VDM Van Dieman

    RNS Number : 8175X
  Van Dieman Mines plc
  30 June 2008
   

    
    30 June 2008

    VAN DIEMAN MINES PLC

    Strategic Investor Provides Loan Facility 

    Following the ongoing strategic review by the Directors of Van Dieman Mines Plc, (AIM:VDM), the AIM listed mining company (the
"Company") which has resulted in the Company implementing changes to the mining and processing methods of the Scotia mine; the consequential
delays to production (as outlined in an announcement on 16 May 2008); and the refusal recently by the providers of the Company's current
debt facility to honour a drawdown request for A$1.95 million, the Company has been forced to seek alternative and additional financing.

    The Board has been actively seeking alternative and additional funding from both potential equity investors and debt providers for
several months.  Unfortunately, advanced discussions with a major Australian bank which the Board had expected to complete imminently were
recently terminated in the face of the ongoing and much publicised difficult conditions in financial markets. 

    In the absence of immediate development funding, the Company would have imminently become insolvent, leading to receivership and the
potential for total loss of shareholder value. It is against this background that the Board has obtained the financial support of Galena
Special Situations Master Fund Limited ("Galena") as a strategic partner and major shareholder in the Company.

    The Company announces that it has entered into an investors agreement and loan facility agreement with Galena for up to �5 million on
the terms and subject to the satisfaction of the conditions set out in further detail below. The Company, together with its subsidiary, Van
Dieman Mines Pty Limited ("VDM Australia"), has also entered into a royalty agreement with Galena (together the "Agreements"). As a result
of these Agreements Galena will become a strategic partner and a more significant shareholder in the Company. The principal terms of the
Agreements are as follows:

    *     Galena has granted an immediate loan facility of up to �3 million which, until the satisfaction of certain conditions set out
below, is to be drawn down in part to fund the Company's immediate working capital requirements, at the sole discretion of Galena (the "Loan
Facility").  Galena has agreed to an initial draw down of A$1 million. Under the terms of the facility agreement the initial Loan Facility
may be extended by up to a further �2 million on the same terms subject to the conditions and variations set out below. In particular, the
additional �2 million may only be drawn down at the discretion of Galena to the extent that the Company is not able to raise that sum
through an equity issue.

    *     The Company's ability to demand full draw down of the Loan Facility is conditional upon the Australian Foreign Investment Review
Board ("FIRB") consenting to Galena, as a non-Australian entity, taking registered security over the assets of the Company and VDM Australia
(together the "Group"). It is also subject to the shareholders of the Company passing the resolutions referred to below.

    *     The Company and VDM Australia are in the process of seeking the requisite consents from the FIRB.  It is expected that a response
will be received from FIRB within four to six weeks.  The Board anticipates that FIRB approval will be obtained. Upon registration of the
security over the Group's assets, the Group will be entitled to immediately draw down on the remaining portion of the Loan Facility.

    *     The Loan Facility will be used, in the first instance, to fund the Group's immediate working capital requirements including
payment of the Group's creditors and to fund the working capital required to undertake the trial mining, dewatering, plant modifications and
initial confirmatory drilling (~1,000 metres) through to the end of August 2008. On receipt of the approval from FIRB the Company's existing
debt facility will be repaid from the remaining Loan Facility proceeds and Galena will be granted a fixed and floating charge over the
assets of the Group. This security will remain in place until all monies lent by Galena have either been fully repaid or converted into
Ordinary Shares.

    *     A general meeting of shareholders (notice of which will shortly be sent to shareholders) will be called for 29 August 2008 (the
"General Meeting") at which resolutions increasing the authorised share capital of the Company and increasing the Directors' authorities
under section 80 of the Companies Act 1985 and disapplying pre-emption rights under section 95 of the Companies Act will be proposed (the
"Resolutions"). In the event that the Resolutions are not passed then the Company will be required to repay all monies received from Galena
under the Loan Facility plus a break fee of �600,000. The Company will also be required to pay this break fee  in the event that the
requisite consents from the FIRB are not received by 29 August 2008 or in the event of either early repayment of the Loan Facility or an
event of default.

    *     Conditional on the Resolutions being passed at the General Meeting, the amounts drawn down under the Loan Facility will be
replaced by loan notes (the "Loan Notes") which are convertible at the discretion of Galena into ordinary shares of 1p each in the Company
(the "Ordinary Shares") at a price of �0.06 per Ordinary Share.

    *     Following the passing of the Resolutions, the Company will also grant Galena �3 million of warrants to subscribe for Ordinary
Shares in the Company (the "Warrants") with an exercise price of �0.07 per Ordinary Share. The Warrants will not be exercisable until the
earlier of 31 December 2008 or completion of a proposed equity raising prior to 31 December 2008 (see below).

    *     Interest on the Loan Notes will accrue at LIBOR plus 3% per annum.  During the first year, interest will be payable in Ordinary
Shares at �0.06 per Ordinary Share. Thereafter, interest will, at the agreement of both Galena and the Company, be payable in either cash or
in Ordinary Shares at �0.06 per Ordinary Share.

    *     Galena may elect, 12 months after the first draw down of the Loan Facility that 25% of the Group's free operational cash revenues
is directed towards the redemption of the Loan Notes, subject always to Galena's right to convert the Loan Notes.

