Shares in DiamondCorp (LON:DCP) spiked 13% after the group put in place the final piece in the funding jigsaw for its Lace Mine in South Africa.
It did so with a £4.2mln convertible bond issue, which carries a coupon of 14%.
Along with loans from a subsidiary of jeweller Tiffany and the Industrial Development Corporation, it now has the cash required to push on with the 1.2 million tonne a year block cave development at Lace.
Chief executive Paul Loudon said: "We are very pleased to have arranged the funding required for the Lace underground development in a period of extremely challenging capital markets.
“The bond issue is the last piece of the funding jigsaw and will allow the company to unlock significant shareholder value from the Lace resource.
“The loans from IDC and Tiffany & Co. illustrate confidence in Lace, with its above average gem content and potential for fancy lilac stones."
The shares were marked 0.5 pence higher to 4.25 pence, valuing DiamondCorp at £10.3mln. Ocean Equities analyst Christopher Welch said the net present value of the Lace Mine is £70mln.
He said today’s news represents a crucial landmark for DCP: “The most pertinent aspect of today’s announcement is that there is no requirement to use the Equity Financing Facility that had been offered by Darwin Strategic Limited.
“This deal may have been a worst-case scenario/back-stop position for DiamondCorp but these types of financing deals can lead to a heavy dilution.
“We think it is very positive that DiamondCorp has avoided using the deal.
“Moreover, when the company has finalised the whole financing package it will have successfully financed the development of Lace at minimal dilution to shareholders, a great achievement for the company.”