Following several days of steady price improvement, shares in Kopane Diamond Developments lifted again this morning on the news that finance had been secured to continue with the Definitive Feasibility Study at their Lesotho diamond project.
The company have issued 50,000,000 shares at 3.5p each under a placing agreement with AIM-listed Obtala Resources plc, to raise approximately £1.7 million. Francesco Scolaro, Chairman of Obtala, will join the board of Kopane as non-executive Chairman on completion of the Placing, whilst Tim Read will become a non-executive director.
Funds from the placing will be spent on furthering the completion of the DFS and the ESIA in respect of the Main Pipe and for general working capital purposes. The company was, however, clear that more working capital will be required to finance the Company up to the point of funding of the Main Pipe construction project. Approximately £2.4 million is likely to be needed, assuming that the Main Pipe project finance is secured at the end of 2010.
Work currently in hand on the DFS is the processing of 1,800 tonnes of mini-bulk samples through a dense media separation plant. Once this has been accomplished, grades at depth for each of the four facies of the Main Pipe will be incorporated into a revised resource statement, and will enable more of the resource to move into the indicated and measured categories. The final statement is expected by the end of Q2 2009. Remaining work includes finalisation of plant and tailings disposal design, infrastructure requirements and completion of ESIA work.
Kopane were also able to announce that agreement is now close with the Government of Lesotho, the Lesotho Electricity Company and a lending bank for the extension of grid electrical power to the Liqhobong site. A government guaranteed loan, plus contributions to the cost of the project from GOL and LEC, should see construction start in the second half of 2009, leading to power on site by the end of 2010.
The market for rough diamonds remains depressed and Kopane are continuing to hold any diamonds recovered in inventory. The Satellite plant remains in care and maintenance, and given the current state of the diamond market, Kopane estimate it will be at least 2010 before production resumes. They are confident, however, that by the time Main Pipe comes into production in 2012, the market should have experienced some recovery.
Tim Read, Chairman of the Company today said "The investment by Obtala Resources Plc. not only provides funding for further work on the DFS now but also gives potential access to future funding to enable the Main Pipe to be brought to full production. The Company continues to consider its strategic options. Frank Scolaro brings with him a wealth of experience in developing resource companies and I am pleased to welcome him as the new Chairman. I will remain a non-executive director of the Company and will continue to work for the successful development of our quality Liqhobong assets."
Separately, Kopane also announced its half year financial results, revealing a loss for the half year of £3.1 million, as opposed to £2.2 million for the comparable period in 2007. The increased losses were accounted for primarily by lower sales proceeds, higher mining and production costs due to the cost of suspension of production, offset by lower depreciation resulting from a greater expected life of the Satellite plant and a lower exchange gain recognised in the income statement.