Goodrich Resources (ASX: GRX) is undertaking a pro rata non-renounceable rights issue to raise A$5.6 million to fund the acquisition of Gem Diamonds Australia Holdings.
The company is offering 37.3 million shares at $0.15 each on the basis of one new share for every one held.
Additionally, Goodrich is assessing whether it will also undertake a placement of ordinary shares.
Goodrich has entered into a sales and purchase agreement with Gem Diamonds (LSE: GEMD) to wholly acquire Gem Diamonds Australia Holdings.
Gem Diamonds Australia Holdings is the owner and operator of the Ellendale Diamond Mine in Western Australia, which produces half of the world supply of rare fancy yellow diamonds.
Ellendale is renowned for its fancy and vivid yellow diamonds, which are greatly sought after for their rarity. Offtake agreements are in place with Tiffany & Co. for the yellow diamonds, accounting for around 80% of the mine revenue.
The current resource is 91.3 million tonnes at an average grade of 4.35 carats per hundred tonnes. Ellendale covers 124 square kilometres and is located 120 kilometres east of Derby in the West Kimberly Region of Western Australia.
The project has exploration potential with 47 additional diamond pipes within the Mining Lease.
Consideration for the acquisition comprises an upfront payment of $3.1 million with the balance of $11.2 million to be paid in instalments over 12 months from completion.
In addition, Gem Diamonds will receive a further cash reimbursement for surplus working capital and agreed capital expenditure incurred between the signing of the share sale agreement and the effective date of 31 December 2012.
The acquisition is subject to due diligence and expected to be completed in January 2013.
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