DiamondCorp (LON:DCP) said its 74 per cent-owned subsidiary Lace Diamond Mines has entered into a loan funding term sheet with the Industrial Development Corporation of South Africa Limited (IDC).
The IDC will grant the subsidiary a loan of 280 million Rand, approximately US$33.6 million, subject to due diligence.
Chief executive Paul Loudon said: ”We are delighted that we and our Black Economic Empowerment (BEE) partners have been able to agree in principle a debt financing proposal from the IDC to provide over 98 per cent of the estimated capital required to establish a block cave development on the 47 level at the Lace mine.
“This is a significant milestone in DiamondCorp's transition from developer to producer and we welcome the support of the IDC in funding this potentially long-life diamond mine in the Free State Province."
The money will go towards underground development and purchase of mining equipment at the Lace mine.
The term of the loan is expected to be 7 years.
Subject to completion of due diligence and satisfaction of other conditions, including approval for the upgrade of the electricity supply to the mine by South African utility Eskom, DiamondCorp expects the loan agreement to be finalised by the end of July 2012.
The group's latest estimate for the total cost of development at Lace is R384 million, around US$46 million, but with revenue expected from diamond sales after 18 months, the peak funding requirement is forecast to be R285 million, or around US$34.1 million.