Obtala Resources Ltd (LON:OBT) announced plans to list its wholly owned subsidiary Paragon Diamonds Ltd on the Alternative Investment Market segment of the London Stock Exchange.
The resources investment, development and production company said that, on admission, Paragon will acquire the entire issued share capital of Sierra Leone Hard Rock Ltd (SLHR) from Obtala for £17.5 million, to be paid through the issue of 87.5 million new Paragon shares.
Paragon will also acquire African Rock Resources Ltd (ARR), a private company which holds the Mabuki Diamond licence and two further coloured gemstones licences in Tanzania. Paragon will pay £2.5 million through the issue of 12.5 million Paragon shares.
The acquisition of ARR is conditional on admission, the renewal of the Mabuki diamond licence and consent from the relevant Tanzanian licensing to its change of control.
Paragon will raise over £3 million through the issue of new shares new institutional and private investors. Admission to AIM is expected to occur on November 1.
Following the listing on AIM and the acquisition of ARR, Paragon will be 70-percent controlled by Obtala.
SLHR owns and operates the established Konoma mine in Kono, Sierra Leone. The mining operations comprise four mining licences, ML001/06, ML002/06, ML003/06 and ML004/06 covering a total area of 164.2 square kilometres along the Bafi River in Sierra Leone.
The entire processing plant, heavy earth moving equipment and camp will be acquired from Obtala, including the data from the extensive exploration work undertaken by African Minerals Limited prior to Obtala's purchase of SLHR in January 2010.
The exploration licences (EXPL 001/04, EXPL 006/06, EXPL 004/06, EXPL 008/06 and EXPL 001/07) held by SLHR, covering a total area of 1,613 square kilometres, were not renewed during the year as Obtala has been focused on increasing production from the Konoma mine. Once AIM-listed, Paragon will review these licences and may submit applications to regain the licences in due course.
“There is however, no guarantee that once an application is submitted a renewed licence will automatically be granted, but the company has no reason to believe they would be unsuccessful if applications were submitted,” Obtala said.
ARR owns the Mabuki diamond licence area in northwest Tanzania, approximately 81 kilometres southeast of the city of Mwanza. The licence area covers 64 square kilometres and is situated in a region where evidence indicates that known diamond deposits are currently being worked by artisanal miners.
Although no exploration work has been undertaken to date, the geological setting of the licence indicates the area may have the potential for, as yet, undiscovered diamond deposits. In addition, ARR owns the Ndunda and the Kalalani coloured gemstones licences in Tanzania.
The licences are deemed non-core to Paragon's strategy and the board may relinquish them in due course or farm out an interest in them to other mining exploration groups.
Paragon's objective will be to step up production from the established operating Konoma mine, with the intention subsequently of increasing the value of its diamond assets through the development of its resource estimates and, where appropriate, commencing production of other economically feasible diamond assets.