Acquisition

    RNS Number : 2582U
  Gemfields Resources PLC
  13 May 2008
   

    13 May 2008

    Gemfields Resources plc

    ("Gemfields" or "the Company")

    Conditional placing of 66,666,667 Ordinary Shares at 45 pence per share
    Resumption of trading on AIM
    Publication of Admission Document

    Gemfields Resources plc (AIM: GEM), the AIM-listed gemstone mining and exploration company, today announces the resumption of trading of
the Company's existing ordinary shares and additional details of the Company's proposed acquisition as announced on 18 December 2007 which
forms part of its strategy to become a leading international coloured gemstone producer.

    Shareholders are informed that an AIM Admission Document has been published and posted today, together with a notice convening an
extraordinary general meeting (the "EGM") of the Company at which the approval of Shareholders will be sought for the proposed acquisition,
an increase in the authorised share capital of the Company and the authority to allot the new ordinary shares pursuant to the proposed
acquisition, the placing and generally to change the name of the Company to Gemfields plc. A copy of this AIM Admission Document is
available from the Company's website: www.gemfields.co.uk.

    The Directors and Proposed Directors believe that the proposed acquisition and placing provides a unique opportunity in the coloured
gemstone market, and will transform the Company into a leading international coloured gemstone producer. The proposed acquisition will
combine the operational expertise and extensive tenement portfolio of Gemfields with the Kagem Emerald mine, an option to acquire 15
exploration licences in Madagascar (rubies, sapphires and tourmalines), and an option to use the Faberg brand name, through the acquisition
of Greentop International Inc and Krinera Group SA from Rox Limited. The Directors and Proposed Directors believe that this development will
propel Gemfields forward and support its vision for expansion in the future. 

    Key benefits of the proposed transaction, which is subject to shareholder approval at the EGM, include;
    *     Improvements in efficiency and processes at the Kagem Emerald Mine with a view to ramping up production from 200-300,000 tonnes
per annum to a run rate in excess of 1.4 million tonnes of TMS per annum by July 2009;
    *     Improving security at the Kagem Emerald Mine;
    *     Drilling and exploration programmes to further define resources and re-categorise and increase resources figures at existing
operations, particularly at the Kagem Emerald Mine;
    *     Processing, cutting and polishing via the establishment of cutting and polishing facilities in Jaipur, India;
    *     An opportunity to focus on marketing and branding by developing appropriate marketing campaigns to promote coloured gemstones in
general and, at the outset, emeralds in particular;
    *     Use of the Fabergbrand name on coloured gemstones to extract premium prices for the Enlarged Group's very best gemstones;
    *     Development of a structured and consistent supply chain;
    *     Opportunity to achieve premium pricing through natural, organic and CIBJO approved gemstones, guaranteed provenance "direct from
the mine", and high ethical standards that guarantee gemstones are conflict and child-labour free;
    *     Recruitment of appropriate additional operational teams for mining, processing, marketing and sales; and 
    *     Restructure legal entities.

    The consideration for the acquisition of Greentop and Krinera and the option to acquire a licence to use the Faberg brand name in
respect of coloured gemstones (excluding diamonds) and the option to acquire Oriental Mining will be satisfied by the issue to Rox of
137,910,340 new Ordinary Shares in Gemfields which, at the Issue Price, implies a price of £62.06 million.

    It is proposed that Sean Gilbertson and Finn Behnken will join the Board on Completion as interim chief executive officer and
non-executive director respectively. Graham Mascall will remain as non-executive chairman, Rajiv Gupta will remain as executive
vice-chairman, Richard James will remain as chief financial officer and Clive Newall will remain as a non-executive director. Prior to the
publication of the AIM Admission Document, Peter Kitchen, Sanjay Khandelwal and Valentine Chitalu resigned from the Board. The Company
expresses its thanks to Messrs. Kitchen, Khandelwal and Chitalu for their contribution during their time at Gemfields.

    Commenting today, Graham Mascall, Non-executive Chairman of Gemfields Resources plc, said, "The Acquisition will provide Gemfields with
substantial and important building blocks for the future through the addition of a cash generative business from the 75 per cent ownership
of Kagem, the significant exploration upside of Kagem's exploration rights and Oriental Mining's exploration licences and the opportunity to
optimise the value of the Company's best gemstones through the use of the Fabergbrand name." 

    He added, "These factors, together with Gemfields' existing assets and management team, will help the Company achieve its long term
strategy: to pursue consolidation and vertical integration in the coloured gemstone industry." 

