Paragon Diamonds (LON:PRG) has signed a US$12mln finance package that will fund its Lemphane mine in Lesotho to initial production and bring in a major new shareholder.
Dubai-based finance house International Triangle General Trading (ITGT) is putting up the cash, which will comprise US$8mln in new equity and a US$4mln loan.
The new shares will be issued at 5.5p, a small discount to last night’s closing price.
ITGT will further increase its stake in Paragon to just under 30% through the acquisition of shares held by chairman Philip Falzon Sant Manduca’s Titanium Capital, Obtala Resources and Grandinex International. ITGT will also appoint two board members.
Stage one at Lemphane, which will see the extraction of approximately one million tonnes of kimberlite over two years, will now commence in the second quarter of this year.
Philip Falzon Sant Manduca said that securing funding on acceptable terms and pushing out of the commencement of Stage 1 production was an acceptable trade-off.
"This US$12m finance package demonstrates our ability to meet the goals we set ourselves, specifically limiting net dilution for existing shareholders and securing a significant cornerstone investor that shares our vision of building Paragon into a major player in the diamond world," he added.
“Under the terms of the MOU, new equity is to be issued, near existing market prices, while the effective re-issue of shares we recently re-purchased from Lanstead will make up around two thirds of the new shares.
“We have secured debt financing on reasonable terms and, in my view, this finance package confirms that a well-run diamond company such as Paragon, with strong resource potential in the right asset class, can attract substantial funds without having to give the company away cheaply, whatever the stage of development.
"Most importantly, we have secured a proactive new shareholder, which is a highly respectable and influential investment group in Dubai, the wider Middle East region and in China.
"We believe Dubai is going to rapidly grow into one of the major diamond centres in the world. Paragon is now well placed to take advantage of the expected growth in market share and concomitant diamond distribution activity in Dubai and elsewhere.”