Firestone Diamonds plc announced recently  that it has entered into a “conditional option agreement (the Option Agreement)” with Amulet Diamond Corporation (Amulet) for the “potential disposal of its Botswana operations” (the Disposal), which   include  Firestone’s interest in the BK11 mine.  

 Amulet  is a Canadian special purpose vehicle formed for the purpose of the Disposal  “by a group of private investors led by Gareth Penny and Diacore Diamond Group (PTY) Limited, a multinational diamond company with diversified interests in the diamond industry”, the Company said.

Under the agreement, Amulet  will acquire an option, effective from   June 1,  2017 for a period of up to 14 months  to acquire Firestone's wholly owned subsidiary Firestone Diamonds (Botswana) (PTY) Limited;  and its 90 per cent  interest in Monak Ventures (PTY) Limited (together, the Botswana Companies) which together hold Firestone's interests in Botswana, for a total consideration of US$ 5.1 million in cash.

“Pursuant to the Option Agreement, US$ 0.1 million is payable immediately with the balance, being US$ 5.0 million, to be placed in escrow no later than 10 days following the exercise of the Option,” Frestone announced.

A further two conditions have to be met if Amulet decides to exercise the Option, within 12 months of the date of the exercise of the Option:

• the parties must gain  approval from the Botswana Competition Authority; and
• the parties must obtain  Botswanan ministerial approval for the transfer of the controlling interest in Monak to Amulet.

The agreement also provides for Amulet to fund the construction and operation of a bulk sample plant and to carry  out of a bulk sample programme at the BK 11 mine during the Option Period; and for Amulet to pay the ongoing cost of BK11's care and maintenance programme up to a maximum of US$ 30,000 per month “during the Option Period and, in the event it exercises the Option, from the time it exercises the Option up and until completion of the Disposal”.  

Firestone   will also be entitled to retain 10% of the proceeds from diamonds sold from the bulk sampling programme (after royalties and agreed expenses) during this period.

“As at 30 June 2016, the aggregate net assets for the Botswana Companies was US$ 4.1 million and for the year ended 30 June 2016, the Botswana Companies achieved an aggregate loss of US$ 2.0 million before foreign exchange losses on conversion from local currencies,” Firestone said.