West Perth-based Lonhro Mining Ltd will sell its stake in a South African diamond mine for over $15 million in a bid to focus on its flagship Lulo project in Angola.
West Perth-based Lonhro Mining Ltd will sell its stake in a South African diamond mine for over $15 million in a bid to focus on its flagship Lulo project in Angola.
The company has entered into an option agreement with New African Mining to sell its 80 per cent interest in the Schmidtsdrift mine and associated mining equipment.
Under the deal and on completion of due diligence, NAM will pay Lonrho $US7.5 million for the mine and $US5.85 million for the mining fleet and equipment.
Lonrho said funds generated from the sale, about $US6 million after payment of debt, will go towards the exploration and development Lulo diamond project.
Lonrho started operations at Schmidtsdrift in 2006 and up to the end of May 2008, the mine has produced 16,805 carats of diamonds.
Below is the full announcement:
Australian-based diamond exploration and development company Lonrho Mining Limited (ASX: LOM) ("Lonrho Mining" or the "Company") today announced it has entered into an option agreement to sell the prospecting right and associated mining equipment to New African Mining ("NAM").
The Schmidtsdrift mine - owned by Lonrho Mining (80%) and the Schmidtsdrift Communal Property Association (20%) - comprises six contiguous farms along the western bank of the Vaal River, with a combined area of 320km².
Since the Company commenced operations in April 2006 up to 31 May 2008, the Schmidtsdrift mine has produced 16,805 carats of diamonds from 3,209,484 tonnes at an average grade of 0.5 carats per hundred tons. The production included 338 stones in excess of 5 carats in size, including a rare 235 carat stone, two 66 carat stones, a 61 carat stone and 45 stones between 15 and 50 carats in size.
Under the Option Agreement NAM will have an exclusive option for 14 days to conclude all the necessary documentation and formal agreements for the sale of the Company's interests in the Schmidstdrift mining operation. NAM has agreed to pay an option fee of US$500,000 for the exclusive right to purchase the Company's interest in the Schmidtsdrift prospecting right (US$7,500,000) and the mining fleet and equipment (US$5,850,000).
The option fee is non-refundable and will be deducted from the purchase price of the transaction. Due diligence has been completed in relation to the sale of the prospecting right. It is expected that completion of due diligence in relation to sale of the equipment will occur during the next 14 days during which the parties will finalise the sale agreements in accordance with the above commercial terms.
On completion of the transaction and after payment of debt and other associated costs, the Company will retain sale proceeds of approximately US$6 million. These funds will in due course be applied towards the exploration and development of the Lulo diamond project in Angola.
Commenting on the sale, Lonrho Mining's Chief Executive Officer Charles Mostert said: "The Company has undertaken the divestment of the Schmidtsdrift mine so that it can focus its efforts on developing the Lulo diamond project in Angola. The Lulo project is capable of delivering significant value to shareholders and we believe it is important that the Company's resources are directd towards unlocking the potential value as quickly as possible."
