PARAGON Diamonds on Monday warned of “material uncertainty” over its financial position until a funding package is secured.
The Alternative Investment Market-listed company, which committed to buy a 75 percent stake in Lesotho’s Mothae Diamond Mine from Canada’s Lucara Diamond in May, had trading in its shares temporarily suspended on Monday until it could clarify its financial position. Paragon said it can give “no assurances” over the terms and timing of new funding arrangements.
“The directors of Paragon remain in negotiations with possible funding providers to secure finance to complete the acquisition of Mothae, provide development funding for Lemphane and to repay short-term debts, including the £500 000 (about M10.8 million) loan facility, which is due on November 18,” Paragon noted in a statement.
If that loan is not repaid within five business days, Paragon will be in default, and the lender will be able to demand immediate repayment of the loan at 120 percent of the outstanding amount, or the lender may convert the outstanding loan into shares in the company.
Paragon Diamonds was incorporated i13n 2010. In May 2011, it completed the acquisition of International Diamond Consultants, a privately-owned group of companies which held a prospecting licence over the Lemphane Kimberlite project in Lesotho. The subsequent exploration programme resulted in the award of a mining lease for the Lemphane Kimberlite in March 2014.
Paragon secured the formal approval necessary from government to complete the acquisition and operatorship of Mothae Diamond Mine in May from Lucara Diamond Corp. The approval followed Paragon’s finalisation of an agreement on 14 July 2015with Lucara Diamond Corporation to purchase its 75 percent stake in Mothae for $8.5-million (about M92.42 million).
Situated on the southern edge of the Kaapvaal Craton, which hosts the diamondiferous northern Lesotho kimberlite field, Mothae Diamond Mine is only five kilometres from Gem Diamonds’ Letšeng mine. Mothae Diamond Mine is 25 percent-owned by the government of Lesotho.
Next to Letšeng mine, Mothae Diamond Mine has an indicated resource of one million carats and an inferred resource valuation of $1 billion.
According to Mining.com, Paragon’s situation reflects the challenging times currently affecting large parts of the diamond chain.
“Dealers are facing increasing difficulties to sell their existing inventory into softening markets, while also facing tougher financing conditions. At the same time, major players such as Anglo American-owned De Beers, the world’s No.1 diamond producer, are finding it difficult to place expected volumes of rough stones with traders and polishers,” the publication noted.
“And even Russia’s Alrosa, the world’s top diamond producer by output in carats, said last month it was able to sell only 42 percent of the precious stones it mined in the quarter ending in September.”