Paragon Diamonds Ltd Update on Lemphane Diamond Project and Placing

 
TIDMPRG 
 
Paragon Diamonds Limited / Index: AIM / Epic: PRG / Sector: Resources 
 
13 March 2015 
 
                           Paragon Diamonds Limited 
 
                          ("Paragon"or the "Company") 
 
                  Update onLemphaneDiamond Projectand Placing 
 
Paragon Diamonds Limited, the AIM quoted vertically integrated diamond 
development company in Lesotho, Africa, is pleased to provide a positive update 
on the development of its Lemphane kimberlite Pipe Project (`Lemphane' or `the 
Project') located in Lesotho, Africa, and in respect to a proposed acquisition 
of a diamond resource in Africa. If successful the proposed acquisition will 
significantly enhance the asset base of the Company and its valuation ahead of 
Stage I production at Lemphane in Q2 2015. 
 
Highlights 
 
  * Stage I production at Lemphane remains on track to commence in Q2 2015 
 
  * 
      + Lemphane is located among a cluster of kimberlites known for producing 
        exceptionally large, high value diamonds 
 
      + Extraction of approximately 1 million tonnes of kimberlite over an 18 
        month to two year period 
 
      + Targeting recovery of over 100 diamonds larger than 9 carats, including 
        stones over 100 carats in size 
 
  * Potential to significantly reduce future operating costs at Lemphane- 
    discussions remain on-going with contractors with regards to the 
    electrification of the mining operations 
 
  * GBP130,000 raised in new equity to fund critical due diligence on a 
    prospective diamond mine acquisition with validated resource in Africa, 
    supported by International Triangle General Trading LLC ("ITGT") financing 
    the acquisition as opposed to equity dilution 
 
Paragon's Chairman Philip Falzon Sant Manduca said: 
 
"We continue to work aggressively to add value for shareholders. Discussions to 
reduce our energy costs at Lemphane by tapping in to the electrification which 
is now being established will be a significant contributor to added net 
revenues. In addition, we are seeking a new acquisition target which has a 
kimberlite diamond resource in Africa, and have been performing due diligence 
to validate our strategy for development. We can achieve significant economies 
of scale by combining management teams at both Lemphane and the potential 
acquisition mine and through the ordering of relevant plant equipment and use 
of sub-contractors should our efforts at an acquisition be successful, we would 
look to develop both mines simultaneously. At this stage Paragon is one of a 
number of potential acquirers and there is no guarantee that the Company will 
be successful. If we do not make an immediate acquisition, nothing changes and 
we remain on schedule for Q2 2015 production at Lemphane. 
 
"We have completed a small fund raise to isolate and thus segregate the costs 
associated with a potential acquisition of a resource, rather than utilise 
development capital to acquire other assets. If an acquisition is successful it 
should significantly re-rate the company, significantly escalate production and 
revenue numbers and of course one would hope be reflected in a higher share 
price. As a consequence, I support this fundraise from existing shareholders to 
finance the rigorous due diligence involved to support an acquisition, which is 
not inconsistent with my stated ambition to keep share dilution to a minimum. 
Should the acquisition be successful, ITGT will finance it on agreeable terms, 
and at a lower rate of interest, rather than via further share issuance. 
 
"Paragon Diamonds is a company in the right place at the right time and I 
firmly believe with the right strategy to develop itself into a holistic 
diamond company controlling the sourcing and supply of investment grade 
diamonds. In the six months that I have been a director, we have cleaned up the 
shareholder register and agreed significant funding and financing with ITGT on 
favourable terms. Furthermore we have established the Company's distribution 
channels in Dubai, and upgraded our business strategy to focus on production 
and not exploration, which is evidenced by our decision to move away from our 
current ownership of unexplored licenses in Zambia, Botswana and Tanzania and 
towards the potential acquisition of a further resource which can combine with 
Lemphane to produce significant economies of scale and an increased level of 
production. I have become increasingly positive about our prospects month on 
month since I became the Chairman, a time when Titanium Capital Investments 
Ltd. evaluated Paragon as the best value diamond company on the market in which 
to invest in, alongside having the greatest potential." 
 
Lemphane Mine Site 
 
Preparatory earthworks are already scheduled at Lemphane. The first stage will 
involve the construction of a dual haul road, capable of handling the larger 40 
tonne haul trucks between the kimberlite orebody and processing plant site; 
preparing the 75tph (0.5Mt/year) processing plant site in anticipation of civil 
construction of foundations and footings; and commencing work on a terraced 
site for intended residential staff camp, planned to house circa 75 employees 
and contractors. 
 
Immediately following completion of the preparatory earthworks, earth moving 
machinery will be deployed to undertake final pre-stripping of overburden over 
the Lemphane kimberlite to enable initial pit development; the construction of 
access ramps and roads within the planned 1 million tonne sub-pit and 
earthworks on the access to, and retention wall toe for the planned 0.5mln 
cubic metres tailings storage facility, and associated drainage, retaining wall 
and water dams, the design of which has recently been finalised by the 
Company's civil engineering consultants. 
 