    In addition, Brian Gilbertson, Chairman of Pallinghurst Resources said, "The coloured gemstone industry forms a key part of the luxury
goods sector, but is currently fragmented and undercapitalised. Despite minimal consumer marketing, unreliable supply chains and a dearth of
ethically-sourced product, the popularity of these gemstones has increased in recent years, with corresponding price rises. Pallinghurst
believes that the Gemfields initiative will harness and enhance this trend in the international market for coloured gemstones, emulating the
development of the diamond industry."

    Placing statistics

    Issue price                                                                                                                45p
    Number of Existing Ordinary Shares as at date of this announcement               104,575,733
    Number of New Ordinary Shares to be issued, as follows:
                Consideration shares                                                                          137,910,340
    Placing Shares                                                                                                66,666,667
    Percentage of Enlarged Share Capital represented by:
                Consideration shares                                                                                44.61%
                Placing Shares                                                                                         21.56%
    Number of Ordinary Shares in issue immediately following the Acquisition, Placing and Admission*                                        
                                        309,152,740
    Estimated net proceeds of the Placing receivable by the Company                £ 27.50 million
    Market Capitalisation of the Company on Admission at the Issue Price*       £139.12 million

    *assuming no options are exercised between the date of the AIM Admission Document and Admission


    Expected timetable of principal events

    Announcement of the Acquisition                                                                                 18 December 2007
    Latest time and date for receipt of Forms of Proxy                                        9.00am (BST) on 3 June 2008 
    EGM, at the office of Reed Smith Rambaud Charot, Paris                             9.00am (BST) on 5 June 2008
    Completion of the Acquisition and Admission becomes effective and dealings on AIM commence in respect of the Enlarged Share Capital     
                                                                 8.00am (BST) on 6 June 2008
    CREST accounts credited                                                                            8.00am (BST) on 6 June 2008
    Expected date of dispatch of definitive share certificates (where appropriate)                      by 11 June 2008

    For more information:

    Richard James, CFO            [e-mail]
    Gemfields Resources Plc        Tel: [phone]
                            
    Mike Jones /Robin Birchall      Tel: [phone]
    Canaccord Adams Limited

    Neil Passmore/Sam Critchlow  Tel: [phone]
    JPMorgan Cazenove Limited

    Charlie Geller/Ed Portman      Tel: [phone]
    Conduit PR

    Not for release, publication or distribution in or into the United States of America, Australia, South Africa or Japan.
    This announcement does not constitute an offer or invitation to purchase any securities.
    Not for release, publication or distribution in or into the United States of America, Australia, South Africa or Japan.
    Proposed acquisition of Greentop International Inc. and Krinera Group SA
    Option to acquire a licence to use the Fabergbrand name in respect of gemstones (excluding diamonds)
    Option to acquire Oriental Mining S.a.r.l.
    Placing of 66,666,667 Ordinary Shares at 45 pence per share
    Proposed change of name to Gemfields plc
    Application for re-admission of the Existing Ordinary Shares and admission of the New Ordinary Shares to trading on AIM
    Notice of Extraordinary General Meeting
    Introduction
    As announced by the Company on 18 December 2007, Gemfields has conditionally agreed to purchase from Rox, a company controlled by
Pallinghurst Resources, a 75 per cent. interest in Kagem, the holder of the licence for the Kagem Emerald Mine located in the Zambian
Fwaya-Fwaya belt adjacent to Gemfields' existing emerald mining operations and close to its exploration operations. This will be achieved
via the purchase from Rox of the entire issued share capital of Greentop and Krinera, the indirect holders of a 75 per cent. interest in
Kagem. The consideration for the acquisition of Greentop and Krinera will be satisfied by the issue to Rox of 137,910,340 new Ordinary
Shares in Gemfields which, at the Issue Price, implies a price of approximately £62.06 million.
    The Acquisition also includes:
    * a put and call option to acquire a worldwide exclusive 15 year licence to use the Fabergbrand name in respect of coloured gemstones
(excluding diamonds); and
    * a put and call option to acquire, for the additional consideration of £1.00, the entire issued share capital of Oriental Mining,
which is the holder of and applicant for (subject to certain registration requirements more fully described at paragraph 4 of Part I of the
AIM Admission Document) 15 licences for gemstone exploration in Madagascar.
    The Directors and Proposed Directors believe that the Acquisition will provide the Group with substantial and important building blocks
for the future through the addition of an immediate cash generating business (through the 75 per cent. ownership of Kagem), the significant
exploration upside (through Kagem's exploration rights and Oriental Mining's exploration licences) and the opportunity to optimise the value
of the Company's best gemstones (through the use of the Fabergbrand name). The Directors and Proposed Directors believe that these factors,
together with Gemfields' existing mining and exploration assets and management team, will help the Company in achieving its long term
strategy, to pursue consolidation and vertical integration in the coloured gemstone industry.
    The Directors and Proposed Directors believe that the coloured gemstone industry is ripe for the emergence of a significant industry
participant who can supply this market with suites of high quality gemstones. Gemfields and Rox share the view that the coloured gemstone
industry (which now forms a significant part of the luxury goods industry) is currently fragmented and undercapitalised. Given the
increasing popularity of coloured gemstones and the price increases that have resulted in recent years, both companies believe that a
significant opportunity exists in pursuing consolidation and vertical integration of the coloured gemstone industry on an international
scale.

