Dwyka Resources subsidiary in reverse takeover for diamonds

West Perth-based minerals developer Dwyka Resources Ltd will sell its diamond and industrial subsidiary Dwyka Diamonds Holdings Ltd to UK-based KimCor Diamonds Plc through a scrip issue worth around $21.7 million.

Under the deal, Dwyka will acquire a 50.09 per cent stake in the company, with Dwyka chief executive Melissa Sturgess to become chair of KimCor in a non-executive capacity. She will be joined on the company's board by Cedric Bredenkamp, the managing director of Dwyka's South African operations.

DDH is a holding company, registered in Mauritius and wholly owned by Dwyka Resources, whose subsidiaries are principally engaged in the exploration and mining of diamonds in South Africa and Tanzania.

Dwyka said in an announcement that the transaction would create a mid-tier (by volume) diamond producer with potentially greater access to capital than is currently available to either KimCor or Dwyka Resources in relation to its smaller suite of diamond assets.

Both Dwyka and KimCor are listed on the London Stock Exchange's Alternative Investment Market.

The full text of a Dwyka Resources announcement is pasted below

Approval of waiver of the obligation to make a mandatory offer under Rule 9 of the Takeover Code
Admission of Enlarged Share Capital and Existing Warrants to trading on AIM
and Notice of Extraordinary General Meeting

Highlights

• KimCor to acquire Dwyka Resources' diamond and industrial assets
• Establishes KimCor as a mid tier diamond producer by volume
• Allows for funding of further acquisitions using internally generated cash flows
• GBP4.26m raised from institutional and high net worth investors
• Transaction subject, inter alia, to the approval of KimCor and Dwyka Resources shareholders

The boards of KimCor and Dwyka Resources are pleased to announce that they have today conditionally agreed that KimCor will acquire the entire issued share capital of Dwyka Resources' diamond and industrial subsidiary DDH, a holding company registered in Mauritius, whose subsidiaries are principally engaged in the exploration and mining of diamonds in South Africa and Tanzania, in consideration of the issue to Dwyka Resources of 134,383,718 new Ordinary Shares.

The board of KimCor is also pleased to announce a conditional placing of 65,535,000 new Ordinary Shares at the Placing Price with institutional investors. The proposed placing is conditional, inter alia, on completion of the Acquisition.

By reason of the size of DDH in relation to KimCor, the Acquisition is classified as a reverse takeover under the AIM Rules. The AIM Rules require that completion of the Acquisition is subject to the prior approval of KimCor shareholders, which will be sought at an extraordinary genereal meeting of the Company, and the publication of an AIM admission document, which is expected to be posted to KimCor shareholders as soon as practicable after the date of this announcement. Under the ASX Listing Rules, completion of the Acquisition is subject to the prior approval of Dwyka Resources shareholders, which will be sought at an extraordinary general meeting of those shareholders. A circular convening that meeting is expected to be posted to Dwyka Resources shareholders as soon as practicable after the date of this announcement.

Certain definitions and terms apply throughout this announcement and your attention is drawn to the table at the end of this announcement where these definitions and terms are set out in full.

Transaction Summary

• The consideration payable in respect of the Acquisition is to be satisfied through the issue to Dwyka Resources of 134,383,718 New Ordinary Shares, valuing all of the ordinary shares of DDH at approximately £8.73 million at the Placing Price and £9.74 million based on the closing middle market price of 7.25 pence per Ordinary Share on 20 August 2007, being the business day immediately prior to this announcement.
• The Consideration Shares will represent 50.09 per cent. of the Enlarged Share Capital following Admission.
• The Board of KimCor is to be strengthened through the appointment of Melissa Sturgess and Cedric Bredenkamp, conditional upon Completion.
• The transaction will create a mid-tier (by volume) diamond producer with potentially greater access to capital than is currently available to either KimCor or Dwyka Resources in relation to its smaller suite of diamond assets.
• In view of its size and nature, the Acquisition constitutes a reverse takeover of the Company under the AIM Rules and therefore requires the prior approval of Shareholders at an Extraordinary General Meeting.
• Strand Partners Limited is acting as Nominated Adviser and Broker to KimCor in connection with the Proposals.

The transaction will leave Dwyka Resources free to concentrate on the Muremera nickel project owned by its wholly-owned subsidiary Danyland Limited and the Swazi Gold project operated by Swazi Gold Ventures (Pty) Ltd (in respect of which Dwyka Resources' wholly-owned subsidiary Karrinyup Holdings Limited has a 50% shareholding), whilst continuing to retain a controlling interest in the diamond and industrial assets through its shareholding in KimCor. As such, it is consistent with the diversification strategy announced by Dwyka Resources on 17 January 2007.

The full text of an announcement made by KimCor in relation to the transaction is available from the KimCor webpage.

Melissa Sturgess, Chief Executive Officer of Dwyka Resources, commented:
"The consolidation of Dwyka Resources' diamond assets with those of KimCor creates opportunities for shareholders of both companies, establishing a mid tier diamond producer and explorer with a focussed management team and an integrated suite of assets. Dwyka Resources' controlling shareholding in KimCor will allow Dwyka Resources shareholders to benefit from potential upside in the diamond operations, while the company itself can look to further drive shareholder value through its nickel and gold projects."