Interesting release. If everything works out, this amalgamation allows DMW to retire most of its debt for dilution, and acquire additional diamond producing properties to generate dollars to allow current operations to continue. They will shed another one of their nine lives, but stay alive to eventually develop the pipes at Luo, and mine the Sierra Leone concessions. Of course, we will have a new majority share holder(300,000,000 shares out of 526,000,000), as control appears to shift to the new partner, unless a lot of options get exercised.
Looks good to me,....but I bought a whack of shares in the $0.03 range (ggggggggggg). I'd say the principals in this deal think preservation of DMW's assets will result in the ability to make lots of money in the future,...maybe even helping the shareprice!?
From: DiamondWorks Ltd. (DMW)
diamondworks.com
mailto:info@diamondworks.com
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Re: News Releases - Tuesday, January 18, 2000
DIAMONDWORKS ANNOUNCES MAJOR RESTRUCTURING
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Johannesburg, South Africa -- DiamondWorks Ltd. announced today that it had
received financial assistance from Lyndhurst Limited (LL), an unrelated,
privately held UK-based mining holding company, which is controlled by a
consortium lead by Mr. Antonio Teixeira, a well known Southern African
entrepreneur with substantial mining interests in central Africa. The
transaction would include the acquisition of certain LL central African mining
and diamond trading businesses by DiamondWorks, which arrangements, taken
together, would constitute a substantial financial and operational
restructuring of DiamondWorks.
Salient features of the transaction
1. Lyndhurst will advance a series of working capital loans totaling US$3
million to DiamondWorks in four tranches, the first two of which have already
been received, representing 75% of the First Loan. US$2 million (the "Second
Loan") will be advanced upon request by the DiamondWorks board after the
conditions with regard to the acquisition of the LL diamond trading business by
DiamondWorks shall have been fulfilled or waived by Lyndhurst. The Loans shall
become due and payable on March 31, 2000, and shall, unless earlier converted
into DiamondWorks' shares as provided below, bear interest from the date of the
advance to the date of repayment at US dollar LIBOR plus four percentage
points.
2. DiamondWorks will acquire from Lyndhurst 100% of Central African Diamond
Company S.A.R.L ("CADCO") at a purchase price of Cdn$12,000,000, to be settled
by the issuance of 300,000,000 common shares of DiamondWorks at Cdn$0.04 per
share.
3. Lyndhurst shall have the right, if the acquisition of the LL diamond trading
business does not close, and the obligation, if it does, to convert the First
Loan into 40,000,000 common shares of DiamondWorks at Cdn$0.04 per share. The
Second Loan shall be convertible at the election of Lyndhurst into DiamondWorks
common shares at the ruling market price upon conversion.
4. DiamondWorks shall have a call option to acquire 100% of Central African
Mining Company S.A.R.L ("CAMCO") for Cdn$53,000,000, payable by means of the
issue of 265,000,000 DiamondWorks common shares at a price of Cdn$0.20 per
share. The purchase price is based upon an independent valuation.
5. Lyndhurst shall have a put option to require DiamondWorks to acquire CAMCO
for Cdn$53,000,000, payable by means of the issue of DiamondWorks common shares
at a price per share of the greater of (i) Cdn$0.20 per share and (ii) the
average closing price of DiamondWorks common shares for the 30-day period
immediately preceding the date of exercise of the put option less a 10%
discount, provided that, in any event, the issue price per share shall not
exceed Cdn$0.40 per share.
6. The call and put options referred to above shall be conditional upon
completion of the CADCO acquisition by DiamondWorks and shall be enforceable
for a period of 24 months.
7. Mr. Teixeira and Mr. Miguel Caldeira, a member of the Teixeira consortium,
will join the DiamondWorks Board with immediate effect, and up to four
additional directors nominated by LL will be appointed upon closing.
8. Existing members of DiamondWorks' management will be appointed to the
following positions as officers of DiamondWorks with immediate effect:
8.1 Brian M. Menell: Non-Executive Chairman and President
8.2 John Firth: Chief Executive Officer
8.3 Rob Rainey: Chief Financial Officer
9. The parties record their intention that no substantial changes will be made
to the management structure of DiamondWorks for the time being.
Suspensive Conditions
The transaction is subject to the fulfillment of the following conditions
precedent:
all necessary approvals being obtained from regulatory authorities and the
Toronto Stock Exchange;
the appointments referred to in paragraph 7;
approval of the shareholders of DiamondWorks, to the extent required;
9.1 the creditors of DiamondWorks and its wholly-owned subsidiaries irrevocably
agreeing in writing to convert at least 75% of their claims into DiamondWorks
common shares at an issue price of not less than Cdn$0.20 per share.
