Diamonex Limited, the tri-listed junior miner, has issued a locally listed convertible bond. The company issued the BWP 50 000 000 convertible bond in the local Botswana capital market on 3 September, 2007.
The bond pays a semi-annual fixed rate coupon of 13.20% and matures on the 3 September 2011. The inaugural coupon has successfully been paid on the bond on the 3rd March. The embedded conversion option provides investors with the right, but not the obligation, on maturity to convert 10% of the nominal value of the bond to ordinary shares in Diamonex Limited at a conversion price of P1.83. The equity of the company is listed on the Australian Stock Exchange (ASX), the London Alternative Investment Market (AIM) and locally, on the Botswana Stock Exchange (BSE). The share currently trades at P 2.25 on the BSE, placing the conversion option on the convertible component of the bond in-the-money by 42 thebe.
The Bond has been a first for the Botswana capital market in many respects. It is the first resource bond to be issued in the local capital market. Furthermore, it is also the first convertible bond as well as the first resources bond to qualify for a listing on the BSE. The bond was arranged and placed with local Botswana institutions by Fleming Advisors (Pty) Limited. Fleming Advisors is a Fleming Group company, based in Gaborone. Fleming Advisors (Pty) Limited is a leading debt origination and specialist fixed income solutions provider in Botswana.
The Fleming Advisory Team has been involved in a number of bond transactions in the local Botswana capital markets which include bond transactions arranged for Stanbic Bank Botswana, the Botswana Development Corporation and Kgalagadi Breweries. The Team manages the Fleming Aggregate Bond Index (FABI). The FABI is a total return bond index, representative of the market portfolio of bonds that trade in the local Botswana capital market. The FABI is used as the official local bond market benchmark for local Pension Funds.
Since Diamonex has been listed in this country, the company has been active in the exploration for diamonds, but at the same time, it has also been granted a mining license to exploit five identified, diamond bearing kimberlites in the Martin’s Drift area of Botswana. The mining company to exploit this resource, called the Lerala Diamond Mine, is due to be commissioned before the end of the second quarter of 2008. It will deploy state-of-the-art technology to deliver at least 330 000 carats of diamonds to the market per annum, for an initial ten year period.
There is scope to extend the life of the mining project beyond the initial ten year period by mining at greater depths. Furthermore, there are a number of other high priority target areas that are being investigated for new, as yet unidentified, kimberlites. Revenue from the samples of diamonds that have been recovered as part of the trial mining programme has averaged approximately USD 60.00 per carat. These developments by this junior miner have attracted sufficient external interest in that Diamonex has now been able to enter into an agreement to investigate two known diamond bearing kimberlites known as the Sloan Deposit kimberlites, in the United States. This offshore project is in line with the objective of the company to procure a pipeline of new projects wherever such opportunities may exist.
The ability to invest in a company like Diamonex affords Batswana an opportunity to benefit from the emerging resource sector and also provides new and diversified opportunities for its citizens to have an interest in this sector through the returns that it can generate, but also through job opportunities that this project has brought about.