DiamondCorp (LON:DCP) shares surged more than 14 per cent today after it agreed a US$6 million loan with a subsidiary of Tiffany & Co.
In return, the world renowned jeweller gets an off-take deal giving it the right of first refusal to buy stones from DiamondCorp's Lace Mine in South Africa.
Today’s announcement is another facet of fundraising being organised to bring the historic operation back into production having already secured US$26.7 million-worth of backing from South Africa’s Industrial Development Corporation.
The Tiffany cash, provided via Laurelton Diamonds, will be drawn down in two tranches next January and April.
The eight-year loan carries an annual coupon of 9%, and is subject to final due diligence before it is formally signed off.
DiamondCorp's chief executive Paul Loudon said: "We are very excited to have secured such a prestigious funding partner as Tiffany.
“Their decision to provide project finance in return for access to a long-term supply agreement is testament to the quality of the Lace diamonds and an expression of confidence in DiamondCorp's development strategy."
Lace, in South Africa’s Free State, was owned by De Beers but never fully developed.
With funding, City broker WH Ireland believes initial production under DiamondCorp could occur in 2014 with full production by 2015.
The first block in the mine should provide ore until 2025, with two follow-up developments planned below this to take production to 2040. The ore body remains open at depth.
In a note today, Northland analyst Dr Ryan Long said: "Tiffany and Co will be an important long term partner for DiamondCorp and the agreement demonstrates that the diamond industry believes in the strength of the Lace project."
The broker rates the shares a 'buy' with a target price of 11 pence.
Shares were up today 14.29%, to stand at 4 pence each.