Firestone Diamonds (LON:FDI) still has a substantial funding gap to fill to get its Liqhobong diamond project into production despite raising US$6mln, according to SP Angel.
The diamond group also laid out its plans to move to the production stage for the Lesotho-based mine, but admitted that a further substantial equity fund raise will be required to fund a new main treatment plant (MTP).
Last year’s definitive feasibility study estimated capital expenditure at US$167mln.
Firestone said it will try to find alternatives to minimise the equity dilution for shareholders and currently expects to close its other financing initiatives during the fourth quarter of 2013.
The pilot plant, which has produced 274,000 carats since it became operational, will also be shut down when work on the MTP begins.
SP Angel said that while Firestone has strong support from its shareholder base, there is a funding gap of around US$21-US$51m depending on how much it can raise project financing and prepayments.
This is still a big ask from shareholders alone, the broker added, and "it may well be" that the company looks at some form of convertible funding as a stop gap.
The returns for the project look good, but execution will be key to optimise the potential from Liqhobong where the large stones can make a big difference to the valuation, SP Angel added.