DiamondCorp (LON:DCP, JSE:DMC) has raised £2.95 million to help fund additional underground work on the Lace kimberlites in South Africa.
It is issuing 34.7 million shares at 8.5 pence each, an 11 percent discount.
The company has decided to carry out its bulk sampling programme 20 metres deeper, at the -260 metre level, following an independent review of its plans.
This will require 240 metres of additional decline development, which will add a further 6 weeks to the work programme. Overall it will also add around £1 million to the cost - including both direct and indirect costs.
The independent geotechnical team believes it will be better to target the -260m level in the bulk sampling programme. Access to most areas of the pipe at this level will be unrestricted, allowing for easier and safer sampling methods.
Diamondcorp now expects to reach this level for bulk sampling by the end of February 2011, and the sampling programme will be completed by the end of April 2011.
Aside from this change of plans, the company stressed that work has been close to schedule and budget since the development began in May.
Fairfax analyst Marc Elliot believes that the placing will strengthen the company’s financial position considerably.
“Extending the depth required to take the bulk sample, despite delaying progress, does carry certain benefits in that the work being done would have been necessary later next year when developing the mine for full production in 2012, therefore effectively bringing forward progress,” Elliot said in a note to clients.
He adds: “We will be updating our numbers in due course to reflect this development and look forward to the results of the bulk sample in April.”
The analyst emphasised that a positive sampling result would lead to a major re-rating for Diamondcorp.
Diamondcorp has also earmarked £0.5 million to accelerate bulk sampling in Botswana, where it is a 77.5 percent stake in the PL/71 license.
It also plans to pay off £1 million of its debt to the Africa Opportunity Fund LP - US$1.55 million is due in April 2011.
The rest of the cash is being used for general working capital purposes.