Firestone Diamonds (LON:FDI) today announced a proposed placing to raise £14.7 million to further develop its flagship Liqhobong mine in Lesotho.
It follows a strategic review of the firm's operations and was oversubscribed, the firm said, adding the cash will also be used to repay debt, the ongoing costs of the BK11 in Botswana and for general working capital.
The company has provisionally placed 172.9 million shares at 8.5 pence a share. In order to carry out the placing, the company has reorganised its capital, it added.
The AIM quoted firm carried out the review in January and February and identified that a primary value driver was the development of the Liqhobong main treatment plant.
A definitive feasibility study, to cost around £1.6 million,for this plant will be completed by the middle of this year followed by detailed engineering and financing.
A further £1.9 million is required to increase the height of the tailings dam wall in order to allow for continued production from the pilot plant for the remainder of 2012.
Last month, the company revealed that its BK11 mine in Botswana had been placed on temporary care and maintenance.
Firestone said the decision was due to operational challenges and current weakness in the diamond market.
Today, it said it was now reviewing its exploration assets in Botswana with a view to unlocking value from these assets.
The company's renewed strategic focus is expected to transform the company from an early stage development and exploration business to an around 1 million carat per annum producer by 2015.
Firestone's chief executive Tim Wilkes said the oversubscribed placing showed the strong support for the company's Liqhobong project.
Directors Michael Hampton and William Baxter have resigned from the board, the firm also said today.
In a separate stock exchange statement, the firm released results for the six months to December 31 last year, in which it reiterated that its focus was now on the Liquobong mine.
It explained that the disappointing operating and financial results reported for the period can be attributed to the weakening diamond market and technical issues at the BK11 and Liqhobong processing plants.
Further investment here is expected to reduce diamond breakages and increase throughput, it said.
In the half year, the firm posted a loss before tax of £8.76 million, compared to a loss of £1.83 million in the comparative period in 2010, while the loss per share was 2.2 pence (2010:1.2 pence).
As at year end the firm had cash of £4.2 million (2010: £10.8 million).
Wilkes explained: "The higher than expected cash outflows in H1 2012 are mainly due to the general weakness in the diamond price experienced from July 2011 combined with technical challenges experienced at both the Liqhobong and BK11 plants."