Stellar Diamonds (LON:STEL) says it will advance its key projects at Droujba and Tongo as it announced a placing to raise £2 million.
The aim of the cash call is to raise sufficient capital to develop the two projects and increase their total inferred resource base from 3.1 million carats, the firm said.
The company, Northland Capital Partners and Daniel Stewart have carried out the placing which sees around 66.9 million company shares issued to institutional and other investors at 3 pence a share.
Stellar shares are currently trading at 3.13 pence each.
The company's chief executive Karl Smithson said the firm was very pleased with the level of shareholder support.
"We expect to undertake further drilling and bulk sampling with the objective of increasing the company's resource base and commence pre-feasibility studies to determine the economic potential of these high grade projects."
At Droujba in Guinea, drilling and bulk sampling is planned using £0.6 million of the funds raised, while, at Tongo in Sierra Leone, further drilling and sampling will be carried out at a cost of £0.3 million.
Stellar said that £1 million will be used for working capital.
Smithson also updated investors today on the Kono licence dispute and said the company was "continuing dialogue with the Government of Sierra Leone" to satisfactorily resolve the issue.
Last month, the company revealed that the country's Ministry of Mines had claimed its two licences in the Kono district should not have been renewed.
Stellar disputed the assertion and said it was seeking clarification of the position with the Ministry.
In association with the placing, there will also be a capital reorganisation.
Both the placing and the reorganisation will be subject to a shareholder vote. Stellar said after the reorganisation, it will have the same number of shares in issue as before the shareholder meeting.
In a note following the announcement, broker Daniel Stewart, said: "We view the success of this placing as a positive affirmation of Stellar Diamonds experienced management team and recognises their work in developing their assets and the upside value of both the Droujba and Tongo projects."
Rating the stock a 'buy' with a target price of 21 pence, it said it would revisit its model and valuation following the release of Droujba and Tongo resource statements.