Rex Diamond Mining (RXD-T) has agreed to sell its South African diamond mines to Johannesburg-listed African Gem Resources (Afgem), which recently spun off its tanzanite business to subsidiary, TanzaniteOne.
In return, Afgem will issue Rex 50 million shares at a deemed price of 0.5 rand apiece. Rex will also retain a 4% gross revenue royalty on rough diamond sales from the Loxton-, Rex Diamond- and Bellsbank-run mines from 2006 through 2021. The royalty’s estimated net present value comes to 32.5 million rand. Rex will continue to market diamonds produced from the mines.
Afgem has also committed to fund an optimization program at the mines, and will provide an interest-free 5 million rand loan to a subsidiary of Rex.
The transaction is subject to the approval of both companies’ shareholders and regulators. Rex’s board and controlling shareholder have irrevocably agreed to vote in favour of the deal; shareholders holding around 25% of Afgem have returned the favour. Rex will put the plan to a shareholder vote on Sept. 27.
Afgem currently has around 143.8 million shares in issue.
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