9.2 The receipt of the last tranche of the First Loan.
Rationale for the Transaction
DiamondWorks' management believes that considerable operational, management and
financial synergies will arise between the merged operations of DiamondWorks,
CADCO and in due course, CAMCO. DiamondWorks' management also believes that the
addition of CAMCO will deliver to DiamondWorks a substantial, geographically
diversified, diamond mining resource base.
The following issues are pertinent regarding the Central African Republic
("CAR"):
 CAR receives little international attention but annually produces over
600,000 carats of high-quality diamonds through legitimate channels mainly as a
result of the extensive artisan workings in alluvial diggings. Most of these
diamonds are produced from CAMCO's concessions. This is an activity encouraged
by the CAR government and serves as a natural exploration and prospecting tool.
 CAR is not involved in any of the civil conflicts that are taking
place around it and the small population, limited national resources and lack
of infrastructure prevents it from doing so. It has neither the will or the
resources to wage war and the country is a peaceful democracy;
 CAR has a population of less than 3.5 million and is land locked. The
countryside is relatively unspoiled although poaching has severely reduced the
wildlife density. CAR has been considered to be a high risk country but the
perception of risk is reducing as the government of President Patasse remains
in power and confidence in the administration improves;
 At this point, the exploration and resource targeting are still in
their infancy in an area which is very large. The potential to franchise
diamond mining operations is extremely good, particularly as the operating
conditions and security levels are much better than any of the surrounding
countries, and very little publicity has been given to CAR.
The following issues are pertinent regarding CADCO and CAMCO:
 All CAMCO concessions related to this transaction are owned 100% by
CAMCO.
 CADCO is a profitable diamond trading business that has been in
operation since August 1997.
 Over a period of 30 months, CAMCO has established itself as the single
largest diamond concession holder in CAR with direct ownership of six
concessions (11,577km2). It also holds a Namibian concession on the Orange
River;
 At present, the only formal diamond mining company activity in the CAR
is being carried out by CAMCO.
 CAMCO has established a network in CAR that consists of an office in
Bangui that facilitates entry into CAR and a regional office and mining camp in
Bria in the northeast. The Bria camp is mainly a CAMCO base for the mining
operations for all concessions in the northeast. Bangui is a base camp for
operations in the west but no joint ventures have yet been established in this
area;
 Scientific papers written suggest that the diamonds of CAR were
sourced from a) Erosion during the Cretaceous period of primary kimberlitic
diamond fields some 3-4,000km south of the existing Cretaceous basins, such as
the Cretaceous sediments are now providing diamonds which are being re-worked
into the modern river systems; b) Analysis of the heavy minerals from the
Carnot area suggest that the detrital material comes from the glacial Mambere
Formation and the basement. Consequently, the glacial event may be considered
as the primary transport process of the diamonds and this is being eroded into
the modern rivers.
 CADCO is a diamond-trading agency, which is one of four officially
licensed in CAR. CADCO is fast becoming regionalized as the mining operations
spread throughout the country. This means that CADCO can buy deep into the
diamond value chain and generate significant US Dollar profits through diamond
sales into the international market;
 Lyndhurst has invested an aggregate of US$26 million into CAMCO and
CADCO. Most of this finance has been sunk into infrastructure development
General
Other than the commitment by both parties in respect of the loan arrangements
in the event of these transactions not being consummated, these arrangements
are subject to all necessary regulatory, shareholder and DiamondWorks' creditor
consents, including those subject to due diligence and independent valuations
as may be required.
Additional information regarding CAMCO and CADCO and regarding DiamondWorks'
current operations and production levels at the Luo Mine will be provided to
shareholders over the next few weeks.
DiamondWorks is a diamond mining and exploration company. In addition to the
Luo and Yetwene mines in Angola, the company has other diamond concessions in
Angola and Sierra Leone, including the Koidu mine.
DiamondWorks' shares trade on the Toronto Stock Exchange under the symbol DMW.
For further information, please contact:
Robert Rainey in Johannesburg at 27-11-975-5986
Bill Trenaman in Vancouver at 1-604-669-8871
Website: diamondworks.com
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Copyright (c) 2000 DIAMONDWORKS LTD. (DMW) All rights reserved worldwide. For
more information, please visit our website at diamondworks.com or
send electronic mailto:info@diamondworks.com
Message sent on Tue Jan 18, 2000 at 8:35:23 AM Pacific Time
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