Firestone Diamonds plc has suffered a blow in the disposal of its Botswana assets after the Canadian company that was supposed to purchase the local operations failed to negotiate the first huddle to wrap up the deal.
Tango Mining Limited, which entered into a conditional agreement with Firestone to buy the operations including its interest in the BK11 mine, has stated that it is unable to pay US$0.3 million into escrow as a deposit by 30 September 2015 as stipulated in the agreement.
In July, the two parties announced a conditional sale agreement in respect of the disposal of Firestone’s Botswana operations to Tango Mining Limited. However, on 30th September Tango Mining informed Firestone negotiators that it had failed to pay US$0.3 million into escrow as a deposit, as stipulated in the CSA.
The AIM-quoted diamond development company said on Friday that Tango Mining has formally requested an extension to the previously disclosed timetable, in order to complete its fundraising activities in relation to the consideration still due, being US$7.65 million.
“We are currently in discussions with Tango Mining to consider its request,” read the statement from Firestone.
The assets were to be sold for US$8.0 million (about P80m) in cash with US$0.35 million to be paid immediately, US$0.30 million to be placed in escrow as a deposit by no later than 30 September 2015, and the remainder to be received on completion. However, the deal was also subject to Tango Mining raising the balance of the consideration, being US$7.35 million and the parties gaining approval from the Competition Authority in Botswana. Equally, the parties would first seek Botswana ministerial approval for the transfer of the controlling interest in Monak. Tango Mining would also seek the requisite approvals by the TSX Venture Exchange in respect of the disposal.
“If the conditions of the agreement are not satisfied or waived by the Drop Dead Date and an extension is not agreed between the Company and Tango Mining, the disposal will not complete,” said Firestone. Tango Mining had agreed to pay into escrow the ongoing cost of BK11’s care and maintenance programme from the date of the Agreement up to the earlier of the date of completion of the Disposal and the Drop Dead Date, up to a maximum of US$40,000 per month. Firestone’s principal investment in Botswana is its BK11 mine. Following a strategic review, the mine was placed under care and maintenance in February 2012, when the Firestone board decided to focus on the company’s interests in the Kingdom of Lesotho, for which it raised US$225.2 million earlier this year. BK11 mine is located in the Orapa kimberlite field in northern Botswana, approximately 7km north-west and 20km south-east of Debswana’s Letlhakane and Orapa mines respectively, and is within 5km of Karowe mine which is currently operated by Lucara Diamond Corporation.
Firestone is of the view that its Botswana operations present a rare opportunity that has the ability to deliver strong returns under the ownership of an operator for whom it would be a core asset.