Download focused on building a leading vertically integrated diamond

Investor Presentation: December 2014
FOCUSED ON BUILDING A
LEADING VERTICALLY
INTEGRATED DIAMOND
PRODUCTION AND
DISTRIBUTION COMPANY IN
AFRICA
“Capturing the value of
a diamond from the ground to the
consumer”
Paragon Diamonds is growing a top
class, vertically integrated, diamond
company which recovers from its mine
in Lesotho, in Africa, large and high
quality diamonds, then follows the
revenue path of the diamonds
downstream through to manufacturing,
By
securing largeand
high value
at source and
polishing
finaldiamonds
distribution
to combining
both a streamlined business model
which allows for ownership of the distribution and sale of diamonds downstream, Paragon
investors
and
retail
to capture
the diamond producing companies currently
Diamonds’
strategy
clearly
differentiates
it from other
listed on the
London markets.
maximum uplift in profits
through
the
value chain for shareholders.
Diamond Production and Investment in Africa
2
Paragon Snapshot
• AIM quoted diamond development and
company in Lesotho, Zambia and Botswana
production
• Strategy to grow into a leading vertically integrated
diamond production and investment company retaining
value from source to end product
• Flagship Lemphane kimberlite diamond project located in
Lesotho, southern Africa, in an established large high
value diamond producing region
• Good mining economics already defined supporting +100
carat /high value diamond model at Lemphane
Market
AIM
• Stage 1 production at Lemphane targeted to commence Q1
2015 – potential to provide significant cash flow in the
near-term
Ticker
PRG
Market Cap.
£16 million
• Additional project pipeline in Lesotho, Zambia and
Botswana representing significant upside revenue stream
Shares in Issue
275.5 million
Nom Adviser/ Broker
Northland
Partners
Financial PR
St Brides
Finance
• Strong diamond market fundamentals – growing demand
for larger diamonds as an investment and store of wealth
Capital
Media
and
• Highly experienced Board and technical team with proven
track records in delivering growth across production and
corporate management
Diamond Production and Investment in Africa
3
The Board
“Strategic appointment in August 2014 of Philip Falzon Sant Manduca, a pioneer in the
European hedge fund industry, to lead Paragon’s development into a leading vertically
integrated diamond production and investment company”
•
•
Philip Falzon Sant Manduca
Executive Chairman
•
•
•
Dr Stephen Grimmer
Managing Director
•
•
•
•
Simon Retter
Finance Director
Martin Doyle
Non-Exec Director
Pioneering 25 year career in the financial industry during which he has founded, managed and sold a
number of leading asset management businesses
CEO of Titanium Capital Group, a private equity investment group of companies, focused on executing
strategic hard asset investments
Alternative investment manager at Titanium Capital LLP which at time of sale had c. US$1 billion
under management
Global macro fund manager at Sant Cassia Investments which was acquired by Eldon Capital with
c. US$1 billion of assets
Previously head of investments at the ECU Group plc, a global macro and currency management
company, managing c.US$1.5 billion of client money
Over 25 years’ mining and geological experience in the diamond industry
Worldwide experience in kimberlite resource development (Koidu, Camtchia, Camutue kimberlite
mines)
PhD in kimberlite related studies
Several senior positions with significant Canadian & London companies
•
Chartered Accountant, trained with Deloitte
Advised corporate transactions including Yamana Gold from AIM to full board and the reverse takeover
of Pan African Resources
Listed Paragon Diamonds in November 2010
•
•
•
Over 30 year’s mining experience with De Beers in Botswana, South Africa, Brazil and Canada
Qualified field geologist and most recently VP Exploration for De Beers Canada
Joined Paragon in October 2012
•
•
Diamond Production and Investment in Africa
4
Strategy
“Objective - to become a leading vertically integrated diamond production
and investment company in Europe, the Far East and Africa”
.
• Build a cash generative diamond production and distribution company
.
• Staged de-risking of flagship open pit Lemphane Project – Stage 1 production
targeted to commence Q1 2015
.
• Capture higher margins mid and downstream via JVs/ SPVs/ offtake agreements
particularly on stones of 10 carats and larger
.
