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Obtala to sell Paragon loan notes to Titanium Capital

27th August 2014

By: Leandi Kolver

Creamer Media Deputy Editor

  

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JOHANNESBURG (miningweekly.com) – Aim-listed Obtala Resources has entered into an agreement to sell its nearly £2-million of loan notes in diamond development and production company Paragon Diamonds to Titanium Capital Investments for £998 000.

Titanium could convert the notes into ordinary shares of 1p each in Paragon at a price of 2.75p.

“The board of Obtala is very pleased to have reached this agreement with Titanium, as it allows the company to reduce its financial risk with regard to the loan notes and immediately enhance the balance sheet of Obtala by about £1-million. We will look to devote the new funds to deliver our principal business, being agriforestry in Africa,” Obtala chairperson Francesco Scolaro said.

Further, Titanium had also been granted a call option to buy 60-million ordinary shares in Paragon from Obtala, which currently had a 27.33% shareholding in Paragon, at a price of 3.25p a share at any time up to December 1.

Should Titanium exercise this option, which would reduce Obtala’s shareholding in Paragon to 9.2%, Obtala would realise a further £1.95-million in gross proceeds.

Scolaro said this additional cash would enable Obtala to accelerate its business plan.

Meanwhile, given the agreement reached between Obtala and Titanium, Paragon would appoint Titanium CEO Philip Manduca as executive chairperson with immediate effect, with current Paragon executive chairperson Martin Doyle assuming the role of nonexecutive director.

"I am delighted to be joining Paragon at a time when production is on course to start in the near term at our 80%-owned Lemphane kimberlite mine, which is located close to the world-class Letseng pipe, in Lesotho,” Manduca commented. 

Further, Titanium had also agreed to take responsibility for funding the Phase 1 mine development at the Lemphane diamond mine, which would entail two years of openpit mining targeting one-million tonnes a year to produce 20 000 ct. Phase 1 also included the completion of a bankable three-dimensional geological model supported by additional resource definition drilling.

“I am assuming the responsibility to procure for Paragon its funding needs in both Stage 1 and, within two years, Stage 2 of its development of the Lemphane mine, while concurrently exploring further options, including the company's assets in Botswana and Zambia, that can accelerate Paragon's revenue profile,” Manduca said.

He added that the company’s vision over the next three years was to develop Paragon into a vertically integrated diamond house with established production from majority owned mines.

“Through related business ventures and joint ventures in diamond mining, trading, manufacturing and sales, investors will be able to participate in downstream commercialisation activities from the mine to the high street,” he said. 

Paragon also noted that, as part of the negotiations, Titanium and Paragon would establish a separate sales and marketing company in which Paragon would hold a minimum 25% interest, rising to a maximum of 50% once fully established. 

“This entity will seek to buy and sell diamonds globally and is conditional upon the call option granted by Obtala being exercised in full by Titanium,” Paragon said.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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