Firestone Diamonds Offer For Kopane Diamond -4-

21st Jul 2010 11:55

capital have irrevocably undertaken to vote in favour of the Scheme and the Kopane Resolution. In total Firestone has received irrevocable undertakings to vote in favour of the Scheme at the Court Meeting and the Kopane Resolution at the Kopane General Meeting from Kopane Shareholders representing approximately 35.73 per cent. of Kopane's existing issued ordinary share capital. The Acquisition is classified as a reverse takeover of Firestone under the AIM Rules and therefore requires Firestone Shareholders' approval. In addition, to implement the Acquisition Firestone requires Firestone Shareholder approval in relation to the increase of its authorised share capital and to allot the New Firestone Shares which will be sought at the Firestone GM. In addition, Firestone will be seeking shareholder consent to adopt new articles of association and to disapply statutory pre-emption rights. Firestone and Kopane have received irrevocable undertakings to vote in favour of the Firestone Resolutions at the Firestone GM from each of the Firestone Directors who, directly or indirectly, hold in aggregate 2,000,363 Firestone Shares, representing approximately 1.56 per cent. of the existing issued share capital of Firestone. Firestone and Kopane have also received irrevocable undertakings to vote in favour of the Firestone Resolutions at the Firestone GM from certain other Firestone Shareholders who, directly or indirectly, hold in aggregate 36,151,667 Firestone Shares, representing approximately 28.27 per cent. of the existing issued ordinary share capital of Firestone. In total Firestone and Kopane have received irrevocable undertakings to vote in favour of the Firestone Resolutions at the Firestone General Meeting from Firestone Shareholders representing approximately 29.83 per cent. of Firestone's existing issued ordinary share capital. 2. Terms of the Acquisition The Acquisition involves the acquisition by Firestone of the entire issued and to be issued ordinary share capital of Kopane and is to be effected by way of a scheme of arrangement between Kopane and Scheme Shareholders under Part 26 of the Companies Act. Under the terms of the Scheme, which will be subject to satisfaction or (where appropriate) waiver of the Conditions set out in Appendix I and to the further terms set out in Appendix I, Scheme Shareholders who are on the register of members at the Scheme Record Time will receive: 0.4657 of a New Firestone Share for every 1 Kopane Share and so in proportion for any other number of Scheme Shares held at the Scheme Record Time. Fractions of New Firestone Shares will not be allotted or issued pursuant to the Acquisition and fractional entitlements will be rounded down to the nearest whole number of New Firestone Shares. The terms of the Acquisition have been agreed on the basis of a price of 36.5 pence for each existing Firestone Share and a price of 17.0 pence for each Kopane Share which values the Kopane Fully Diluted Share Capital at approximately GBP52.7 million. On this agreed basis, the Acquisition represents a premium of 33.33 per cent. to the Closing Price of a Kopane Share of 12.75 pence on 20 July 2010 (being the Business Day prior to this Announcement), a premium of 44.68 per cent. to the Closing Price of a Kopane Share of 11.75 pence on 9 February 2010 (being the Business Day prior to the announcement by Kopane regarding a possible offer for Kopane) and a premium of 42.86 per cent. to the volume weighted average price of a Kopane Share of 11.90 pence over the thirty business days preceding the date of this Announcement Based on the current Kopane issued ordinary share capital, the number of New Firestone Shares to be issued in connection with the Acquisition will be 140,413,465. Assuming no further Kopane Shares or Firestone Shares are issued in the period between the date of this Announcement and the Effective Date, immediately following the Effective Date approximately 52 per cent. of the enlarged issued ordinary share capital of Firestone will be held by former Kopane Shareholders and approximately 48 per cent. will be held by existing Firestone Shareholders. Based on the Kopane Fully Diluted Share Capital, the number of New Firestone Shares to be issued in connection with the Acquisition will be 144,268,053 and were all outstanding Kopane Options to be exercised prior to the Effective Date immediately following the Effective Date approximately 53 per cent. of the enlarged issued ordinary share capital of Firestone would be held by former Kopane Shareholders and approximately 47 per cent. would be held by Firestone Shareholders. If the Scheme becomes effective, it will be binding on all Scheme Shareholders irrespective of whether or not they attended or voted in favour of the resolutions at the Court Meeting or the Kopane GM. The New Firestone Shares will be issued and credited as fully paid, and on identical terms to and will rank pari passu with the Existing Firestone Shares, including the right to receive and retain all dividends and other distributions declared, paid or made on Firestone Shares after the Scheme becomes effective. Application will be made for the New Firestone Shares to be admitted and for the Existing Firestone Shares to be re-admitted to trading on AIM. The Acquisition will be subject to the conditions and further terms set out in the paragraphs contained in Appendix I to this Announcement and to be set out in the Scheme Document. 