Stellar Diamonds (LON:STEL) has arranged a US$330,000 convertible loan note and a warrant for similar amount with German private equity firm Deutsche Balaton.
The Sierra Leone and Guinea diamond miner also intends to restructure its share capital through a 50 into one consolidation.
After the consolidation, and if it converts fully, Deutsche Balaton will hold a 4.4% stake in Stellar, which rises to 10.7% including the warrant.
Talks are also underway over increasing the size of the loan to provide financial headroom while trial mining and bulk sampling at Stellar’s two mines ramps up.
Karl Smithson, chief executive, said: "Deutsche Balaton share our vision for the development of a significant hard rock diamond mine from our portfolio of advanced projects in West Africa.
“In what remains a challenging market for the natural resource sector we welcome and value the support and credentials of Deutsche Balaton who we believe will be a long term strategic investor in the company.
“The directors consider that the participation of Deutsche Balaton and the proposed share re-organisation are important developments in the transformation of Stellar from a junior explorer in to an established diamond producer."
Non-executive chairman Peter Daresbury lent Stellar US$45,000 to bolster its working capital position while the talks were being held with Deutsche Balaton.