    Background to and reasons for the Acquisition
    Gemfields was the inspiration of Rajiv Gupta who formed the predecessor company to Gemfields in 2000 when he identified a significant
opportunity in the gemstone industry and has since pursued a primary objective of identifying, acquiring and developing coloured gemstone
mines. The proposed Acquisition forms the next logical step in achieving consolidation in the coloured gemstone industry and is expected to
transform Gemfields into a leading international coloured gemstone producer. 
    Significantly, Gemfields already owns two significant assets on the Fwaya-Fwaya emerald belt in Zambia (where the Kagem Emerald Mine is
also located): Mbuva-Chibolele and Kamakanga. Gemfields has, during its development of Mbuva-Chibolele from a greenfield project, assembled
an experienced management and operating team. The Directors and Proposed Directors believe the Kagem Emerald Mine is presently the single
most desirable emerald mine on the Fwaya-Fwaya belt and has a long and demonstrated history of producing high quality emeralds. Hence,
Gemfields and Rox believe that significant synergies can be achieved by pooling their respective assets and skill sets.
    Gemfields is already managing operations at Kagem after signing a management agreement with Hagura UK (which holds the Target Group's
interest in Kagem) in 2007. A significant review of operations has already been concluded and a revised production plan implemented to
increase production to a run rate of in excess of 1.4 million tonnes of TMS per annum by July 2009. On completion of the Acquisition, the
Enlarged Group will be the largest operator on the Fwaya-Fwaya belt by a substantial margin and the Directors and Proposed Directors believe
that the Enlarged Group will be in a good position to further consolidate the belt and thereby achieve economies of scale. In addition, as
the primary producer of emeralds in Zambia, the Enlarged Group will be in a position to restructure the sale process that has historically
been characterised by inconsistent supply and quality.
    The Directors and Proposed Directors believe that this initial footprint in the emerald market will form the cornerstone for expansion
into other coloured gemstones. This will be achieved via Gemfields' existing rights in respect of amethyst, the option to acquire gemstone
licences in Madagascar (which includes ruby, emerald and sapphire licences) currently owned (subject to certain registration requirements
more fully, described in paragraph 4 of Part I of the AIM Admission Document) by Rox via Oriental Mining and by further focussed
acquisitions of various coloured gemstone varieties.
    In addition, the branding potential inherent in the Fabergname, particularly given the recent re-unification of the Fabergbrand with the
direct descendents of Peter Carl Faberg should position the Enlarged Group to optimise the value of its cut and polished production by
branding its best stones with the Fabergname.
    Accordingly, the Directors believe that the Acquisition represents an attractive opportunity for Shareholders to participate in the
Enlarged Group. The Acquisition enables Gemfields to draw together the following key components to accelerate the Directors' and Proposed
Directors' vision of consolidating and vertically integrating the coloured gemstone industry:
    * the operational expertise, infrastructure and extensive tenement portfolio of Gemfields;
    * the renowned Kagem Emerald Mine;
    * a put and call option to enter into an exclusive worldwide licence to use the Fabergbrand name on coloured gemstones for a period of
15 years;
    * a base from which to add value through the development of in-house cutting and polishing facilities;
    * modernisation of the mining process at the Kagem Emerald Mine to increase throughput, increase yield and lift overall efficiency;
    * a put and call option to acquire Oriental Mining, which holds (subject to certain registration requirements more fully described in
paragraph 4 below) 15 licences for gemstone exploration in Madagascar;
    * enhanced leadership with deal making capabilities; and
    * greater access to capital.