• Reinvest internally generated cash flow into further development and resource
definition at Lemphane ahead of Stage 2 production in 2017
• Maintain low cost corporate structure to ensure as much revenues as possible are
retained for further reinvestment, value creation and shareholder dividends
• Advance additional projects in Lesotho and Zambia to create further in ground
resource value and to secure future production into the long term
Diamond Production and Investment in Africa
5
Holistic Business Model
“By securing large high value
diamonds at source and combining
a streamlined business model which
allows for ownership of the
distribution and sale of diamonds
downstream, Paragon Diamonds’
strategy clearly differentiates it
from other one dimensional
diamond mining companies
currently listed on the London
markets.”
Development of
existing diamond
projects in Africa
Cash flow and
return on
investment
SPVs for
diamond
investment and
retail sales
Diamond
Production
JV/ strategic
alliances for
cutting and
polishing
Diamond Production and Investment in Africa
6
Attractive Market Fundamentals
“Global diamond demand exceeding forecasted growth in production is set to continue”*
• Over the next ten years, high jewellery
demand is expected to grow at a compound
annual rate of 6% - with increased demand
from China and India
• Price growth assured
• No immediate new supply
• Demand set to rise
• Emerging growth markets
• Potential for diamonds to gain acceptance as
the optimal mobile hard currency
• Security of supply becoming a key price driver
in the diamond industry
• Rough diamond industry now requires
investment in new projects just to maintain
current production levels
• Majority of diamond revenue generated by
small amount of large diamonds
• “New” production increasingly coming from
underground operations – with higher costs
*Charles Stanley ‘The Quarterly Carat’ 22/01/14
Diamond Production and Investment in Africa
7
Paragon is securing profit retention
Diamond Production and Investment in Africa
8
Portfolio
Flagship
Lemphane Kimberlite - Lesotho
Best address
in the
diamond
industry
Pipeline
Motete Kimberlite – Lesotho
Kaplamp – Zambia
High value
upside for
growth and
profit
High value
large carat
sizes
Paragon
Diamonds
Defined
development
path
Short term
cash flow
generation
Strong and
proven local
partners
Aerial view of Lemphane Kimberlite
Diamond Production and Investment in Africa
9
Lesotho Diamond Country
Lesotho – map of major diamond operations
Major mining operations – Lesotho
Lemphane: 6Ha kimberlite under evaluation – 48Mt openpit
volume to date, expected average value US$1,500 per carat
Motete – 1.5Mt dyke under evaluation – a 1+Mct resource at
65cpht
Letšeng le Terai: world-class mine of two 5 & 17Ha kimberlites
– 141Mt reserves; 1.7cpht and US$2,733/ct value
Mothae: 8Ha Kimberlite under elevation – 39Mt @ 2.7 cpht
and US$1,067/carat
Liqhobong: 8Ha kimberlite under development – 55Mt
resource at 30cpht and ~US$120/ct
Kao: 19Ha Kimberlite mine producing 121,000 carats in 2012 –
53Mt indicated resource at 6.3cpht and US$200/ct
• Lesotho is a premier diamond
destination with the highest quality and
value diamonds worldwide*
• A quarter of the world’s largest diamonds
have been sourced from Lesotho**
producing
under development/evaluation
Paragon projects under development/evaluation
* Source: The Quarterly Carat, Charles Stanley Securities ** Source: Gem Diamonds
• Progressive mining code and supportive
government and local mining partners
• Excellent infrastructure – roads and
access to power and water
Diamond Production and Investment in Africa
10
Lemphane - Lesotho
• 80% interest in the 6Ha Lemphane Kimberlite Pipe
Project (Gov’t of Lesotho has 20%)
• Located only 27km from the world-class Letšeng
diamond mine operated by Gem Diamonds (141Mt at
1.7cpht & US$2,733/carat)
• Last remaining large kimberlite to be developed in
Lesotho
• High value/ large stone mining model in place
• Initial 48Mt kimberlite tonnage estimate (in house
estimate of 1 million carats) – significant upside
