[miningmx.com] – STUART Brown, CEO of UK-listed firm, Firestone Diamonds, is hoping to raise as much as $200m, possibly before the year-end, in an effort to transform the under-performing Liqhobong mine into a one million carat per year producer.
“The plant requires about $167m to build but we probably need about two years’ worth of working capital,” he said. Production from the expanded mine, which is in Lesotho, would be from around 2016.
The bulk of the finance – about $75m – will be raised from a South African bank (possibly Absa Capital) whilst an undisclosed strategic investor could add another $45m to the pot. The balance would be from shareholders ($30m) and mezzanine finance.
“It’s a difficult situation because it you look around for finance for too long it suggests your mine is not financeable,” said Brown.
Brown, formerly finance director of De Beers, is facing the typical bind of many junior miners where lenders want to see equity placed while investors want to see the mine plan can attract loan finance. He was hopeful finance for the mine could be tied up by year-end.
Shares in Firestone Diamonds have been volatile lately, albeit it on small volumes and only moving one pence either way. Still, there is some expectation the junior could put vim back into the Liqhobong mine which has been operational for years.
“On funding, the company has a loyal shareholder base and is in advanced discussions on securing project financing but [it] will be looking for a diverse range of funding sources to meet the $167m required for the project and also for working capital purposes during the construction process,” said SP Angel, a UK stockbroker.
“The revision of the revenue models should be helpful in their discussions as well as more appetite for the diamond space,” it said.
SP Angel was referring to an announcement from Firestone Diamonds earlier today in which it said a new mill – consuming the majority of the fund raising – would accommodate the recovery of larger stones and lead to a 48% lift in revenue.
“The current mill is not fit-for-purpose,” said Brown. He added that it led to large stones being crushed whereas a mill allowing the recovery of larger stones would quite logically boost revenue.
“We hope to produce about one million carats with values of between $107 to $155 per carat,” said Brown. This compares to an average price of $98 per carat recovered by the current mill.
“It is tragic that anyone should crush a 430 carat cape yellow diamond,” said SP Angel. “Firestone is to modify the plant to capture larger stones and hopefully more value.
While the cost per tonne treated should rise so should the value gained if these larger stones can be recovered in tact,” it said.
The Liqhobong mine has an obvious parallel with the Letseng mine, also in Lesotho, and owned by Gem Diamonds. Letseng is famed for its large gems. On December 2, 2010, Gem Diamonds said it had recovered an 185 carat pure white diamond and in 2011, it sold its ‘Letseng Star’ for $16.5m.