    Terms of the Acquisition
    Under the terms of the Acquisition Agreement, Gemfields has conditionally agreed to acquire the entire issued share capital of Greentop
and Krinera. The aggregate consideration for the acquisition of Greentop and Krinera is the allotment and issue of 137,910,340 Ordinary
Shares (to rank pari passu in all respects with the Existing Ordinary Shares) to Rox at Completion which will represent 56.9 per cent. of
the enlarged share capital of the Company immediately following the Acquisition but before the Placing. Rox is also participating in the
Placing and following the Placing will hold approximately 56.35 per cent. of the Enlarged Share Capital. The Company has also been notified
that, pursuant to an agreement between Rox and a vehicle of which Rajiv Gupta is a beneficiary, 8,888,890 Ordinary Shares in which Rajiv
Gupta is interested will be transferred to Rox within three months of Admission in return for shares in Rox. This will mean Rox will hold
183,091,453 Ordinary Shares representing approximately 59.22 per cent. of the Enlarged Share Capital following such transfer (assuming no options are exercised between the date of the AIM Admission
Document and the date of such transfer).
    Following the issue of the Consideration Shares and the Placing Shares, the Existing Shareholders will own, in aggregate approximately
33.83 per cent. of the Enlarged Share Capital. 
    The Acquisition Agreement contains certain warranties and an indemnity given by Rox to Gemfields in relation to the Target Group and
certain warranties given by Gemfields to Rox in relation to the Group (in both cases subject to certain financial and other limitations).
The Acquisition includes an escrow arrangement whereby the Consideration Shares and certain cash sums will be held in escrow for a defined
period to be accessed in the event of any successful warranty claims by the Company. The Consideration Shares and cash may be released from
escrow under certain specific circumstances,
    In addition, the Acquisition Agreement includes restrictions on Gemfields and Rox entering into certain transactions with third parties
in the period prior to Completion and a requirement on Gemfields and Rox to operate their groups in the ordinary course until Admission. The
Acquisition Agreement may be terminated in a number of circumstances.
    The Acquisition Agreement includes a put and call option, in consideration of an additional sum of £1.00, for the acquisition of the
entire issued share capital of Oriental Mining. Gemfields has the right to exercise the option to acquire Oriental Mining, and Rox has the
right to require Gemfields to exercise such option, within three months of Completion. The Acquisition Agreement contains certain warranties
given by Rox to Gemfields in relation to Oriental Mining and its licences.
    The Acquisition Agreement further contains a put and call option for Gemfields to enter into a worldwide exclusive 15 year licence with
FabergLimited to use the Fabergbrand name in respect of coloured gemstones (excluding diamonds). Each of the Company and FabergLimited can
require the other party to enter into such licence agreement within three months of Completion.
    The Acquisition is conditional upon, amongst other things, the approval by Shareholders of the 
    Resolutions to be proposed at the EGM (other than resolutions 3 and 5) and Admission.


    Information on Enlarged Group
    Enlarged Group assets
    The Enlarged Group's assets will comprise 17 licences which cover an area of 1,344.17km2 in Zambia, Southern Africa and include: two
advanced gemstone assets (assets upon which mineral resources reported in accordance with an internationally recognised reporting code have
been defined), six exploration properties (assets upon which either historical mining or recent exploration activities have occurred) and
nine exploration prospects (assets upon which limited or no exploration activity has been undertaken to date). In addition the Company will
have the option to purchase Oriental Mining.
    Gemfields is a holding company which currently manages (and will continue to manage following Completion) the Gemstone Assets through
various subsidiaries and currently derives its revenues entirely from the Gemstone Assets. The subsidiaries comprise holding companies,
intermediate holding companies, coloured gemstone exploration and mining companies and various dormant companies. The principal operating
companies are:
    * Kagem (in which Gemfields will, following Completion, have a 75 per cent. beneficial interest) will manage the Kagem Emerald Mine
comprising an open-pit emerald and beryl mine and associated processing facilities;
    * Kariba Minerals Limited (in which Gemfields has a 50 per cent. beneficial interest) which operates the Kariba mine comprising an
open-pit amethyst mine and an associated processing facility; and
    * Gemfields Holdings Zambia Limited (in which Gemfields has a 100 per cent. beneficial interest) which operates the Mbuva-Chibolele mine
comprising an open-pit emerald and beryl mine and an associated processing facility (currently on care and maintenance).
    The exploration properties and the exploration prospects in Zambia are all held by the Company's subsidiary, Gemfields Holdings Zambia
Limited. Exploration and development activities are conducted through its representative office in Zambia which manages the licences for the
advanced gemstone assets, the advanced exploration properties and the exploration properties. The Company also provides management services
to each of the operating companies including: sales and marketing; finance; legal and technical support. Other administrative and regulatory
aspects will also be provided in respect of co-ordinating group operating companies as well as public domain reporting.
    Tables of consolidated resources
    The Competent Persons Report set out in the AIM Admission Document notes that emerald deposits, owing to the distribution of economic
concentrations of reaction zones are notoriously difficult to sample, estimate and classify as their thickness and grade are highly variable
and their exact location very difficult to predict. Current drilling techniques are inappropriate to provide sufficient data density to
enable direct estimation of reaction zone tonnage and grade. Accordingly drilling as currently employed can only provide information to
determine the volume of the geological entity in which such reaction zones are present and the location of such entities relative to other
lithology and geological structures. Derivation of mineral resources is largely dependent on the availability of the results of bulk samples
or equivalent data such as historical production statistics. All the above uncertainties and the use of extrapolated grade and geological
information require that only an Inferred Mineral Resource category can be assigned to the resources associated with the Gemstone Assets.