    *     Galena will receive a royalty of 1.5% of the Group's net sales revenues for 15 years from the date of these Agreements.

    *     It is envisaged that the Company will undertake an equity raising of up to �2 million before 31 December 2008 by way of a private
placement. The Directors currently believe that this will provide the necessary funding required to meet the commissioning costs of the
Scotia mine. Galena will have the right to participate in this equity raising for its pro-rata proportion of Ordinary Shares held at such
time (both directly and indirectly) and those Ordinary Shares it would hold if all the Loan Notes had been converted. However, the Warrants
will not be included in such  calculation. It has further been agreed that, at Galena's discretion, it may, in the event that the equity
raising is undersubscribed, subscribe for additional convertible loan notes in respect of the shortfall which may, at Galena's election, be
converted into Ordinary Shares, such conversion price being the lower of 6p per Ordinary Share and the price per Ordinary Share pursuant to
the private placement.  In the event that Galena does subscribe for additional convertible loan notes it shall be entitled to additional Warrants on the basis of one Warrant for every one
Ordinary Share into which the loan notes are converted. 

    *     For so long as any amount remains outstanding to Galena under either the Facility Agreement or there are outstanding convertible
loan notes or as long as Galena holds 10 per cent. of the issued share capital of the Company, Galena may appoint two directors or observers
to the Board. 

    The Board currently believes that these facilities should enable the Company to proceed to full production at its Scotia and Endurance
tin-sapphire projects.  

    Update on Scotia and Endurance Projects

    As a result of the need to seek further funding the Company's projects at both Scotia and Endurance are further delayed. It is expected
that commissioning of the Scotia project will commence in September 2008 and production at the Endurance project is now expected to commence
in the second quarter of 2009.

    Related Party Transaction
    Galena is currently directly or indirectly interested in 18,455,000 Ordinary Shares in the Company representing an interest of 11.97% in
the total voting rights of the Company. Galena is therefore a substantial shareholder of the Company and considered to be a related party as
defined under the AIM Rules for Companies (the "AIM Rules"). The entry into the Agreements and the terms and conditions contained therein
including the Loan Facility and the possibility of extending the facility by up to �2 million is therefore classified as a related party
transaction for the purposes of the AIM Rules. Accordingly, the Directors, having consulted with Grant Thornton UK LLP (in its capacity as
the Company's nominated adviser), confirm that they are satisfied that the terms of the Agreements and the grant of the Loan Facility are
fair and reasonable insofar as the shareholders of the Company are concerned. 

    Upon conversion of the Loan Facility into Loan Notes and assuming such Loan Notes are converted into Ordinary Shares, Galena will be
interested in 68,455,000 Ordinary Shares representing an interest of 33.52% in the total voting rights of the Company (assuming that no
additional Ordinary Shares are issued). In addition, Galena shall be interested in 42,857,142 Warrants to subscribe for Ordinary Shares at
�0.07 per Ordinary Share.

    As the Company's place of central management and control is outside the UK, the Panel on Takeovers and Mergers has agreed that the
Takeover Code does not apply to the Company. Accordingly, Shareholders will not be asked at the General Meeting to approve the waiver of the
Rule 9 obligation that would apply if the Company were managed in the UK.


    Mike Etheridge, Non-Executive Chairman, commented:
    "The Board appreciates the financial support provided by Galena at this very difficult time for the Company, and welcomes it as a
strategic and major investor in the Company. Galena is connected with Trafigura, the international metal trading group and is an ideal
strategic partner. 

    Galena's investment decision was made under uncertain and difficult conditions and at short notice, and is a vote of confidence in the
Company's projects and prospects. It ensures the necessary funding to undertake the critical trial mining, dewatering, plant modification
and confirmatory drilling work to determine project feasibility.

    Your Board considers that Galena's support and Board representation will provide financial, operational and strategic support as we
develop and optimise the Group's tin-sapphire projects. 

    We also appreciate the support of our other shareholders, and look forward to providing them with an opportunity to invest under similar
terms to Galena's investment later in 2008, when the project risk will have been reduced."

    Background to Galena

    Galena Special Situations Master Fund Limited was launched in August 2006 to invest in the mineral, mining, processing, energy and
freight sectors and presently has US$200 million under management. Galena Asset Management Limited is the investment manager of Galena
Special Situations Master Fund Limited and additionally manages in excess of US$600 million in other funds investing in base and precious
metals.  Galena Asset Management Limited is a subsidiary of Trafigura, one of the world's leading international commodity traders, which
specialises in the oil, minerals and metals markets.

    Enquiries

 VAN DIEMAN MINES plc        Tel: +61 (0) 2 8908 5111        
 Mike Etheridge, Chairman    Email:
 Ken Frey, Managing          ken.frey@vandiemanmines.com 
 Director                     

 GRANT THORNTON UK LLP       Tel: +44 (0) 20 7383 5100
 Gerry Beaney / Fiona Owen

 FOX DAVIES CAPITAL LIMITED         Tel: +44 (0) 20 7936 5230
 Richard Hail, Corporate
 Finance

 BANKSIDE CONSULTANTS        Tel: +44 (0) 20 7367 8888
 Michael Padley / Libby
 Moss



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