Lucapa raises A$16.5m as Angola diamond policy begins thaw

LUCAPA Diamond Corporation (Lucapa) has raised A$16.5m in a share placement which included a “new cornerstone investor” – a development that was a major vote of confidence in its Angola, Australian and Lesotho production and exploration activities, it said.

The shares were issued at 23 Australian cents per share which represented the firm’s market price. The share placement, most of which was supported by three institutional investors, would fully fund the firm’s exploration activities at its Brooking prospect in Western Australia, and its 70%-owned Mothae – a developing mine in Lesotho.

Lucapa currently mines at Lulo in Angola which for the year-to-date had generated diamond sales of $10.8m at an average price per carat of $1,731. Lulo is shared with Endiama, the Angola government-owned mining company.

In the past, the Angola government has insisted on control, but Lucapa said today that the country’s newly elected president, Joao Lourenco, had set down plans to double the country’s diamond production to some 14 million carats in the next four years. As a result, the investment horizon in Angola – deemed previously as constraining – could change.

Lucapa MD, Stephen Wetherall, said Angola was therefore considering the “… design and implementation of new investment policies and to re-evaluate its marketing policies to attract investors”. Diamond companies had subsequently been invited by Angola’s mines minister – improbably named Diamantino Azevedo – to discuss possible initiatives.

“As such, and in anticipation of a positive outcome, Lucapa and its local Angolan partners are devising a growth strategy at Lulo, to build on the successful alluvial mining operations and kimberlite exploration venture,” said Wetherall. “Lucapa has been operating successfully in Angola for 10 years and is well positioned to be a first mover and be a part of Angola’s future development,” he added.

Commenting on the share placement, Wetherall said the transaction provided shareholders with a number of benefits including the removal of an overhang – itself a function of concerns regarding how Lucapa was going to fund growth. The new cornerstone investor had been invited to join Lucapa’s board.

The funds would also provide a “… working capital buffer” for Mothae which remained on budget and on schedule for commercial production in the second half of the calendar year. Lucapa said in February it had recovered the first diamonds from Mothae through the existing bulk sampling plant and infrastructure. Lucapa secured $15m in private equity capital for the re-development of the mine.

The largest of the diamonds recovered in the first test run was 6.6 carats, the company said. Some $36m has been previously spent in trial mining of Mothae in which more than 23,000 carats of diamonds has been recovered. The mine is situated some 5km from Letseng, the fabulously rich diamond mined owned by GEM Diamonds.