TIDMFDI
RNS Number : 9751D
Firestone Diamonds PLC
25 February 2020
25 February 2020
Firestone Diamonds plc
("Firestone", the "Group" or the "Company")
Shareholder Circular and Notice of General Meeting - proposed
cancellation of AIM listing
Firestone Diamonds plc (AIM: FDI), the AIM-quoted diamond mining
company, announces that a circular (the "Circular") has been posted
to Shareholders today convening a General Meeting to be held at
10.30 a.m. on 13 March 2020 to approve the cancellation of the
admission of the Ordinary Shares to trading on AIM (the
"Cancellation"). The AIM Rules require that, unless the London
Stock Exchange otherwise agrees, the Cancellation must be
conditional upon the consent of not less than 75 per cent of votes
cast by the Shareholders, given in a general meeting of the
Company.
After commencing mining production at the end of 2016, it became
clear during 2017 that the anticipated average value of US$107 per
carat was not being achieved and as a result, Liqhobong Mining
Development Company (Pty) Limited, the 75% owned subsidiary of the
Company ("LMDC"), would be unable to service its scheduled debt
repayments to ABSA Bank Limited ("ABSA Bank") in respect of its
US$82.4 million project debt finance facility. This culminated in
the US$25.0 million fund raising and debt restructuring announced
during December 2017 that entailed an eighteen-month standstill on
the ABSA Bank debt during which only interest was serviced. The
standstill period came to an end mid-2019 and debt repayment
resumed from June 2019 according to the revised schedule.
Due to the deteriorating diamond market and price pressure on
the smaller stones that form the bulk of the diamonds recovered
from Liqhobong, the Company identified towards the end of 2019 that
once again LMDC would be unable to service its ABSA Bank debt
repayments as they became due and therefore embarked on a further
round of discussions and negotiations with its principal lenders.
This culminated in non-binding term sheets being signed at the end
of 2019 with ABSA Bank and separately with RCF and Pacific Road as
Bondholders agreeing in principle to another debt repayment
standstill and to the provision of a temporary working capital
facility.
Additionally, the Company continues to work with ABSA Bank and
the Bondholders on a longer-term restructure of its outstanding
ABSA debt of US$63.9 million and its Series A and B Eurobond debt
of US$38.4 million.
The Board still believes that the diamond market has the
potential to improve but that it will take longer than had been
previously anticipated and therefore everything possible needs to
be done to ensure that the Company can survive the current downturn
using its existing cash resources. In order to do so all costs and
expenses have been reviewed critically including the costs
associated with being listed. The Directors have conducted a review
of the benefits and challenges of maintaining the Company's listing
on AIM and after careful consideration, have concluded that it is
no longer in the best interests of the Company and its
Shareholders.
The main reasons for arriving at this conclusion are:
-- Cost savings
The costs associated with maintaining the AIM listing (e.g.
broking, Nomad, legal, financial, regulatory) provide minimal
benefit and the funds can be better utilised to extend the
Company's operating window. The need to preserve cash by all means
possible to ensure the Company survives the current market downturn
is the overriding principle for the Board and will include a review
of operations, corporate structure and overheads including the
composition of the Board.
-- Share price and liquidity
The Company suffers from a lack of liquidity in trading of its
Ordinary Shares due to the Bondholders holding 65 per cent of the
Company's issued ordinary share capital, and in addition, two
minority Shareholders hold approximately a further 18 per cent.
This, combined with the poor diamond market and general negative
sentiment towards the sector, has resulted in a material share
price and consequent market capitalisation decline. The poor market
conditions are expected to persist for the foreseeable future and
therefore the Board sees limited value in maintaining the AIM
listing as it is unlikely to provide a positive platform for any
further corporate opportunities.
Following the Cancellation, it is the Company's intention to
rationalise the Board so that its composition is more appropriate
for its current activities whilst, at all times, taking into
account the interests of all Shareholders and sound corporate
governance. It is the Company's current intention that the Board
will consist of no less than four Directors, including an
independent Chair.
The Company has also, conditional on the Cancellation becoming
effective, entered into a relationship agreement with the
Bondholders pursuant to which the Bondholders, for so long as each
Bondholder respectively continues to hold 20 per cent or more of
the voting capital of the Company, have given certain undertakings
to the Company to the effect that the Company can, amongst other
things, continue to operate on an independent basis. Further
details of the relationship agreement are set out in the
Circular.
It is important to note that Shareholders continue to be able to
hold their shares in uncertificated form (i.e. in CREST) and that
the Company has arranged a Matched Bargain Facility to assist
Shareholders to trade in the Ordinary Shares and this will be put
in place from the day of Cancellation. Further detail is provided
in the Circular. The Company also undertakes to continue to
communicate information about the Company to its Shareholders as
explained in the Circular.
In conclusion, the Board believes that it is in the best
interests of Shareholders, employees and lenders to reduce costs
and preserve cash by all means possible to ensure that the Company
survives the market downturn. Accordingly the Directors consider
that Cancellation and approval of the Cancellation Resolution is in
the best interests of the Company and its members as a whole.
General Meeting
A general meeting of the Company, notice of which is set out in
the Circular, will be held at 10.30 a.m. on 13 March 2020 at the
offices of Gowling WLG (UK) LLP, 4 More London Riverside, London
SE1 2AU to seek Shareholders' support for the Resolutions.
The Company has received irrevocable undertakings from RCF,
Pacific Road and Edwards Family Holdings Ltd to vote in favour of
the Resolutions at the General Meeting in respect of, in aggregate,
513,346,739 Ordinary Shares representing 74.19 per cent of the
existing issued ordinary share capital of the Company.
Timetable
2020
Announcement of proposed Cancellation 25 February
Notice provided to the London Stock Exchange 25 February
to notify it of the proposed Cancellation
Publication and posting of this document 25 February
Latest time and date for receipt of Forms of 11 March
Proxy in respect of the General Meeting
General Meeting 13 March
Announcement of results of General Meeting 13 March
Expected last day of dealings in Ordinary Shares 25 March
on AIM
Expected date of Cancellation 26 March
Document availability
An electronic copy of the shareholder circular can be accessed
at the Company's website: www.firestonediamonds.com
Terms not otherwise defined in this announcement shall have the
meaning given to them in the Circular.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014.
For more information please visit: www.firestonediamonds.com or contact:
+44 (0)20 3319
Firestone Diamonds plc 1690
Paul Bosma
Grant Ferriman
Macquarie Capital (Europe) Limited
(Nomad and Broker) +44 (0)20 3037
Alex Reynolds 2000
+44 (0)20 7920
Tavistock (Public and Investor Relations) 3150
Jos Simson
Gareth Tredway
Annabel de Morgan
Background information on Firestone
Firestone is an international diamond mining company with
operations in Lesotho. Firestone commenced commercial production in
July 2017 at the Liqhobong Diamond Mine. Liqhobong is owned 75% by
Firestone and 25% by the Government of Lesotho. Lesotho is one of
Africa's significant new diamond producers, hosting Gem Diamonds'
Letšeng Mine, Firestone's Liqhobong Mine, Namakwa Diamonds' Kao
Mine and Lucapa's Mothae Mine.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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