African Diamonds (AFD), the diamond outfit aiming to develop the AK6 mine ÔÇô near OrapaÔÇö urged its shareholders to offload all their shares to Lucara under a very “compelling” share swap bid aimed at creating a bigger diamond miner.
John Teeling, the maverick chairman of the BSE quoted outfit pleaded with investors on Monday to support the proposed deal saying it will give them a chance to own shares in a bigger company and indirectly have a stake in African Diamonds that is poised to start the┬ádevelopment of the AK6 mine.
The total value of the┬á proposed┬á transaction will be $ 82 million Canadian (US $ 80 million, P 528 million ) ÔÇörepresenting a 27 percent upside ÔÇö┬á┬á based on Lucara price and Canadian dollar exchange rate┬á as at the close of┬á business on Friday.
┬á“The logic of this deal is compelling.┬á Marrying African Diamonds and Lucara will create a $240 million Canadian emerging diamond producer controlling 2 new kimberlite diamond mines.┬á The new company, with strong financial backing, will be perfectly poised to exploit an expected gap in diamond supply,” Teeling said.
Under the proposed deal, shareholders will hold an indirect stake in AK6 ÔÇô the 26.57 percent holding in Lucara is close to the stake in AK6 held prior to the De Beers takeout, they get 26.57 percent of the Lucara interest in the high diamond value Mothae mine in Lesotho.
Further, he said the current shareholders of┬áAfrican Diamonds will get┬átotal control of Botswana Exploration, which will be an AIM/Botswana listed vehicle, holding all of the current African Diamonds exploration interests.
Botswana Exploration, which is a new company said it is in good cash standing with exploration┬áopportunities in Botswana, and advanced licence applications in Zimbabwe and Cameroon.
“Botswana Exploration will hold all of the interests of African Diamonds┬áapart from AK6.┬á These interests include cash, currently at US $2.9 million, exploration ground in Botswana, including AK8, AK9 and BK5, advanced stage diamonds licence applications in the Marange┬áarea of Zimbabwe and licence applications in Cameroon and indirect exposure to diamond plays in West Africa and the DRC,” Teeling said.┬á
The company is expected to apply for listing┬áboth on the Botswana Stock Exchange (BSE) and in London upon the┬ácompletion of the share swap deal.
Teeling, a significant┬áshareholder┬áin┬áAfrican Diamonds Plc with his family stake standing at 25 percent, is one of the people who┬ádirectly waged┬áverbal war against De Beers ÔÇô leading to the latter having to pull out of their joint venture, Boteti, that was geared to develop AK6┬ádiamond resource.
“I hated coming here in the last two years because there was a lot of bad news,” Teeling had said,┬áreferring to the troubled relationship between African Diamonds and De Beers over their Boteti joint venture.
The troubled relationship that stemmed from lack of trust between the partners ended up towards the end of 2009 when De Beers decided to sell its stake to the Canadian-based company Lucara for US $ 49 million.
As De Beers pulled out,┬áTeeling urged investors to open their purse to help┬áincrease African Diamonds shareholding under the new shareholding arrangement from 28 ÔÇôto- 40 percent as then agreed with Lucara.
Teeling┬á loudly praised┬á African Diamonds of being “lucky” for having a concession┬á within Orapa region ,┬á being what he calls “the best diamond address in the world”, saying the proposed mine┬á has the potential to produce 1 million carats at revenue levels of US $ 200 million or P1.3 billion.
Lucara’s shares are listed on the Toronto Venture board and the intent is to list in Botswana.┬á The current market capitalisation of Lucara is $180 million Canadian.┬á
A circular containing the terms of the Scheme of Arrangement is expected to be posted to the African Diamonds┬áshareholders by October 31st.