Kopane Diamond Developments PLC
LSE : KDD

January 26, 2010 02:00 ET

Trading Update and Development MOU

                                      KOPANE DIAMOND DEVELOPMENTS Plc
                                                     
                                              (the "Company")
                                                     
                                               ANNOUNCEMENT
                                                     
26 January 2010
                                                     
                                    Trading Update and Development MOU


Kopane  Diamond  Developments  Plc. today announces a trading update and strategic  outlook  following  the
recent  £5.7m  fundraising  conducted by the Company. The Company has signed  a  non-binding  MOU  with  an
established  mining  company  to co-develop the Liqhobong kimberlite project in  Lesotho.  Details  of  the
proposed  development  partner are currently commercially sensitive but if binding agreements  are  reached
full information will be disclosed to shareholders.

Highlights

 *  MOU development entered into
 *  Recommencement of production at Liqhobong:
       o  Focus on Main Pipe value
       o  High value pipe facets to be targeted
       o  Main and satellite pipe previously recovered high value fine white and yellow stones
 *  Capital investment of $64 million for 51% of Kopane's 75% equity in Liqhobong
 *  Completion of DFS for full Main Pipe production

Investment in Liqhobong

The  Company has entered into a non-binding Memorandum of Understanding ("MOU") with an established  mining
company to develop its Liqhobong assets in Lesotho. It is planned that the parties will proceed to finalise
terms of a binding joint venture agreement as soon as practicable.

The principal terms of the MOU are as follows:

 *  The  mining  company will fund and operate the recommencement of production at Liqhobong  with
    processing of kimberlite through the Satellite Plant. Mining focus will be on the K5 and K2 facies of the
    Main Pipe, where we have previously found large and bonanza stones and will seek to recover approximately
    200,000 carats over an 18 month period. Revenues generated from sales of diamonds in excess of costs will
    be shared between the parties.
 *  Kopane and the mining company will jointly fund the completion of the remaining work on the
    Definitive Feasibility Study ("DFS") into the Main Pipe.
 *  Following successful completion of the DFS and recovery of diamonds as noted above, the mining
    company may exercise an option to acquire 51% of the Company's interest in the Main Pipe in return for
    raising 80% of the cost of developing Liqhobong to production of in excess of one million carats per annum,
    such 80% funding being in the form of equity and non-recourse loans at asset level.
 *  The balance of 20% funding to be provided by Kopane in the form of non-recourse loans at asset
    level.
 *  Subject to confirmation of plant design identified in the DFS, the mining company estimates that
    the cost of constructing new plant will be approximately $80 million.

The  financial commitment and operating ability of the mining company will considerably remove risk factors
in  bringing  Liqhobong  into  major production. Under the MOU, funding for the  project  is  substantially
secured  and  operating risks reduced. On the basis of the $80 million capital cost  as  noted  above,  the
mining  company  would  provide  $64 million for a 51% of the Company's interest  in  Liqhobong,  which  is
currently 75% of the project, the other 25% being owned by the Government of Lesotho.

As  indicated in the trading update on 15 December 2009, the Company believes the outlook for  2010  to  be
very positive. The market price for rough diamonds has substantially recovered from falls in late 2008  and
early 2009 and progress is being made towards the funding and commencement of construction of a power  line
to connect Liqhobong to the Lesotho electricity grid by mid 2011.

Frank  Scolaro,  Chairman  of  Kopane said today "The signing of the MOU  with  the  mining  company  is  a
significant step in the development of our Liqhobong assets. Our MOU partner proposes to fund  80%  of  the
cost  of  new plant and the recommencement of production, which substantially reduces risks of funding  and
implementation, and avoids dilution for Kopane's shareholders.  Our company has a healthy cash balance with
low costs and no debt.  I look forward to progressing Kopane into a major diamond producing company."

About Kopane

Kopane Diamond Developments Plc ("Kopane") is a diamond producer, developer and explorer with core projects
at  Liqhobong  in  Lesotho,  Southern Africa. The Liqhobong operations are  operated  by  Liqhobong  Mining
Development Company ("LMDC") which is 75% owned by Kopane and 25% by the Government of Lesotho ("GoL").

LMDC  has  to date produced over 350,000 carats of diamonds since operations commenced at the end of  2005.
The  principal  development project is the Main Pipe which has the potential to produce at a  rate  of  one
million carats per annum.

For further information contact:
                          
Kopane Diamond Developments Plc                           Threadneedle Communications
Frank Scolaro, Chairman                                   Laurence Read/Beth Harris
James Cable, Finance Director                             +44 (0) 207 653 9855
+44 (0) 20 7963 9590

FinnCap
Matthew Robinson/Ed Frisby, Corporate Finance
Stephen Norcross, Corporate Broking
+44 (0) 20 7600 1658

e-mail: ir@kopanediamonds.com
website: www.kopanediamonds.com

Contact Information

  • Kopane Diamond Developments PLC