DiamondCorp (LON:DCP) said the Lace mine’s underground development is on track and within budget, and raised £2.1mln in an oversubscribed share placing.
The mine development work is fully project financed, and the money raised today covers corporate budgets for the next two years.
Commercial production from the underground section of the Lace mine, which historically produced around 750,000 carats, is expected to start in the second half of next year.
In today’s placing 41.5mln new shares are being issued to new and existing, private and institutional investors. The bulk of the new shares are priced in pounds sterling, at 5p each, while 5mln shares are being issued at ZAR0.90 each (which is the equivalent of 5p at current exchange rates).
"We are delighted with the continued support of our existing shareholders and welcome some new shareholders onto our register,” said chief executive Paul Loudon.
“DiamondCorp is in the process of making the transition from mine developer to becoming a mid-tier diamond producer, and we will be providing regular updates on the progress of the development at Lace.
The company’s work at Lace appears to have opportune timing.
A renaissance of demand for luxury goods and increasing numbers of high net worth individuals, particularly in Asia’s growth markets, is expected to drive the continually improving market for diamonds and gemstones.
Charlie Long, analyst at City broker Sanlam, in a recent note said: “We believe companies with exposure to the luxury goods sector will enjoy resilient pricing for their products irrespective of the global economic environment.”
DiamondCorp was selected among Long’s ‘top picks’ in the sector, which he expects will ‘outperform’ as gemstone prices remain strong.
“Going forward we expect the same mining specific factors to continue to drive share performance, but also expect resilient gemstone prices to support profit margins and shareholder total returns,” he said.
Sanlam rates DiamondCorp as a “buy”, with a 15p price target.