3. Background to and reasons for the Acquisition Both Firestone and Kopane are diamond exploration and development companies with a geographical focus on Southern Africa. The majority of Firestone's assets are located in Botswana and Kopane's principal asset is located in Lesotho. Firestone has assembled a substantial portfolio of diamond projects in Botswana and recently commenced production at its BK11 kimberlite in the Orapa region. The Firestone Board considers that Firestone's achievement in commencing production in just over three years from being granted a prospecting licence for BK11, and less than nine months after the decision was made in December 2009 to proceed with mine development, demonstrates Firestone's significant capabilities in evaluating and developing kimberlite projects. Firestone has a further 107 kimberlites in its Botswana portfolio, of which to date 29 have been proven to contain diamonds. Firestone intends to use cash flow from BK11 to accelerate the evaluation of these kimberlites with the objective of identifying additional Mineral Resources that can be developed and brought into production. In addition to its exploration and development capabilities Firestone has proven experience in operating diamond projects, having successfully operated the Project Buffels toll treatment project for De Beers in South Africa. The Firestone Board has identified the toll treatment business as a relatively low risk way of generating cash flow as such projects are not dependant on rough diamond prices, thus reducing the potential impact to Firestone of any drop in rough diamond prices that could be caused by future economic or stock market volatility. Accordingly, Firestone is continuing to develop its toll treatment business and has several advanced toll treatment opportunities in both Botswana and Namibia that have the potential to generate significant cash flow for the Firestone Group. Kopane's principal asset is the Liqhobong project in Lesotho, where a substantial resource of over 90Mt at an average grade of 34.3cpht containing 31 million carats has been identified at the Main Pipe. Small scale production was carried out at the Satellite Plant up to December 2008, when mining operations were suspended due to the sharp fall in diamond prices at that time. Kopane's recent activities have been focused on the completion of a definitive feasibility study on the Main Pipe. Preliminary results from the DFS, which is now at an advanced stage, indicate that the Main Pipe is likely to support a substantial, long life mining operation. Within the scope of publicly available information, Liqhobong is believed by the Firestone Directors to be the third largest undeveloped kimberlite resource, as measured by contained carats (after the Gahcho Kue and Star kimberlites in Canada), and the fourth largest as measured by tonnes (after the Star and Orion South kimberlites in Canada and the Gope kimberlite in Botswana). With capital costs for Liqhobong expected by the Firestone Directors to be significantly lower than for these projects, the Firestone Directors consider Liqhobong to be one of the most attractive undeveloped kimberlites in the world. In parallel with completing the outstanding work on the DFS, Kopane is planning to recommence production at Liqhobong in 2011 employing the Satellite Plant and using diesel-generated power until a connection to the electricity grid is available, which is expected to be in Q1 2012. In addition, following completion of the DFS, Kopane intends to construct a new diamond processing plant which will be significantly larger than the Satellite Plant and of suitable size to optimally exploit the Main Pipe resource. Estimates for the schedule and cost for construction of the new plant are being made as part of the DFS. Firestone intends to proceed with Kopane's plans to recommence production at Liqhobong in 2011 and complete the DFS, subject to undertaking a review of these plans following completion of the Acquisition. The Firestone Directors and the Kopane Directors believe that Firestone's and Kopane's respective projects complement each other, and that the acquisition of (MORE TO FOLLOW) Dow Jones Newswires July 21, 2010 06:55 ET (10:55 GMT)