potential
• Current in-house estimated value of US$1.8billion @
US$1,5000/ct
• Open pit modelled for the first +15 years followed by
potentially +10 years underground
• Established operational and regional infrastructure
• Targeted to commence Stage I production Q1 2015
Diamond Production and Investment in Africa
11
Lemphane Project Elements
Exceptional diamonds
High grade/large value diamond model
Coarse size frequency distribution
Open pit
Low strip ratio
Mining lease
Near term cash flow
International team of consultants & contractors
Diamond Production and Investment in Africa
12
Lemphane – Stage 1 Economics
Initial Economics
Operation
Development
Capital
Operating
Costs
Capital Costs
Phase 1
Production
Phase 1
Revenues
1Mt initial pit at zero strip ratio
• Stage 1 production on target to
commence Q1 2015
US$10 million
• Planned drilling to increase life of
mine and resource potential
US$15/t
• Drilling, Scoping study update and
geological modelling underway to
further define and improve economics
US$6 million
2,500 carats per quarter initially at with
an average value of US$930/ct –
US$1,025/ct
~US$10 million p.a for 2 years
Size frequency and revenue modelling report – June 2014
A 100+ carat diamond expected per million tonnes mined
Preliminary diamond values from Stage 1 production
anticipated at US$930 – US$1,025/carat
Size frequency indicates 12% of carats exceeding 9 carats
Conservative grade of 2cpht used as modelling basis
Grade and value to rise as tonnages processed increase
Diamond Production and Investment in Africa
13
Pre-Production Development
“Multiple milestones reached since 2013 which have de-risked the project”







Initial drilling and scoping study completed
Bulk sampling programme– 300 carats recovered with largest stone 8.9ct at US$2,400/ct
Size frequency and revenue modelling report concluded – indicates +100carat stones per 1Mt of
kimberlite processed
Water, power and infrastructure installed
Consultants for mine design and optimisation approved
10 year mining lease secured
Planned drilling and scoping study update
Secure processing plant
Diamond Production and Investment in Africa
14
Stage 1 & 2 Production Stages
Stage 2 Production: 2017+
Stage 1 Production: 2015-2016
• 1Mt of Kimberlite to be mined
over a 2 year period
•
Increase open pit mining to
3Mt of kimberlite per annum
within 3 years
•
Peak production of 65,000
carats per year of high value
diamonds
• Generate annual revenues of
US$9m-US$10m
•
10+ year Life-of-Mine (open
pit)
• Complete bankable DFS & 3D
geological model
•
Potential for subsequent
underground development of at
least a further 25+Mt
• Drilling to further define
resource at depth
•
On-going cash flow and
dividend potential
• Targeting 20,000 carats
(2,500 per quarter) with an
average value of US$930 1,025 per carat
Diamond Production and Investment in Africa
15
Diamond Value vs. Tonnage
“Importantly, grade and value of diamonds projected to rise as tonnages
processed increase”
Diamond Production and Investment in Africa
16
Lemphane Gallery
Diamond Production and Investment in Africa
17
Pipeline Portfolio
Motete - Lesotho
Kaplamp - Zambia
• 85% owned 23km² high-grade kimberlite
dyke in Lesotho
• 863 km² located in Eastern Zambia and
close to the Luangwa valley
• 1.56Mt resource at 65 cpht for 1 million
carats
• Hosts 14 Lamproite pipes within a well
known diamondiferous region.
• Work completed to date:
•
Micro-diamond & bulk sampling - 327
carats recovered
•
Delineation drilling to 150m below surface,
open at depth
• Further bulk sampling to re-commence
• Scoping study for a narrow-vein
underground mine in preparation
• Further 99km² of licence applications
submitted
• In discussions with potential JV partners
on development
• Significant numbers of diamonds
recovered following previous
exploration work by De Beers which
discovered a 16.5 ha pipe
•
184 diamonds up to 0.5 carats in weight
including yellow, orange and brown
stones.
• Other diamonds recovered from another
four pipes with surface areas up to 45
ha.