    Gemstone Assets: Emeralds and Beryl Mineral Resource statement (1 January 2008)(1)
 Mineral Resources           Tonnage  Grade                                     Content
                                (kt)  (g/t Emeralds)  (g/t Beryl)  (g/t Total)  (Mct Emeralds)  (Mct Beryl)  (Mct Total)
 Total Measured + Indicated        0             0.0          0.0          0.0             0.0          0.0          0.0
 Inferred                      1,462            22.6         57.4         80.0           164.9        419.9        584.8
 Subtotal                      1,462            22.6         57.4         80.0           164.9        419.9        584.8
 Mineral  Resources                                                                                                     
 Total Resources               1,462            22.6         57.4         80.0           164.9        419.9        584.8

    (1)    No Measured or Indicated Mineral Resources are defined at Kagem and no Mineral Resources are defined at Mbuva-Chibolele.
    Gemstone Assets: Amethyst Mineral Resource statement (1 January 2008)(1)
 Mineral Resources           Tonnage       Grade          Content
                              (kt)    (kg/t Amethyst)  (kt Amethyst)
 Total Measured + Indicated        0              0.0            0.0
 Inferred                        325             37.1           12.1
 Subtotal                        325             37.1           12.1
 Mineral Resources                                                  
 Total Resources                 325             37.1           12.1

     (1) No Measured or Indicated Mineral Resources are defined at Kariba.
    Enlarged Group Assets: Attributable Emeralds and Beryl Mineral Resource statement
    (1 January 2008)(1), (2)
 Mineral Resources           Tonnage  Grade                                     Content
                                (kt)  (g/t Emeralds)  (g/t Beryl)  (g/t Total)  (Mct Emeralds)  (Mct Beryl)  (Mct Total)
 Total Measured + Indicated        0             0.0          0.0          0.0             0.0          0.0          0.0
 Inferred                      1,097            22.6         57.4         80.0           123.7        314.9        438.6
 Subtotal                      1,097            22.6         57.4         80.0           123.7        314.9        438.6
 Mineral Resources
 Total Resources               1,097            22.6         57.4         80.0           123.7        314.9        438.6

     (1) No Measured or Indicated Mineral Resources are defined at Kagem and no Mineral Resources are defined at Mbuva-Chibolele.
    (2) Reported using 75 per cent. equity participation for Kagem.


    Enlarged Group Assets: Attributable Amethyst Mineral Resource statement (1 January 2008)(1), (2)
 Mineral Resources           Tonnage            Grade        Content
                                (kt)  (kg/t Amethyst)  (kt Amethyst)
 Total Measured + Indicated        0              0.0            0.0
 Inferred                        163             37.1            6.0
 Subtotal                        163             37.1            6.0
 Mineral Resources
 Total Resources                 163             37.1            6.0

