Broker Northland says Stellar Diamonds' (LON:STEL) completion of a £2 million placing highlights investor confidence in the company's remaining programmes.
The firm said yesterday it would use the funds to advance its key projects at Droujba in Guinea and Tongo in Sierra Leone.
Northland rates the stock a 'buy' and analyst Dr Ryan Long said today: "Stellar has completed a £2m fund raising despite the disappointing developments at the Kono project, highlighting continued investor confidence in the remaining projects."
It comes after the company revealed last month that Sierra Leone's Ministry of Mines had claimed the company's two licences in the Kono district should not have been renewed.
In Sierra Leone, the company has the Tongo licence as well as the two in the Kono district.
Stellar had disputed the assertion and said it was seeking clarification of the position with the Ministry.
In yesterday's announcement, the company said in regard to the Kono dispute that it was "continuing dialogue with the Government of Sierra Leone "to satisfactorily resolve the issue".
The cash call saw around 66.9 million company shares issued to institutional and other investors at 3 pence a share (current share price: 3.13 pence).
Stellar said it planned to carry out further drilling and bulk sampling to increase 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.
Dr Long said today he viewed the pre-feasibility study for Droujba and Tongo as a catalyst to move the company to producer from explorer.