• Strategy to delineate and evaluate of
the significant diamond-bearing "Argyle
Type" olivine Lamproites
Diamond Production and Investment in Africa
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Value Drivers
Low cost favourable mining economics including strip ratios, waste
haul and disposal for success
Nearby operations have provided costly lessons on mining process,
diamond breakage, slimes and water management
Current tonnage estimate of 48Mt of Kimberlite (in house
estimate of 1 million carats – significant upside potential
to increase through resource drilling
Value Chain
Security of Supply
Market
Fundamentals
Lessons Learnt
Resource
Large Diamond/High
Value
Unique Criteria
Mining
Large high value diamonds recovered with
valuations in excess than US$2,400/ct – models
suggest at least 1 +100carat stone per million
processed
Few remaining undeveloped kimberlite
pipes globally
Rough diamond production is an attractive point in the
value chain boasting profit margins of 16-20%
Challenge for jewellers to secure adequate supply of polished
diamonds in a range of sizes, shapes and colours to suit their
lines
Diamond supply and demand expected to grow at a compound annual
rate of 2.1% and 5.1% respectively
Diamond Production and Investment in Africa
19
Why invest with Paragon?
World-class
Asset and
Jurisdiction
Clear Path to
Production:
2015
• Lemphane Kimberlite Project is located in a prolific diamond producing
region of Lesotho within a cluster of producing kimberlite pipes
• Large/high value diamond model
• Near-term production expected H1 2015 – Stage 1 targeting:
•
•
•
•
US$10 per annum in cash flow solely from mining for first 2 years
20,000 carats ~ US$930 – US$1,025/carat minimum
At least one 100 carat diamond expected per million tonnes processed
Grade and value expected to rise as tonnages processed increase
Large/High
Value Diamond • Positive diamond market fundamentals – growing demand with supply
constrained + high barrier to entry
Model
Near-term
Cash Flow
• Potential for diamonds to grow as optimal mobile hard currency which
would warrant a greater investment premium within the price
• Unique market position – no equivalent opportunities in the value chain
lifecycle presenting excellent share appreciation potential
• Strategy to build Paragon into a leading vertically integrated diamond
Excellent
production and investment company
Diamond
• Strong Board and proven management team with top class track records
Market
Fundamental
in delivering growth across production and corporate management
s
Diamond Production and Investment in Africa
20
Frequently Asked Questions
Diamond Production and Investment in Africa
21
FAQ - 1
What is the grade?
Based on 15,000t processed to date, the grade is 2 carats per hundred tonnes. This is an under-estimate as this relatively small
sample did not recover any of the +10 carat stones known to be statistically present. The majority of the kimberlite (the
southern 2/3rds of Lemphane) is higher grade at ~2.5cpht. We expect the final production grade to increase to between 23cpht and 2.5cpht will be used for scoping purposes.
What’s the Life of Mine?
The kimberlite hosts at least 48Mt of Kimberlite to 350m below surface, the likely limit of open pit mining, and an estimated
75,000t per vertical meter below that point. The likely maximum annual output, due to space constraints, in 3Mtpa, resulting
in a 15+ year open pit life. An underground operation of at least 2Mtpa could then be sustained for a further 10 years by
mining underground to at least 300m below the pit floor. The mining lease is extendable to a maximum of 40 years.
Why is the grade low by
international standards?
Lesotho kimberlites are unusual by world standards, with grades typically from 1.5-7 cpht. The majority of kimberlite mines
worldwide have grades of 100 cpht or greater, but these largely commenced production in the 1970’s, and their US$ per-carat
value is significantly lower. The trend for the original giant mines such as Botswana’s Orapa and Jwaneng, or Australia’s Argyle
was to chase volume and carats rather than value. The later Canadian mines such as Ekati and Diavik are also high grade but
are relatively small and high cost. The recent industry trned has been to re-focus on the previously overlooked lower grade
kimberlites such as Letseng in Lesotho and Karowe in Botswana because of their large size and exceptional diamond values,
What is the average value
of diamonds?