It is proposed that the dam construction and mining will be undertaken by 
leading mining contractor, Matekane Mining Investment Company (`MMIC'), the 
principals of which hold a 12.9% interest in Paragon Diamonds. MMIC is the main 
mining contractor on two neighbouring mines moving in excess of 20 million 
tonnes of kimberlite and basalt waste rock per annum. 
 
Importantly, discussions are on-going with the consortium developing the 
Lesotho Electric Corporation HT regional 132kV power line with regards to the 
electrification for both Stage I and Stage II mining operations which has the 
potential to significantly reduce the Project's operating costs. 
 
Additional Drilling 
 
Drilling of a final eight holes to confirm the dimensions of the kimberlite at 
between 200-300m depth below surface is due to complete shortly. Geotechnical 
drilling will also be carried out for the purposes of the tailings storage 
facility and open pit construction at Lemphane by Rodio Geotechnical Services, 
who are the main core drilling contractor at the nearby Letseng Diamond Mine. 
 
Issue of Equity 
 
The Company has raised approximately GBP130,000 by placing 2,363,637 new ordinary 
shares of 1p each in the Company with existing shareholders at a placing price 
of 5.5 pence per share (the "New Ordinary Shares"). In anticipation of the 
funding package from ITGT, a privately owned international investment group 
with a focus on construction, automobiles, real estate and banking completing 
imminently, the Company will use these proceeds to advance due diligence on a 
proposed acquisition of a diamond resource in Africa which, if successful, will 
significantly enhance the asset base of the Company and its valuation. 
Management believe that it is important to segregate capital already raised and 
allocated to production at Lemphane from any additional investment expended to 
acquire additional resource. ITGT will partner with Titanium Capital 
Investments Ltd. to additionally finance any acquisition should it be 
successful. This funding keeps dilution to existing shareholders to a minimum 
whilst ensuring that the relevant work can be undertaken on the targeted 
acquisition in a timely manner, which will add significantly to shareholder 
value. 
 
Application for the 2,363,637 New Ordinary Shares to be admitted to trading on 
AIM ("Admission") will be made and Admission is expected to occur on or around 
19 March 2015. The New Ordinary Shares will rank pari passu with the existing 
ordinary shares of 1p each (the "Ordinary Shares") in the Company. 
 
Total Voting Rights 
 
Following Admission, the Company's enlarged issued share capital will comprise 
277,888,291 Ordinary Shares. The Company does not hold any Ordinary Shares in 
treasury. Therefore, the total number of Ordinary Shares with voting rights 
will be 277,888,291. This figure may be used by shareholders in the Company as 
the denominator for the calculations by which they will determine if they are 
required to notify their interest in, or a change in their interest in, the 
share capital of the Company under the FCA's Disclosure and Transparency Rules. 
 
In accordance with the AIM Rules for Companies, the information in this 
announcement has been reviewed by Stephen Grimmer PhD., MSc., a qualified 
geologist with over 25 years diamond exploration experience. 
 
                                   **ENDS** 
 
For further information please visit www.paragondiamonds.com or contact: 
 
Philip Falzon Sant     Paragon Diamonds Limited        [phone] 
Manduca 
 
Simon Retter           Paragon Diamonds Limited        [phone] 
 
David Hignell/Gerry    Northland Capital Partners      [phone] 
Beaney                 Limited 
 
John Howes/Mark        Northland Capital Partners      [phone] 
Treharne               Limited 
 
Felicity Winkles       St Brides Partners Ltd          [phone] 
 
Frank Buhagiar         St Brides Partners Ltd          [phone] 
 
Notes 
 
Paragon Diamonds has a pipeline of projects in Lesotho, Botswana and Zambia, 
the most advanced of which is its Lemphane Kimberlite Pipe Project in Lesotho, 
located close to the world class Letseng mine, Lesotho's largest diamond mine. 
Lemphane is the last known world-class sized kimberlite to be developed in 
Lesotho. Among the stones recovered in the Company's 2013 bulk sampling 
programme were several large high value stones of up 8.9 carats in size and 
individual diamond values in excess of US$2,400/ct have been achieved, 
demonstrating the potential for Lemphane to hold large and valuable diamonds. 
The first of a two stage production programme is currently expected to commence 
late 2014 (subject to financing) which will further define the resource at 
Lemphane. As increased tonnages of kimberlite are processed the proportion of 
larger diamonds recovered will improve, increasing the average value of 
diamonds recovered at the project, as was the case at Letseng. 
 
Stage 1 production will cover a two year period during which approximately 1 Mt 
of kimberlite will be mined and processed out of the currently estimated 48.6Mt 
of kimberlite (to 350m depth) at the site, using a 75 tonne per hour processing 
plant. The Company is targeting 20,000 carats during Stage 1 production with an 
estimated minimum value of US$930 per carat that is expected to generate 
revenues in excess of US$9m per annum. Cash flow will be reinvested to further 
develop Lemphane and complete a bankable feasibility study, a 3D geological 
model and a substantial inferred resource ahead of commencing the Stage 2 
production phase. Stage 2 will see production ramped up to 3Mt/year with peak 
production expected to hit 65,000 carats per year of high value diamonds. 
 
It is the intention of the Company to become a fully integrated diamond company 
maximising the margins gained from being exposed from the mining to selling of 
diamonds. 
 
 
 
END