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Purchase of the Loxton Dal and Frank Smith Mines from Diamond Fields International Ltd.
The Company is pleased to announce that is has signed a binding letter agreement with Diamond Fields International Ltd., a wholly-owned subsidiary of
Diamond Fields Resources Inc., for the purchase of a 100% interest in the Loxton Dal and Frank Smith diamond mines at Kimberley in the Republic of South
Africa.
The Company has agreed to purchase all of the outstanding shares of either Good Hope Diamond & Estates (Proprietary) Limited ("GHDE"), the owner of
Frank Smith Mine and Don Diamonds (Proprietary) Limited ("DD"), the owner of the Loxton Dal mine, or all of the issued and outstanding shares of
Diamond Land Mining (Proprietary) Limited, the owner of GHDE and DD. In consideration, the Company will pay Diamond Fields International Ltd. the sum
of USD $2.0 million and issue 200,000 Special Warrants at a deemed value of CDN $3.50 per Special Warrant. Each Special Warrant will be exchangeable
(for no additional consideration) into one common share of the Company upon approval of the Company's Prospectus by securities regulatory authorities in
qualifying jurisdictions. The closing date for this transaction is July 3, 1996.
Located 25 kilometers northeast of Kimberley, the Loxton Dal mine is known for high yields of gem quality tonnes per vertical meter of pipe. Based upon
current independant engineering reports, the Loxton Dal mine is estimated to have sufficient reserves for 17 years.
Substantial capital expenditures by Diamond Fields has increased the capacity of the operation to approximately 25,000 carats per year. The mine's upgrading
above ground has now been completed, with improved security and a fully installed, new heavy media separation and x-ray recovery plant. The development
of new levels underground, together with the equipping of a new raise-bored shaft is now complete and the mine is ready for production.
Located 80 kilometers northwest of Kimberley, the Frank Smith Mine has comparatively lower yields than the Loxton Dal but produces larger stones of
outstanding quality and marketability. These stones historically have commanded an average price of between USD $150 to $200 per carat.
The mine and surface facilities are in the process of being upgraded to enable increased production. This has necessitated the completion of a new shaft from
surface. Upgrade of the underground mining systems is in progress and more efficient recovery/security systems are planned after the Loxton Dal mine
attains full production.
In addition, the substantial dumps resulting from historic production at the Frank Smith mine will be evaluated.
The Company is also very pleased to report that it has retained C.M. Oliver & Company Limited (the "Agent") as agent for a best efforts private placement of
up to 2,200,000 Special Warrants at a price of CDN $3.50 per Special Warrant for gross proceeds of CDN $7.7 million. Each Special Warrant is convertible
(for no additional consideration) into one free trading common share and one-half of one non-transferable share purchase warrant upon approval of the
Company's Prospectus by securities regulatory authorities in British Columbia, Alberta & Ontario. Each whole non-transferable share purchase warrant will
entitle the holder to purchase one additional common share in the capital of the Company for a period of one year from Closing, for the exercise price of
$4.00 if exercised during the first 6 months following Closing, or $4.50 if exercised for the period 7 to 12 months following Closing.
Canaccord Capital Corporation has agreed to participate in up to 25% of this Offering on an inter-dealer basis.
Of the net proceeds from the Special Warrants, 30% will be held in escrow pending final receipt of the Prospectus. If the Company has not obtained a receipt
for its Prospectus in each of the qualifying jurisdictions within 120 days of closing, subscribers for special warrants shall be entitled to receive a bonus of up
to 10% of the special warrants subscribed by them.
The Company will pay the Agent a commission of 8% of the gross proceeds in cash or Special Warrants (or a combination thereof), at the Agent's discretion,
and grant the Agent the right and option to purchase (the "Agent's Warrants") that number of common shares of the Company equal to 10% of the number of
Special Warrants placed under the Offering. The Agent's Warrants shall have a term of one year only, and be exercisable at a price of $3.50 per share for 12
months after Closing. The Company has also agreed to pay the Agent a corporate finance fee consisting of 15,000 Special Agent's Warrants, each Special
Agent's Warrant exercisable by the Agent at no additional cost for a period of one year from Closing into one common share of the Company.
The proceeds of the private placement will be used for the acquisition of the Frank Smith and Loxton Dal mines, together will provide development and
working capital.
The foregoing is subject to regulatory approval.
On Behalf Of The Board Of Directors Of Kensington Resources Ltd.
G. Clive Newall
President |