The average value is very high, certainly in excess of US$1,000 per carat. This is because the majority of the value is derived
from a few, large high value diamonds. Typically the 1% of the largest diamonds represent over 50% of the value and even the
largest 20% of diamonds represent over 80% of the total value. Other low grade/high value kimberlites in Lesotho range
fromUS$1,100/ct (Mothae) to US$2,000+/ct (Letšeng). We project circa US$1,000/carat for the initial 20,000 carats of
production including diamonds up to 100 carats, and US$1,500 per carat once production exceeds 50,000 cartas per annum
including diamonds in excess of 300 carats. Large Lesotho diamonds (+30ct) have recently achieved US$40,000-US70,000 per
carat for white diamonds and US$450,000 per carat for a fancy pink.
Why is the average value
different to the average
value you have disclosed
on regulatory new release?
The official US$358 per carat valuation of diamonds recovered to date was a “snap-shot”. Sampling recovers many small
diamonds as it is more rigorous, but fails to recover the larger stones, which are rare, and only occur once or twice per every
million tonnes of kimberlite processed. As such a 15,000t sample is extremely unlikely to recover a large diamond, and so the
achieved value is a significant underestimate. From the smaller diamonds recovered we can however predict the occurrence of
large diamonds with a high degree of confidence. Modelling predicts what would be recovered if 1Mt were mined, or indeed if
50Mt were mined. In the former, diamonds of up to 100 carats can be expected, and even if conservative values are applied to
these, US$1,000+ per carat can be expected for the initial 20,000 cartas. In full production, diamonds exceeding 300 carats are
predicted, which would push average values to at least US$1,500 on the same principle.
Diamond Production and Investment in Africa
22
FAQ - 2
What are the operational
costs in Lesotho?
The operating costs in Lesotho are well established from existing operating mines in the region and detailed third party
feasibility studies. Contract mining costs are typically ~US$2-3/t and waste:ore ratios are generally <2:1. Plant process costs
are under US$5/t, lower if the latest technology, suitable to the preferential recovery of large diamonds is utilised. HT power
supply is planned for all mining areas in the near future for further cost savings. Overall costs are expected to be around
US$12/t.
What is the expected
capital requirement to
develop the project?
Capital costs vary from US$100-150M for a typical 3Mt/yr operation, depending on technology used, i.e. US$2-3 per tonne on a
50Mt deposit. Of note is that the latest technological innovations, which are particularly suited to preferentially recovering
large diamonds, are also the lowest cost, as extensive crushing and dense media circuits become largely redundant. As such
the most advanced option is also the cheapest, and the most applicable to the Lesotho-style deposits.
Why is the capital
requirement different to
the value you have
disclosed on regulatory
news release?
The original scoping study estimate of US$129.7M capital was arrived at in 2012, using a comparative study of the Karowe Mine
in Botswana, of similar size, where autogenous milling has been used to great effect. Karowe also cost around US$130M to
build. The need to implement full infrastructure was included in the study. Recent technological developments, especially in
coarse x-ray transmission technology (XRT) reduce the need for capital intensive secondary and tertiary crushing and dense
media separation (DMS) and also reducer the footprint, power and water consumption and waste disposal. These all have
positive benefits not only to the capital but also the ongoing operating expenditure,. In addition, by the time Stage II
production commences at Lemphane (targeted for 2016/2017), high tension grid electricity will be available on site, through a
government sponsored programme, at significantly lower capital cost to that originally envisaged. Paragon Diamonds is revising
its scoping study to take account of these changes, as well as the increased scale of operations (from 27Mt to 49Mt) however at
this stage it is confidently expected that Stage II capital expenditure can be reduced to below US$100M.
When is the first
production due to
commence at Lemphane?
Paragon is at an advanced tendering stage with several reputable process equipment suppliers. A typical medium-sized
diamond plant takes around 6 months to design, construct and commission. Assuming orders are placed by September 2014,
we can expect first production towards the end of Q1 2015, and full Stage I production by Q2 2015. At a rate of 75 tonnes per
hour, some 1Mt of kimberlite will be mined and processed in the two years up to June 2017. Planning for Stage II will
commence within six months of first production, thus the longer 18 month lead time will overlap, to significantly reduce any
hiatus between Stages I and II. The Stage I plant will also be used to remove and process all soft, surface kimberlite in
preparation of Stage II.
