Firestone Diamonds Offer For Kopane Diamond -5-

21st Jul 2010 11:55

Kopane by Firestone will be value enhancing and will provide significant benefits to both Firestone Shareholders and Kopane Shareholders. * Firestone will acquire a large Mineral Resource at Liqhobong at the final stages of a DFS with substantial economic potential that will allow the Enlarged Group to significantly expand its production base. * Kopane will gain exposure to a diversified portfolio of diamond projects, with cash flow from BK11, potential future cash flow from toll treatment projects and a large number of both early and advanced stage kimberlites with significant potential for further economic discoveries. * Kopane will have access to Firestone's proven capability in kimberlite resource development, and mine construction, development and operation, which the Firestone Directors believe will enable full scale production to be achieved at Liqhobong in a shorter time and at a lower cost than currently planned. * The Firestone Directors and the Kopane Directors believe that the portfolio of projects and operational capability that the Enlarged Group will control will enable the Enlarged Group to become one of the leading mid-tier diamond producers, allowing Firestone to pay dividends to its shareholders in the mid to long term. * The Enlarged Group will benefit from having a larger market capitalisation, which the Firestone Directors and the Kopane Directors believe is likely to result in greater liquidity in the trading of Firestone's shares, an improved rating and greater access to capital to fund the Enlarged Group's growth plans. * The Firestone Directors believe that the proximity of Firestone's and Kopane's respective assets in Botswana and Lesotho and the fact that both Firestone and Kopane are listed on the AIM market will allow the Enlarged Group to operate more cost effectively by sharing corporate, administrative and technical support services across a larger portfolio of projects. * Rough diamond prices continue to strengthen, with prices recently returning to the previous highs seen in 2008. With the substantial shortfall in rough diamond supply projected in the coming years, the Firestone Directors believe that the Enlarged Group will be well positioned for significant growth and to become one of the leading mid-tier diamond producers. 4. Kopane Shareholder approval and recommendation of the Kopane Board The Kopane Board is receiving financial advice on the Acquisition from finnCap. The Kopane Board, which has been so advised by finnCap, considers the terms of the Acquisition to be fair and reasonable. In providing advice to the Kopane Board, finnCap has taken into account the commercial assessments of the Kopane Directors. The Kopane Directors unanimously intend to recommend that Kopane Shareholders vote in favour of the Scheme at the Court Meeting and in favour of the Kopane Resolution at the Kopane GM. None of the Kopane Directors hold any Kopane Shares, however, they have undertaken to Firestone that if they acquire any Kopane Shares prior to the Voting Record Time they shall vote such Kopane Shares in favour of the Scheme at the Court Meeting and the Kopane Resolution at the Kopane GM. Obtala, a company associated with Francesco Scolaro, the chairman of Kopane, which holds directly and indirectly 48,695,000 Kopane Shares representing approximately 16.15 per cent. of Kopane's issued ordinary share capital, has irrevocably undertaken to Firestone to vote in favour of the Scheme at the Court Meeting and the Kopane Resolution at the Kopane GM. In addition, certain other Kopane Shareholders representing, in aggregate, approximately 19.58 per cent. of Kopane's issued ordinary share capital, have irrevocably undertaken to vote in favour of the Scheme at the Court Meeting and the Kopane Resolution at the Kopane GM.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. 5. Firestone Shareholder Approval and Recommendation of the Firestone Board The Firestone Board is receiving financial advice on the Acquisition from Evolution Securities. The Firestone Board, which has been so advised by Evolution Securities considers the terms of the Acquisition to be fair and reasonable. In providing financial advice to the Firestone Board on the Acquisition, Evolution Securities has taken into account the commercial assessments of the Firestone Board. The Acquisition is classified under the AIM Rules as a reverse takeover of Firestone due to the size of the Acquisition in relation to Firestone and therefore requires approval by Firestone Shareholders at the Firestone General Meeting. In addition, Firestone requires Firestone Shareholders to approve an increase to its authorised share capital and the allotment of the New Firestone Shares in order to implement the Acquisition. Accordingly, the Acquisition is conditional on the approval by Firestone Shareholders of the First Firestone Resolution at the Firestone GM. The Firestone Board intends unanimously to recommend that Firestone Shareholders vote in favour of the Firestone Resolutions, as they have irrevocably undertaken to do in respect of their own beneficial holdings of 2,000,363 Firestone Shares (representing as at the date of this Announcement, in aggregate, approximately 1.56 per cent. of the existing issued ordinary share capital of Firestone). In addition, Firestone and Kopane have also received irrevocable undertakings to vote in favour of the Firestone Resolutions at the Firestone General Meeting from certain other Firestone Shareholders representing, in aggregate, approximately 28.27 per cent. of Firestone's existing issued ordinary share capital. 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. 6. Information on Firestone Firestone is an international diamond mining and exploration company with operations primarily focused on Botswana. Botswana is the world's largest and lowest cost producer of diamonds, with annual production worth over $3.2 billion, and is considered to be one of the most prospective countries in the world to explore for kimberlite - the primary source rock for diamonds. Botswana has a ratio of economic kimberlites of 8%, compared to the global average of 1%. Firestone is the largest holder of mineral rights in Botswana's kimberlite fields, with 16,500 square kilometres under license, covering the entire Tsabong kimberlite field and significant areas around the major Orapa and Jwaneng mines. Firestone has 108 kimberlites in its portfolio, of which 30 have been proven to be diamondiferous to date. Firestone recently commenced commercial production at its BK11 kimberlite in the Orapa region. This represents a major milestone for Firestone, making it one of only three listed kimberlite producers worldwide outside of the major mining companies. The Firestone Directors consider that the achievement of 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. Phase 1 of the BK11 production plant, which has a capacity of approximately 650,000 tonnes per annum, is now in operation. Work on Phase 2 of the production plant, which will increase production capacity to 1,500,000 tonnes per annum, is on target for completion in Q3 2010. Under the BK11 mine plan approximately 11.1 Mt of kimberlite is expected to be mined at an average grade of 8.5 cpht, giving total production of approximately 1 million carats over a 10 year mine life at an average value of $155/carat (March 2010 valuation). Initial mining operations will be focused on the KW area, where approximately 5.4 Mt of kimberlite is expected to be mined at an average grade of 12.6 cpht, and at a diamond value of $175/carat (March 2010 valuation). Firestone intends to use cash flow from BK11 to accelerate the evaluation of its other kimberlites in Botswana. The primary focus of these efforts will initially concentrate on the 21 other kimberlites controlled by Firestone in the Orapa kimberlite field close to the BK11 mine, of which 8 have been proven to be diamondiferous. Firestone intends to use the infrastructure that has now been established at BK11 to evaluate the economic potential of these kimberlites rapidly and at relatively low cost. The Firestone Directors believe that Firestone has the potential to develop a sizeable satellite mining operation based around BK11 and multiple other kimberlites in the Orapa area. Of these, the BK16 kimberlite is at the most advanced stage of evaluation, with high quality diamonds and encouraging grades recovered from historical work, and is expected to be the first of the satellite kimberlites to be evaluated for commercial mining. Firestone also intends to resume exploration and evaluation work at the Tsabong kimberlite field, either through a joint venture with an industry partner or by resuming its own work. The Tsabong kimberlite field is one of the largest diamondiferous kimberlite fields in the world, with 84 kimberlites discovered to date, of which 20 have been proven to contain diamonds. Tsabong is noted for (MORE TO FOLLOW) Dow Jones Newswires July 21, 2010 06:55 ET (10:55 GMT)