     (1) No Measured or Indicated Mineral Resources are defined at Kariba.
    (2) Reported using 50 per cent. equity participation for Kariba.
    The above tables are extracted from paragraph 2.2 of the Competent Person's Report set out in Part VII of the AIM Admission Document.
Details of key assumptions, parameters and methods used to estimate mineral resources are set out in the Competent Person's Report.
    Oriental Mining
    Oriental Mining is a company which was registered in Madagascar in September 2007 and is prior to the Acquisition, a wholly owned
subsidiary of Rox. Oriental Mining is (subject to certain registration requirements which are further explained below and in the risk
factors set out in Part VI of the AIM Admission Document) the holder of 15 licences in the Antananarivo, Fianarantsoa and Toliara provinces
of Madagascar covering rubies, sapphires and emeralds, as well as garnets and tourmalines. Madagascar is presently believed to be one of the
most prospective mineral provinces in the world for coloured gemstones.
    The rights in the 15 exploration mining licences to be held by Oriental Mining were transferred to Oriental Mining pursuant to a sale
and purchase agreement in October 2007. As at the date of the AIM Admission Document, applications have been filed for the transfer of these
licences to Oriental Mining with the Bureau de Cadastres Miniers de Madagasca (''BCCM''), the Madagascar Ministry of Mines but, until new
mining titles are issued by the BCCM in the name of Oriental Mining, the transfer is not complete.
    Fabergbrand name
    FabergLimited was established during 2006 for the purpose of acquiring the Fabergbrand and pursuing Fabergs heritage of excellence in
creativity, design and craftsmanship. In January 2007, FabergLimited acquired Unilever plc's worldwide portfolio of Fabergtrademarks,
licences and associated rights. Gemfields has conditionally acquired the option (also exercisable by Faberg Limited), within 3 months of
Completion, to enter into a 15 year worldwide and exclusive licence with FabergLimited to use the Fabergname in branding, marketing and
selling coloured gemstones excluding diamonds. The Fabergname carries exceptional branding potential and it is intended that, following the
completion of the FabergLicence Agreement, it will become the Enlarged Group's premium brand.
    Strategic development plan
    The Enlarged Group intends to pursue vertical integration in the coloured gemstone industry on an international scale. Its vision is to
become a leading integrated supplier of rough and cut and polished coloured gemstones. The principal methods of achieving this vision will
be by establishing cutting and polishing facilities in Jaipur, India and securing suitable sales and marketing contracts.
    Further details of the Enlarged Group's strategic development plan are set out in Part II of the AIM Admission Document and can be
broken down to include:
    * continuing the improvements in efficiency and processes at the Kagem Emerald Mine with a view to ramping up production from
200-300,000 tonnes per annum to a run rate of in excess of 1.4 million tonnes of TMS per annum by July 2009. The Directors and Proposed
Directors believe that cash costs per tonne of TMS produced are expected to be in the range of $18-19 per tonne upon reaching the 1.4
million tonnes annual production rate. The Directors and Proposed Directors expect that these costs will rise over time as stripping
requirements increase. 
    * improving security at the Kagem Emerald Mine. Theft is a material risk of any precious stone operation and, based on the experiences
which the Group has in implementing security measures and mining processes at the Mbuva-Chibolele mine, steps have already begun to improve
security at the Kagem Emerald Mine;
    * modifying sales formats for example by pursuing direct sales, increasing the number of buyers attending an auction and increasing the
scope to include manufacturing jewellers and buyers from a larger number of countries;
    * processing, cutting and polishing via the establishment of cutting and polishing facilities in Jaipur, India;
    * focussing marketing and branding by developing appropriate marketing campaigns to promote coloured gemstones in general and, at the
outset, emeralds in particular, and the use the Fabergbrand name on coloured gemstones to extract premium prices for the Enlarged Group's
very best gemstones;
    * developing a structured and consistent supply chain. The coloured gemstone industry is renowned for the unstructured nature of its
supply chain and erratic supplies to customers. By working with gemstone processors, manufacturing jewellers and retailers, the Directors
and Proposed Directors believe that the Enlarged Group should be well positioned to create a structured pipeline which will ensure
consistent supply and enhance credibility with, and therefore prices from, consumers;
    * ethical sourcing and assured provenance, obtaining premium pricing by building strong consumer allegiance to its gemstones through
supplying only natural, ''organic'' and CIBJO approved gemstones, adopting the highest ethical standards and a ''direct from source''
capability to guarantee the provenance of high-end gemstones and operating its mines in accordance with the highest environmental, social
and safety standards;
    * drilling and exploration programmes to grow and refine resources figures at existing operations and particularly at the Kagem Emerald
Mine;
    * appropriate restructuring and a reduction in the number of legal entities in the Enlarged Group's structure; and
    * recruitment of appropriate additional operational teams for mining, processing, marketing and sales.
    The Enlarged Group is also actively seeking to acquire additional mine sites and licences in the NRERA and expand its geographic
footprint by the acquisition of other coloured gemstone assets internationally, thereby also broadening its product portfolio.
    The proposed worldwide and exclusive Faberglicence will entitle the Enlarged Group to brand coloured gemstones with the Fabergname.
Fabergwill be used as the Enlarged Group's premium brand and will pioneer the Enlarged Group's policy of ethical sourcing, guaranteed
provenance and strong branding to maximise the value and appeal of the Enlarged Group's gemstones. It will be the ownership of the producing
assets along with an integrated supply chain which will enable the Enlarged Group to guarantee the exact provenance of its gemstones and
assure customers of their ethical legacy. The importance of such considerations to today's consumer can be seen in how blood, conflict and
origin issues have affected the diamond industry.

