Johannesburg: Blom Diamonds, a cutting and polishing firm owned by senior industry figure Ernie Blom, has agreed to be acquired by Australia’s Tychean Resources for up to $4.1 million (AUD 5.5 million).
Under the deal, Tychean will issue shares worth about $206,352 (AUD 273,800), based on AUD 0.004 per share at the time of the deal, to acquire a 74 percent interest in Blom Diamonds Cutting Works and Ernest Blom Diamonds, the resources group reported.
The price will increase by approximately $1.3 million as additional shares will be granted in each of the next three years if the diamond company meets a set of pre-determined profit conditions. Those include achieving earnings before interest, tax, depreciation and amortization (EBITDA) of $1.5 million (ZAR 19.6 million) in the fiscal year ending June 30, 2018, $1.7 million (ZAR 22.2 million) the following year and $1.9 million (ZAR 25.5 million) in fiscal 2020.
South Africa-based Blom Diamonds is involved in trading, beneficiation, cutting and polishing of diamonds. Founder Ernie Blom (pictured), who is the current president of the World Federation of Diamond Bourses (WFDB), will become managing director of Tychean when the deal closes. Blom said he will still be based in South Africa.
Tychean, which is a precious-metal explorer in Australia, sees the move as a first step into the diamond industry, according to Duncan Gordon, founder and co-principal of Adelaide Equity Partners, which advised the resources group on the acquisition. Tychean is also in the early stages of talks to acquire diamond-exploration projects, he added.
“We’re aware the diamond business is driven by circumstances outside our control,” Gordon told Rapaport News. “But there is room to move by being nimble and getting the cutting-and-polishing experience.”
Tychean said the longer-term outlook for the diamond trade is positive, with rising consumer demand and constrained supply.
“The majority of the world’s major diamond mines are at a mature phase and past peak production levels, while new projects coming online are not significant in size as there have been no major discoveries in recent years,” the company explained.
The deal is expected to close in 90 days once it receives approval from the Australian Securities Exchange and Tychean’s shareholders.
