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Paragon Preps Share Buyback, Seeks Immediate Mothae Acquisition
Jun 19, 2015 1:59 PM
By Jeff Miller
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RAPAPORT...
Paragon Diamonds Limited raised $794,000 (GBP 500,000) in unsecured debt financing from an investment company to initiate a share buyback program and to support working capital needs as the junior mining company awaits approval to acquire the Mothae diamond project in Lesotho.
While the Mothae purchase from Lucara Diamond Corporation is largely expected to proceed, Paragon's chairman, Philip Falzon Sant Manduca, is scheduled to meet
Lesotho's Minister of Mines on June 22 to request "immediate approval" of the deal in order to begin diamond production as soon as possible.
Paragon agreed, in principle, to a
$26 million funding package with International Triangle General Trading (ITGT) LLC of Dubai to fund Mothae and its existing Lemphane kimberlite
simultaneously. Paragon believes that the two projects will create significant employment opportunities for local residents and generate substantial revenue for the government.
The new loan will also provide Paragon an opportunity to purchase shares from investors who wish to sell, as the board of directors strongly believe the share price is "undervalued" given the company's progress in the past year coupled with the pending Mothae
acquisition. Shares in Paragon closed 1 percent lower in London at 5.25 pence on June 19, however, they are trading 39 percent higher compared with one year ago. The company's board authorized repurchasing up to 33,106,743 ordinary shares.
Falzon Sant Manduca said, "We wish to
ensure that our share price more accurately reflects the growing value of the
company and, if necessary, the board can now take action to ensure that the share
price remains orderly. This is particularly important while we await
completion of the Mothae acquisition and the associated release of the ITGT
funding package, so that production can commence later this year.
"Paragon's share price, in my opinion, should already be in double digits and
I have no doubt that it will be shortly after production commences. I am also
aware that poor price action can fuel rumors and negative perceptions among
existing and prospective investors and I am determined that this is not going
to happen while I am involved with Paragon. Shareholders and the market
should view this short term debt facility principally as a mechanism for the
board to remove any shareholders if they wish to exit, promote positive
sentiment around the share price at this important time and ensure that the
board transition the share price in a strong and proper manner during the
coming weeks, thereby enabling a more efficient share price valuation to
emerge," he said.
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Tags:
capital, diamond, Jeff Miller, Lesotho, mining, Mothae, Paragon Diamonds
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