[miningmx.com] — JSE- and AIM-listed junior miner DiamondCorp has raised ₤2.95m through a placing at 8.5p a share, of which ₤1m is needed for additional development work on the Lace mine near Kroonstad.
DiamondCorp shares have traded between a high of 14p and a low of 6p this year. The placing price of 8.5p was at a discount of 11.7% to the closing price of 9.6p on December 6.
DiamondCorp raised ₤7m in April to fund development of the decline shaft at Lace to a depth of 240m, as well as pay down debt.
CEO Paul Loudon said: “An independent geotechnical review of the proposed bulk sampling programme has suggested that the 260m level is a better target to take the bulk sample than the 240m level.
“Access to most areas of the (kimberlite) pipe at this level will be unrestricted, allowing for easier and safer sampling methods. This additional 20m of vertical depth requires approximately 140m of additional decline development, and adds approximately six weeks to the programme.’
According to UK institution Fairfax, the direct cost of the additional development is abolut ₤450,000 but the strong rand and general inflation added a further ₤300,000 to the original ₤4m budget for completing the bulk sample.
“Management has also added ₤250,000 to costs for secondary support that could be required during the sampling programme in order to minimise risks, which will also demonstrate to government the precautions being taken.’
The good news is that DiamondCorp has raised this money fairly easily, which Loudon puts down to improving investor sentiment towards the diamond market. He also cited DiamondCorp’s track record in delivering the decline development on time and budget so far.
“Raising this money was somewhat easier than raising the ₤7m we needed back in April. If you look at other recent placings, such as that by Firestone Diamonds to raise ₤13m, I think there’s a greater enthusiasm from investors for diamond companies than there was 12 months ago.’
That’s good news for DiamondCorp which has stated its intention to come back to the market to raise around ₤8.5m in April/May to complete the development of Lace and bring the mine into production by the end of 2011.
“We hope to raise that money at a considerably higher share price. I think our stock is due for a sharp rerating once we have completed the decline and taken the bulk sample,’ Loudon said.
He added ₤5.5m of that amount would be used to complete Lace, while the balance was earmarked to pay off the last of the company’s debt and fund ongoing exploration in Botswana.
He commented trading conditions in the rough diamond market had remained strong because of demand from China and India, combined with continued production restraint by De Beers which had held sales back to an annual level of around 40 million carats.