Diamond Production and Investment in Africa
23
FAQ - 3
Why are you mining in two
stages?
A large mine is significantly more costly to develop (US$100M+ as opposed to ~US$10M), and is better financed via a mixture of
debt and equity, to minimise shareholder dilution and in anticipation of a reliable revenue stream. Debt finance of this
magnitude requires a robust and large resource and detailed feasibility study. The surface (soft) kimberlite representing only a
few million tonnes also requires a completely different plant design which then becomes largely redundant. Mining via a lower
capacity low-cost Stage I will develop a robust resource, permit fine-tuning of the feasibility study, prepare the kimberlite for
long-term mining on a large scale and is expected to be mildly cash generative. To embark on Stage II directly exposes the
company to significantly higher risk and the existing shareholders to a far higher level of potential dilution.
Why should I invest now
rather than Stage 2?
Stage II will be based on a well-defined resource, and a comprehensive definitive (bankable) feasibility study, both of which will
be the outcome of Stage I. As such the value of Paragon Diamonds and its assets will be based on an established resource and
DCF/NPV models. Indications are that the project at this point should be independently valued at US$50-70M, which if based
on the current shares and convertible debt in issue of 400M (330M plus 70M convertible debt), would be a value of $0.175
(£0.10) per share. This is assuming the required funding is provided by debt finance, which the management preferred option.
Development of Stage II is anticipated to be achieved substantially via debt finance, limiting the opportunity to acquire stock ,
and then only at a substantially higher price than present.
Why should I invest when
you do not have a
resource?
The Lesotho-style diamond deposits are not amenable to the industry-standard resource model. Their low grade and absence
of small diamonds means it is physically impractical to sample the underlying deep kimberlite for diamonds. As such, even very
large scale surface sampling and trial mining can only be related to depth by statistical extrapolation. It is a truism of all low
grade Lesotho kimberlites that they have never been physically sampled at depth, and the main reserves or resources are based
on extrapolati9on from ongoing surface mining or trial mining, and relfelcted in the low reserve:resource ratio (30% at Letšeng),
or the indicated:inferred ratio (6% at Mothae). In common with these operations, Paragon intends to establish a robust
butlargely inferred resource via trial mining in stage I (as at Mothae) and ultimately a reserve via commercial mining in Stage II
(as at Letšeng).
Why is Lesotho a good
investment destination?
The obvious attractions of Lesotho diamond projects aside, Lesotho is a politically stable, certainly by African standards,
constitutional democracy, with good infrastructure, access and favourable climate. The mine locations are served by mains grid
power, access to nearby asphalt highways and only hours’ drive from major South African industrial and supply centres.
Constructing a mine is Lesotho is significantly less fraught, and substantially cheaper, than doing so in remote Canadian/Russian
arctic environments, of logistically or politically difficult central or West African locations, and the opportunities are low-risk
advanced development projects rather than high risk discovery and evaluation prospects.
Diamond Production and Investment in Africa
24
FAQ - 4
Why invest in diamonds at
all?
Diamonds are the optimal form of mobile currency in the world, and have been for over 600 years. There is no other
established and proven hard asset currency that can be moved in such large sums on one’s person. Consequently, one can
utilise a globally accepted and certificated currency, which has hugely compelling supply/demand statistics in favour of the
owner with strong future price prospects, and is outside the banking and government controlled regimes. One is not subject to
changes in government or financial market regulations or political regime change risk, increasing bank and credit risk or most of
all sustained currency debasement. Whether one agrees or is neutral to the view that the global geopolitical scene is
deteriorating, that the risk of an economic/trade/military war is increasing to levels not known for 60 years, that the banking
system has placed depositors at a high level of risk of loss, that tax levels on demonstrable assets such as real estate will
continue to escalate, and that there exists a pernicious currency debasement in the major western economies, diamonds
provide both the optimal hard asset hedge against one’s paper investment that is more solidly based on supply/demand
fundamentals than the paper asset price reflection being instigated as the key tenet of monetary policy by g-10 central banks.
Diamonds are THE most attractive and mobile hard asset currency in which to hold a portion of one’s wealth.
