AIM-listed diamond miner BlueRock Diamonds plc, will implement a new mining plan at its Kareevlei diamond mine in the Kimberley region of South Africa in order to increase production with a target of becoming cash flow positive at a corporate level.
In order to facilitate the revised plan the board has restructured the management of the company and has raised additional funding from strategic and other investors.
The company has raised an aggregate of £937 000 (before expenses) via the issue of 937,000,000 share.
In addition, certain directors and a former director of the company have indicated their intention to subscribe for a further aggregate £45,000 via the issue of a further 45,000,000 shares which will take the total gross amount raised is expected to be £982 000.
The new funds will be sufficient to reach the compay’s medium term goal of processing in excess of 400 000 tpa (2018: 190 000 t). The target for 2019 is between 280 000 t and 330 000 t. The board expects that Bluerock will be profitable in the second half of 2019 and expects the company to be self-funding going forward.
Use of proceeds
The board is conscious of continued shareholder dilution but, following further review of the company’s operational plan, considered that the fundraising was necessary in order for Bluerock to invest in Kareevlei to enable it to implement the required operational changes to sufficiently build production and meet its strategic goals.
The funds raised will be used to implement the company’s revised mine plan and for investment in production improvements including:
- Opening up and developing other pipes in order to provide flexible mining
- Final modifications to the crushing circuit
- Improvements in material flow to ensure consistent supply of ore to the processing plant
- Investment in essential stock of spares to minimise the disruption of breakdowns
- Investment in further infrastructure, including dry inventory, to minimise the disruption of wet weather
The fundraising will also provide working capital to fund operations until target throughputs are reached.
Board and key management changes
Gus Simbanegavi has been appointed as CEO of the company’s principal operating company Kareevlei Mining. Simbanegavi is a mining engineer and has extensive experience of working in mining operations in South Africa and Zimbabwe and has previously worked closely with the company’s Chairman Mike Houston.
Importantly, his experience encompasses both small and large scale mining operations including extensive open cast mining. His initial focus will be on increasing production levels and his short term and long term remuneration has been structured to reflect this.
Mike Houston will become executive chairman to oversee the transformation of the company to profitability with the expectation that Simbanegavi will be appointed as CEO of BlueRock once the initial task of reaching and stabilising production at agreed targets has been completed.
Adam Waugh is standing down today as CEO of BlueRock and Kareevlei Mining.
Mining Right and changes to the South African Mining Charter
The mining right for Kareevlei is due for renewal in August 2019 and the application for renewal is in an advanced state. The company does not expect any issues in the renewal process.
The new Mining Charter came into force in December 2018, although it is under judicial review. Under the new Mining Charter there is a requirement to increase the Broadly Based Economic Empowerment partner’s stake from 26% to 30% within 5 years from the date of renewal of the licence, although this is one of the elements of the Mining Charter which is under judicial review.
Given the structure of the shareholders’ agreement from the Company to Kareevlei Mining Limited (“KVM”), which requires the loan to BlueRock, which currently stands at over £6 million, to be repaid before any dividends are declared in KVM, this is expected to have little or no economic impact to the Group.
Mike Houston, Chairman comments:
“The key challenge for management will be achieving the economies of scale and this is largely centred around material handling of what can at times be a difficult product in both the mining and plant operations. This requires a disciplined, innovative and technically competent management team and I believe we have been able to put this team in place now."
"Improvements have already been implemented which will have a material impact on throughput and cashflow. The capital raised will allow management to make further improvements and importantly de-risk the business. The optimisation of the mine plan and right sizing the cost structure will be key objectives for management in the short term."
Accordingly, following this necessary investment, the board now expects the company to be self-funding going forward.