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DiamondCorp (LON:DCP) today revealed further plans to help fund the development of the Lace mine in South Africa.
It is raising £1 million gross from a share placing, issuing 28.5 million new shares at 3p each, and it is also setting up a £10 million equity line facility with specialist financier Darwin Strategic.
The company also revealed it is in advanced talks about a potential diamond offtake agreement and/or royalty over production from the Lace mine - either would be a boost to the coffers.
Its brokers in London and South Africa are working on a bond issue, which is expected to satisfy the majority of its funding requirement.
And the group has also agreed US$26.7 million loan with South Africa’s Industrial Development Corporation, which will help fund the Lace mine’s construction.
“Closing the £1 million raising will provide DiamondCorp with breathing space while it continues to market its convertible bond offering and advance discussions with potential off-take partners,” said Christopher Welch, of Ocean Equities, in a note to clients.
“The company has good support from new and existing shareholders and significant in-principle commitments for the bonds.
“With the combination of the convertible bond issue and ongoing discussions with alternative finance providers such as diamond off-takers, we are optimistic that DiamondCorp will be able to meet its funding commitments to enable it to draw down on the IDC loan.”
Numis said it thought it was a complicated but "clever" way to draw funding from many sources in difficult market conditions.
Northland, meanwhile, restated its buy advice on the stock, though it pegged back its valuation to 11 pence a share from 15 pence (current price 3.95 pence).
“We highlighted at its interims that DiamondCorp’s low cash position was a concern and that we expected some sort of fundraise shortly,” said analyst Dr Ryan Long.
“It is positive to see that the company has raised funds that can enable it to continue the development of the Lace Mine, though the placing at 3.5 pence was completed at a slight discount to the current share price of 4 pence.”
The Lace mine is the group’s primary asset and is located some 200 kilometres south-west of Johannesburg, near the town of Kroonstad in the Free State Province.
It was first mined between 1901 and 1931, with some 4.5 million tonnes of material extracted down to a 240 and around 750,000 carats recovered at an average grade of 16 carats per hundred tonnes.
Once redeveloped Lace will have a life of 26 years and is expected to produce 380,000 carats in the earlier years, but will average 260,000 over the entire period.
The revenues are projected to be around $60 million at full production with operating cash flow of $36m based on a $160 a carat, according to City broker Fairfax.
Analyst Carole Ferguson places a net present value of US$95 million (£59 million) on Lace, which is around six times DiamondCorp’s current market capitalisation.