What risk is there
associated with De Beers
controlling the market
price with their huge stores
of diamonds?
This is a common misconception and may have been true when at the high of the De Beers monopoly in the 1990s. De Beers
have since changed their strategy and run the business in a competitive manner and are driven by demand, rather than trying
to control supply and manipulate the market prices. The diamond industry has numerous examples of successful mining
operations that are existing De Beers mines which were disposed of as part of the revised strategy.
What risk does the rise of
synthetic stones pose to
the industry?
There are a significant amount of synthetic stones already available in the market, but these are mainly used for industrial
purposes (traditionally lower quality stones are used in industry). Synthetic stones are generally not created in larger sizes due
to the prohibitively high cost of production, this poses minimal risk to Lemphane as it will be a large stone producer with
significant amounts of value generated in the large stones. Larger diamonds are generally viewed and valued as pieces of art
would be, and there is a certain amount of stigma attached to the origins and authenticity of the diamonds. Much as art
collectors would not be interested in a fake Van Gogh painting, investors in large, high value diamonds do not consider artificial
diamonds attractive.
Are there lots of other
diamond mines and
diamond opportunities out
there to invest in?
There are very few diamonds mines that are still to be developed and there have not been many significant new discoveries
recently. Therefore the available worldwide resource is shrinking as demand is steadily increasing. This is particularly prevalent
for the larger diamonds as mines which produce the larger sizes are all mature and therefore production is in decline. The kind
of large, high value stones that are recovered in Lesotho are very rare and only a handful of mines in the world are capable of
producing these types of stones on a regular basis.
Diamond Production and Investment in Africa
25
FAQ - 5
There are only three other publicly-listed diamond companies in Lesotho, none of which are actively seeking to raise funds
through private placements (and are not expected to in the foreseeable future). There are no other known large kimberlites in
Lesotho, and no significant new discoveries in over 40 years. Opportunities for a substantial investment in the Lesotho
diamond industry are very limited. Of the four listed companies’ active in this sector:
GEM Diamonds has a market capital of US$520M (90+% of which can loosely be ascribed to its Lesotho mine), a reserve of
132Mt at a value of US$35/t and has a US$4,600M asset values at US$470M (10% of its gross value) 1
Why should I invest in
Lemphane instead of the
other established mines in
Lesotho?
Firestone Diamonds has a market capital of US$2,000M asset valued at US$190M (10% of gross value) 2
Lucara Diamond Corp has a market US$820M (10% of which can loosely be ascribed to its Lesotho mine), a resources of 39Mt
at a value of US$28/t and has a US$1,100M asset valued at US$80M (7% of gross value) 3
Paragon Diamonds (AIM: PRG), on the expected outcome of Stage I, with a present market capital of US$22M (90% of which
can be ascribed to its Lesotho project), has a defined ~50Mt at a potential value of~US$35/t – a US$1,750M potential asset is
valued at US$20M 1% of gross value) 4
Paragon’s Lemphane Project is the only investment opportunity of substantial size with a potential to significantly increase in
value through a straight-forward de-risking process with judicial use of modest investment funds.
1)
2)
3)
4)
Share price of £2.02 on303M shares as of 21/08/2014 & Resources and reserves of Gem Diamonds as at 1st January 2014: Probable reserves only
Share price of £0.37 on 309M shares as of 21/08/2014 & Summary Feasibility Study presentation of 2013
Share price of C$2.43 on 378M shares as of 21/09/2014 & 43-101 Resource Statement of 2013
Based on 330M shares at an anticipated PP price of £0.04 and $1,500/ct on 2.5cpht over 48.6+Mt: USD:GBP 1.7:1 used throughout
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Contact
Stephen Grimmer
Managing Director
E: [email protected]
T: +44 (0) 20 7099 1940
Simon Retter
Finance Director
E: [email protected]
T: +44 (0)207 099 1940
Philip Falzon
Sant Manduca
Executive Chairman
E: [email protected]
T: +44 (0) 7770 477 499
PR/IR
St Brides Media & Finance
Felicity Edwards/ Frank Buhagiar
E: [email protected]
T: +44 (0)207 236 1177
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Disclaimer
This Presentation and the information (the “Presentation”) has been prepared by and is the sole responsibility of Paragon Diamonds Limited (“the Company”) although reasonable
care has been taken to ensure that the facts stated in the presentation and in this document are accurate to the best of the directors knowledge, information and belief and that the
opinions expressed are fair and reasonable. No reliance can be placed for any purpose whatsoever on the information contained in this document or on its completeness. No
representation or warranty, express or implied, is given by the Company (or by any of their respective directors, officers, employees, agents or advisers (as the case may be)) as to the
accuracy of the information or opinions contained in, or as to the completeness of this document. Prospective investors are encouraged to obtain separate and independent
verification of information and opinions contained herein as part of their own due diligence.
