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Gemfields Resources plc (AIM: GEM), the AIM-listed Zambian gemstone mining and exploration company, is pleased to announce that it has conditionally agreed to acquire from Rox Limited ("Rox", a Pallinghurst Resources portfolio company) a 75% interest in the Kagem emerald mine in Zambia.
Rox has also granted to Gemfields an option to acquire a portfolio of in excess of 25 licences and licence applications for gemstone exploration in Madagascar held through its subsidiary Oriental Mining.
In addition, Fabergé Limited, another Pallinghurst Resources portfolio company has agreed to grant Gemfields an option to acquire a worldwide and exclusive 15 year licence to use the Fabergé brand name in respect of gemstones (excluding diamonds).
Under the proposed transaction, Gemfields is to acquire Greentop International Inc. (a BVI company) and Krinera Group SA (a Panamanian company), the holding companies through which Rox's interest in the Kagem mine is held (via intermediate holding companies). In consideration for the acquisition of Greentop and Krinera and the options referred to above, Gemfields will issue to Rox 137,910,340 new ordinary shares in Gemfields (constituting 55% of Gemfields' issued share capital after implementation of the transaction on a fully diluted basis).
As the proposed transaction is classified as a reverse takeover under the AIM Rules, the transaction is conditional, amongst other things, on Gemfields obtaining the approval of its shareholders. Gemfields' shares have been suspended from trading pending the preparation and publication of a re-admission document and notice of extraordinary general meeting ("EGM") setting out the details of the proposed transaction and seeking shareholder approval. A competent persons report is being prepared and will form part of the re-admission document. It is expected that the re-admission document and notice of EGM will be sent to shareholders as soon as they are available, which is currently intended to be in the first quarter of 2008.
Graham Mascall, Chairman of Gemfields said:
"This transaction adds significant value-adding building blocks to Gemfields' vision of becoming a leading supplier of both rough and polished coloured gemstones. Since its IPO in November 2005, Gemfields has assembled a world class operational team with extensive experience in all aspects of the gemstone business. Significant operational synergies will be generated from the combination of these two sets of assets.
Gemfields will now be the dominant company on Zambia's Fwaya-Fwaya emerald belt, and this bodes well for further consolidation of the belt. Gemfields' current position in the emerald industry will form the basis for targeting significant interests in other coloured gemstones."
Mr Brian Gilbertson, Chairman of Pallinghurst Resources said:
"We have long held the view that the coloured gemstone industry is unusually fragmented and undercapitalised. Given the increasing popularity of coloured gemstones, and the resulting price increases in recent years, Pallinghurst Resources believes that a significant opportunity exists in pursuing consolidation and vertical integration of the coloured gemstone industry.
The vision of supplying a range of ethically sourced coloured gemstones with guaranteed provenance, and with the premium stones bearing the Fabergé brand name, creates an attractive value proposition. The combination of the assets of Gemfields and Rox establishes a solid framework for the development of an integrated company involved in the exploration, mining, processing, marketing and sales of coloured gemstones on an international scale. "
Kagem is the largest emerald mine in Zambia and is one of the most attractive operating emerald assets in Africa. Notably, Kagem has a long and demonstrated history of producing high quality emeralds. During the last three years, Kagem has produced an average of 6.5 million carats of emeralds annually. Gemfields believes that these production levels can be significantly improved.
Kagem presently has in excess of 350 employees and has two processing plants. The Kagem assets include a cutting works in nearby Kitwe where lower grade emeralds will be cut and polished.
While Kagem's licence area is extensive and includes five emerald bearing belts, production to date has focussed on a single pit known as "FF-F10" which lies on the Fwaya-Fwaya belt.
Under the terms of the proposed transaction, Gemfields would acquire Rox's 75% indirect interest in Kagem. The Government of the Republic of Zambia owns the remaining 25%.
Under the terms of the proposed transaction, Gemfields will acquire an option to be granted a 15 year worldwide and exclusive licence to use the Fabergé name in branding, marketing and selling coloured gemstones (excluding diamonds). The name carries exceptional branding potential and would, in terms of the proposed transaction, become Gemfields' flagship brand. The option will be exercisable by Gemfields in the three months following completion of the transaction, however, if it has not done so, Fabergé Limited can require it to.
Madagascar is presently one of the most prospective mineral provinces in the world for coloured gemstones. Gemfields would, in terms of the proposed transaction, be granted an option to acquire Oriental Mining which holds a portfolio in excess of 25 licences and licence applications in Madagascar covering rubies, sapphires and emeralds, as well as garnets and tourmalines. The option is exercisable by Gemfields at any time in the three months following completion of the proposed transaction, however, if it has not done so, Rox may require it to.
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About Gemfields Resources plc
Gemfields is an AIM-quoted gemstone exploration, mining and processing company. Gemfields existing assets include:
The wholly owned Mbuva-Chibolele emerald mine on the Fwaya-Fwaya belt, where trial mining commenced in July 2006. A 10,050 carat emerald was recovered from Mbuva-Chibolele in August 2007;
The wholly owned Kamakanga emerald mine on the western limb of the Fwaya-Fwaya belt in Zambia, which was acquired in December 2005;
The 50% (an agreement to increase to 76% is expected to be signed shortly) owned Kariba amethyst mine where production is being ramped up, and a large-scale amethyst prospecting licence in the surrounding area;
An option (valid until 31 March 2008) to acquire the Jagoda pink tourmaline mine for USD 1.95 million. Geological mapping is presently underway on this property;
Substantial prospecting licences in the Ndola Rural Emerald Restricted Area.
About Rox Limited
Rox Limited is incorporated in the Cayman Islands and is a portfolio company of Pallinghurst Resources (see www.pallinghurst.com for more information). Rox was established by Pallinghurst Resources as a special purpose vehicle for the pursuit of consolidation and vertical integration of the coloured gemstone sector.
About Fabergé Limited
Fabergé Limited, another portfolio company of Pallinghurst Resources, acquired the worldwide rights to the Fabergé brand name from Unilever in January 2007.
First established in 1842 in Russia (but originally of French descent), Fabergé is one of the most revered luxury names in history. Fabergé's catalogues of luxury items and objets d'art are intimately associated with the use of colour and of coloured gemstones. A Fabergé egg belonging to the Rothschild Family was sold at auction in November 2007 by Christies for a record breaking GBP 8.9 million.
In a reversal of the Fabergé family's loss of the rights to the Fabergé name in a legal settlement in 1951, the historic re-unification of the Fabergé brand with the direct descendents of Peter Carl Fabergé was announced in October 2007. Mark Dunhill, the former president of Alfred Dunhill Ltd, was appointed as CEO of the unified Fabergé in November 2007 (see www.faberge.com for more information).
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