Stornoway Diamond (TSE:SWY) shares surged on Thursday after the company put a financing plan in place for the construction of its Renard diamond project in Quebec, taking the asset to production.
Shares of Stornoway jumped as much as 17.5% today, lately up over 8% at C$1.05 in Toronto.
The company signed a binding financing commitment agreement with mining-focused private equity firm Orion Co-Investments, as well as the government of Quebec through Ressources Québec, a subsidiary of Investissement Québec, and the Caisse de dépôt et placement du Québec (CDPQ), for almost $1 billion in new funds.
The deal proposes a series of financing transactions totalling C$944 million, with funding commitments of US$360 million from Orion, C$220 million from RQ and C$105 million from the Quebec pension plan, one of Canada's largest institutional investors. It also includes a marketed offering of common share subscription receipts and an equipment financing facility with Caterpillar Financial.
Each financing is conditional on the completion of others, Stornoway said, with shareholder approvals and the settlement of definitive agreements still required.
The deals, when taken together, represent the largest ever financing package for a publicly listed diamond company.
"We are announcing today a comprehensive, one-shot financing package of C$944m designed to fund Renard through construction to the declaration of commercial production, and including all contingencies, capital escalation allowances, working capital requirements, and financing costs," said president and CEO Matt Manson in the release Thursday.
"These transactions have been carefully structured through a balance of debt, equity and stream with a goal of allowing full participation by our shareholders in the value that will be created with the project's development."
Indeed, the financing package will include a C$427 million offering of common share subscription receipts, a C$275 million forward sale of diamonds via a streaming agreement with Orion and CDPQ, and C$155 million in two debt facilities.
The C$35 million equipment financing with Caterpillar will be for the purchase of certain mine equipment items manufactured by Caterpill and others, including the project's mobile mining fleet. This transaction is still subject to due diligence, credit approval, definitive documentation and other conditions.
With permits in hand, and the Renard mine road and Aerodrome already in place and ready for use, the completion of the financing package transactions remains the last step before construction can begin.
"We look forward to presenting the financing of Québec's first diamond mine for approval by shareholders at a special meeting to be held in Montreal at the end of May 2014," Manson said.
The financing transactions are expected to close in June.