stephen Norcross, Corporate Broking
+44 (0) 20 7600 1658