    The Board
    It is proposed that Sean Gilbertson and Finn Behnken will join the Board on Completion as interim chief executive officer and
non-executive director respectively. Graham Mascall will remain as non-executive chairman, Rajiv Gupta will remain as executive
vice-chairman, Richard James will remain as chief financial officer and Clive Newall will remain as a non-executive director. Prior to the
publication of the AIM Admission Document, Peter Kitchen, Sanjay Khandelwal and Valentine Chitalu resigned from the Board. The Company
expresses its thanks to Messrs. Kitchen, Khandelwal and Chitalu for their contribution during their time at Gemfields.and in recognition of
their contribution during that time, the Directors have proposed that the share options held by Messrs Kitchen, Khandelwal and Chitalu
continue to be exercisable after their resignation and for a period of up to three years following Admission. This proposal will be subject
to approval by the Shareholders at the EGM in accordance with the rules of the Unapproved Scheme.
    In addition to remaining as executive vice chairman of the Company, Rajiv Gupta will continue in his significant role of helping the
Group to acquire prospective gemstone properties. He will also have key responsibility for implementing the marketing, cutting and polishing
aspects of the Group's strategy.
    Brief biographies of the Proposed Directors post-Admission are set out below along with details of their letters of appointment or
service contracts. The Company will seek to appoint a permanent chief executive officer in the future.
    Sean Gilbertson, Interim Chief Executive Officer, aged 35 - Proposed Director
    Sean Gilbertson graduated as a mining engineer from the University of the Witwatersrand in South Africa having spent time in the
country's deep-level gold and platinum mines. From 1995 he worked for Deutsche Bank Ag and Deutsche Morgan Grenfell in Frankfurt and London
specialising in project finance. He co-founded globalCOAL in 1998 and was appointed chief executive officer in 2001 when the business was
acquired by industry players including, inter alia, Anglo American plc, BHP-Billiton Ltd, Glencore International Ag and Rio Tinto plc. He
joined the office of Brian Gilbertson in late 2003, working on a variety of natural resources projects and culminating in the establishment
of Pallinghurst Resources LLP in 2005. Sean Gilbertson is a partner of Pallinghurst Resources and is a director of certain Pallinghurst
portfolio companies including Rox Limited and FabergLimited. He will be appointed as interim chief executive of the Company on Admission and
will dedicate two thirds of his professional time to the Company.
    Sean Gilbertson entered into a service agreement with the Company dated 13 May 2008 and will be appointed Interim Chief Executive
Officer of the Company, with effect from and conditional on Admission. The scope of his employment is to perform such duties and exercise
such powers consistent with his position or assigned to him by the board of directors. He has agreed to devote 66 per cent. of his
professional time in carrying out these duties for the Company. The agreement is terminable by the Company on 3 months written notice or by
Sean Gilbertson on 6 months notice. He is entitled to a basic salary of £150,000 per annum payable monthly. He is entitled to 13 days paid
holiday. However, the Company will continue to pay his salary and benefits during an absence of 6 weeks in any 6 month period on medical
grounds. The agreement contains post termination restrictive covenants which place limitations and restrictions on the solicitation of
customers and employees, dealings with customers and interfering with suppliers of the Group and from acting in competition with the business of the Group. The agreement also includes provision for the
assignment to the Company of intellectual property discovered by Sean Gilbertson during his term in office and provision for the
non-disclosure of confidential information.

    Finn Behnken, Non-Executive Director, aged 36 - Proposed Director
    Finn Behnken graduated as a mining engineer from the University of the Witwatersrand in South Africa having worked in coal and gold
mining. He furthered his career by specialising in mining finance and spent almost 10 years with South Africa's Nedbank Ltd serving, inter
alia, as a non-executive director in relation to certain of its producing mining investments. Nedbank moved him to London in 2006 to develop
their international business. He has had wide ranging interaction with small and mid-size listed mining companies across the commodity
spectrum and has travelled extensively visiting mines around the globe. Finn Behnken joined Pallinghurst Resources in 2007 and will join the
Board as a non-executive director on Admission.
    Finn Behnken has pursuant to a letter of appointment dated 13 May 2008, agreed to act as non-executive director conditional upon and
with effect from Admission. He is entitled to a fee of £16,000 per annum gross payable quarterly in arrears. His letter of appointment also
grants him an option over 300,000 ordinary shares in the Company exercisable at the Issue Price subject to the terms and conditions of the
Unapproved Scheme and conditional on Admission. The Company will be responsible for any out of pocket expenses incurred by him. The letter
of appointment contains a restrictive covenant that he will not hold any directorships in the same business sector as the Company except
with prior approval of the board.
    Share options and management incentives
    The Company operates the Unapproved Scheme to incentivise directors and employees of the Group. The Directors intend to grant options
over a total of 4,430,000 Ordinary Shares under the Unapproved Scheme, including to each of the Directors or Proposed Directors (save for
Rajiv Gupta), together with certain other employees on Admission. These options will have an option exercise price equal to the Issue Price.
The aggregate number of Ordinary Shares over which options have been granted and will be outstanding as at the date of Admission (assuming
no options are exercised between the date of the AIM Admission Document and Admission) will be 12,690,000. The percentage of the Enlarged
Share Capital that the Ordinary Shares under option would represent on exercise is approximately 4.10 per cent. 