There are matters discussed in this presentation that are forward-looking. All such forward-looking statements are based on the Company’s assumptions and beliefs in light of
information available to it at this time. Statements, beliefs and opinions contained in this presentation, particularly those regarding the possible or assumed future or other
performance of the Company, industry growth or other trend projections are or may be forward-looking statements, beliefs or opinions and reflect the Company’s current
expectations and projections about future events. Actual results and developments may differ materially from those expressed or implied by such forward-looking statements, beliefs
or opinions depending on a variety of factors and accordingly there can be no assurance that the projected results or developments will be attained. These risks, uncertainties and
assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this document regarding
past trends or activities should not be taken as a representation that such trends or activities will continue in the future. You should not place undue reliance on forward looking
statements, which speak only as of the date of this document. In particular, no representation or warranty express or implied is given on behalf of the Company or any of its
respective directors, officers or employees or any other person as to the achievement or reasonableness of, and no reliance should be placed on, any projections, targets, estimates or
forecasts and nothing in this presentation should be relied on as a promise or representation as to the future.
This document is made available only on request to recipients whom the Company believe on reasonable grounds are persons falling within sections 19(5)(3), 48(2) and 50 of the
Financial Services and Markets Act 2000 (Financial Promotion) order 2001. By attending this Presentation the recipient represents and warrants that they are a person who falls
within the above description of persons entitled to attend the Presentation. The content of this presentation is not to be disclosed to any other person or used for any other purpose.
Any investment or investment activity to which this proposal relates is available only to such persons and will be engaged in only with such persons. Persons who do not have
professional experience in matters relating to investments should not rely on this document. The figures included are illustrative projections and are based on a number of
assumption and no figures should be regarded as a profit forecast.
By accepting this document, the Recipient agrees to keep permanently confidential the information contained herein or sent herewith or made available in connection with further
enquiries. It is a condition of the issue of this document that it will not be reproduced, copied or circulated to any third party without the express prior consent of the Directors of the
Company.
The distribution of this document in certain jurisdictions may be restricted by law and therefore any person into whose possession this document comes should inform itself about
and observe any such restriction. This document is not for distribution outside United Kingdom and, in particular, it or any copy of it should not be distributed by any means (
including electronic transmission) either to persons with addresses in Canada, Australia, or Japan, or to persons with an address in the United States , its territories or possessions
or to any citizens thereof, or to any corporation, partnership or other entity created or organized under the laws thereof. Any such distribution could result in a violation of Canadian,
Australian, Japanese, or United States law.
This Presentation has not been approved by an authorized person in accordance with Section 21 of the FSMA and therefore it is only being made to person falling within an
exemption to Section 21 of the FSMA. No prospectus has been registered in the United Kingdom and no offer is being made in the United Kingdom which would require a
prospectus to have been registered in the United Kingdom under the Public Offer of Securities Regulations 1995.
Some or all of the information contained in the presentation may be inside information relating to the securities of the Company within the meaning of the Criminal Justice Act 1993
and the Financial Services and Markets Act 2000 ("FSMA"). Recipients of this information shall not disclose any of this information and shall not use this information to deal,
attempt to deal, or to encourage another person to deal, in the securities of the Company. Recipients of this information shall ensure that any person to whom they disclose any of
this information complies with this paragraph. The term "deal" is to be construed in accordance with the Criminal Justice Act 1993.
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