Paragon Diamonds’(LON:PRG) chairman expects to see prices rise strongly over the next five years as new markets in Asia develop further.
Company chairman Philip Falzon Sant Manduca said it was a "highly opportune" time for the group to be developing its Lemphane mine in Lesotho as fundamentals are favourable and there is structural change ongoing.
The company today raised £257,000 though a private placement. Shares were placed with directors and other shareholders at 4.5p, a 20% discount to last night’s closing price. The money will used on the development of the mine at Lemphane.
Falzon Sant Manduca said: "Today's small placement with senior management and new shareholders has been undertaken to incentivise and retain senior management and encourage a wider share base.
“These discussions were held over the last few weeks during a sustained rise in the share price to the current level which I believe still significantly undervalues the company.
“Indeed, when funding for Stage 1 production is finalised on terms that could demonstrate minimal share dilution, I expect the share price to more accurately reflect the extraordinary opportunity that Paragon possesses with Lemphane."
Paragon has an 80% share in Lemphane and in the first stage of production plans to extract 1mln tonnes of kimberlite over two years.
The target is to recover more than 20,000 carats to generate US$9mln per year in cashflow, which will help fund stage 2 where the target is 65,000 carats of high value diamonds per year.
"We are firmly committed to commencing production at Lemphane by the end of Q1 2015 (subject to financing) and we feel strongly that this is a highly opportune time thanks to favourable diamond market fundamentals," said Falzon Sant Manduca.
“In addition to increasing demand for diamond jewellery, investment demand for larger stones is rapidly growing against a backdrop of diminishing supply of diamonds generally, and larger stones in particular.
“I believe that diamond prices will strengthen significantly over the next five plus years and that structural changes in the diamond sector will also see a reduced market share for Antwerp, as diamond centres in other parts of the world including Asia and Dubai grow.
“By building our own distribution arm for Lemphane's production, Paragon will be fit for purpose to capitalise on these emerging trends.
"Power in the diamond sector is shifting from buyers to producers as the struggle to secure supply intensifies.
"In Lemphane we believe we have a world class kimberlite on our hands, similar to the nearby large stone/high value deposit at Letšeng.
“As I have said in previous releases, I have never been more positive or excited about any prior investment as I now am with Paragon."