DiamondCorp to seek merger or sale to resolve liquidity crisis

Paul Loudon, CEO, DiamondCorp

DIAMONDCORP, the Johannesburg-listed diamond mining company, said it was considering a sale or merger in order to solve its funding difficulties.

This was in parallel to “accelerated discussions” with shareholders and third party potential lenders to stump up £500,000 in the short-term in order to pay creditors.

Paul Loudon, CEO of DiamondCorp, said there had been “… initial expressions of interest from potential acquirers who are credible participants in the company’s sector”.

He added that the board would conduct “a wider strategic review to explore additional opportunities including a corporate transaction such as a merger with or offer for the group by a third party, or a sale of the group’s businesses”.

“The board therefore intends to pursue any such possible alternatives to ensure the best outcome for its shareholders,” he added.

The company told Miningmx on October 12 that it had held discussions on a potentially transformative deal which would see it import fresh executive mining and finance skills whilst significantly refinancing the balance sheet.

DiamondCorp, which is redeveloping the Lace diamond mine in South Africa’s Free State province, has endured a torrid couple of weeks in which its share price as plummeted amid production delays, interruptions and a liquidity crisis.

Then on October 13, it reported a safety-related stoppage at the mine following a vehicle fire. Commercial production was first planned for December, 2015.

The Department of Mineral Resources (DMR) inspected the mine’s premises and slapped a Section 54 on the operation – a outcome that DiamondCorp said it was prepared to challenge in a court interdict. During this time, investors began to flee the share which is 50% weaker over the last seven trading days.

On October 14, it said interim financing discussions had fallen through after “… the third party with whom the company has been in advanced discussions for the provision of a convertible debt facility has withdrawn from such discussions due to the adverse movement in the company’s share price”.

Production has resumed at the mine, however. In a separate announcement, DiamondCorp said the Section 54 notice had been lifted by the DMR.

“The financial impact of the four days of mining lost as a result of the shutdown instruction has been minimised by a rescheduling of programme maintenance and the fact that the mine was ahead of its planned tonnage for the month at the time of the shutdown,” the company said.