    Shareholdings
    Immediately following the Acquisition, the Placing and Admission, the approximate percentages of the Enlarged Share Capital held by Rox,
the placees and the Existing Shareholders will be as follows:
    Rox                                                        56.35 per cent.
    Placees (excluding Rox)                          9.83 per cent.
    Existing Shareholders                              33.83 per cent.
    The Company has been notified that pursuant to an agreement between Rox and a vehicle of which Rajiv Gupta is a beneficiary, Rajiv Gupta
has agreed to transfer his entire beneficial shareholding in the Company to Rox within 3 months of Admission which will mean Rox will hold
183,091,453 Ordinary Shares representing 59.22 per cent. of the Enlarged Share Capital following such transfer (assuming no options are
exercised between the date of the AIM Admission Document and the date of such transfer).
    Lock-in and escrow arrangements
    The continuing Directors and Proposed Directors have agreed (subject to certain standard exceptions) not to dispose of any interests in
any of the Ordinary Shares for a period of 12 months from Admission other than through Canaccord or JPMorgan Cazenove in such orderly manner
as Canaccord or JPMorgan Cazenove respectively shall reasonably require with a view to the maintenance of an orderly market in the Ordinary
Shares.
    Rox will, on Completion, enter into the Rox Escrow Agreement whereby it has agreed to put into escrow the Consideration Shares or the
proceeds from any sale of the Consideration Shares up to a maximum amount of US$60 million until 30 June 2009 unless a claim has been
brought in which case such shares or proceeds would be retained pending settlement of such claim. The terms of the Rox Escrow Agreement are
described more fully in paragraph 10.1.2 of Part IX of the AIM Admission Document. 
    In addition, Rox has agreed (save for certain standard exceptions) not to dispose of any interest in any Ordinary Shares held by it
(save for any Placing Shares issued to Rox in connection with the Placing) for a period of 12 months following Admission. For a further
period of 12 months after the expiry of the above period, Rox has agreed not to dispose of any interests in any Ordinary Shares other than
through Canaccord or JPMorgan Cazenove in such orderly manner as Canaccord or JPMorgan Cazenove respectively shall reasonably require with a
view to the maintenance of an orderly market in the Ordinary Shares.
    Relationship Agreement
    The Company will, on Completion, enter into a Relationship Agreement with Rox. Under the Relationship Agreement, the parties agree to
regulate their relationship so that the Group is capable of carrying on its business and making decisions independently of Rox. The Board
considers this Relationship Agreement necessary given that following the Placing and Admission it is intended that Rox will own
approximately 59.22 per cent. (following the transfer of Rajiv Gupta's entire beneficial shareholding to Rox) of the Enlarged Share Capital
of the Group and will have two representatives on the Board. The terms of the Relationship Agreement are described more fully in paragraph
10.1.2 of Part IX of the AIM Admission Document.


    Canaccord Adams Limited (''Canaccord''), which is regulated and authorised in the United Kingdom by the Financial Services Authority, is
acting as nominated adviser, joint broker, joint bookrunner and joint co-lead manager to the Company in relation to the Admission and the
Placing. Canaccord is not acting for any other persons and will not be responsible to anyone other than the Company for providing the
protections afforded to customers of Canaccord or for providing advice in relation to the contents of this document, the application for
Admission or the Placing. Canaccord has not authorised any part of this document. No liability is accepted by Canaccord for the accuracy of
any information or opinions contained in or for the omission of any information from this document for which the Directors, the Proposed
Directors and the Company are responsible.
    JPMorgan Cazenove Limited (''JPMorgan Cazenove''), which is regulated and authorised in the United Kingdom by the Financial Services
Authority, is acting as joint broker, joint bookrunner and joint co-lead manager to the Company in relation to the Admission and the
Placing. JPMorgan Cazenove is not acting for any other persons and will not be responsible to anyone other than the Company for providing
the protections afforded to customers of JPMorgan Cazenove or for providing advice in relation to the contents of this document, the
application for Admission or the Placing. JPMorgan Cazenove has not authorised any part of this document. No liability is accepted by
JPMorgan Cazenove for the accuracy of any information or opinions contained in or for the omission of any information from this document for
which the Directors, the Proposed Directors and the Company are responsible.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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