DiamondCorp to raise funds for mine development

| Friday December 10, 2010 00:00

The company had conditionally placed 34 ,713, 796 new ordinary shares at 8,5p a share, representing a 11,7 percent discount to its share price.

In April, DiamondCorp raised £6,6-million to implement the decline development at its Lace mine, undertake drilling of its exploration projects in Botswana, pay down loan obligations and for general working capital.

However, an independent review suggested that the 260-m level at Lace was a superior bulk-sampling target to the original target on 240-m level, as access to most areas of the pipe would be unrestricted. But the additional 20 m of vertical depth required 140 m of additional decline development and would add about six weeks to the programme. The direct cost impact of the change would be about £450,000.

In addition, cost inflation and the effect of the stronger rand had added £300,000 to the original £4-million budget for the decline access, while an additional £250,000 would be used for secondary support during the bulk sampling programme.

The company expected to access the new target level at the end of February 2011 and that bulk sampling would be completed by the end of April 2011.

Of the money raised, £1-million would be used for the completion of the decline development and extraction and processing of kimberlite mining sample of about 30,000 t to determine a definitive diamond grade.However, full scale production of 1,2-million t/y from the underground mining operation would require additional capital, currently estimated by the bankable feasibility study at £5,3-million, and not provided for by the placing.

A further £1-million would be set aside for the company's loan obligations in April next year. DiamondCorp currently has a $3,35-million loan facility with Africa Opportunity Fund secured against the company's South African assets.

The balance would be used for bulk sampling in Botswana and general working capital.

DiamondCorp expected that trading in the new ordinary shares would start on the Aim and AltX on December 23, subject to shareholder approval.