DiamondEx, the mid-tier diamond miner, bounced back to trading Thursday with an announcement that it secured funding for the mine construction and development for its Lerala project that will spur economic boom in the northern parts of the country.
The miner, which took a three-day break from trading, said it had secured a A$ 20 million (P 98 million) from Babcock & Brown.
Dan O’Neill, managing director of DiamondEx, hailed the agreement saying, “We are delighted that Babcock & Brown has decided to provide the principal funding for DiamondEx’s founding project at Lerala.
“Babcock & Brown is a highly respected global investment firm that has been instrumental in the development of many projects around the world.”
Under the agreement, Babcock &Brown will invest A$ 2.5 million in a placement of DiamondEx shares at 24 cents per share, and subject to due diligence, other conditions precedent and DiamondEx shareholders approval, up to A$ 13 million in four-year convertible loan facility currently being fanalised.
“The funding package will enable DiamondEx to fully finance development of Lerala mine while limiting up dilution to existing shareholders. Completion of the funding package will enable commercial production of diamonds to commence at Lerala in late 2007,” O’ Neill said.
Lerala mine lies about 120 kilometres from Palapye ÔÇô a place earmarked for the development of the country’s second university ÔÇô and it is expected to create close to 300 new jobs directly.
At full production, the mine is to produce 330,000 carats per annum over its life span of 10 years. Its production is expected to be sold through the DTC Botswana, which will become operational by 2008.
“The company decided to suspend its trading at the beginning of the week because it was about to announce sensitive information. That was expected,” Leutlwetse Tumelo, an analyst at the sponsoring broker Capital Securities said.
“The mine is going to be highly profitable because the production cost are low. And the most interesting thing about the project is K2, which is the richest resource,” he added.
The mine is forecast to have a net operating cash flow of US $100 million on revenue of US $ 230 million over a period of 10 years.
The mine will be an open cut operation and there is a provision for underground mining after 10 years.
Further, the mine will be boasted by the envisaged diamond shortage in the market and the price spikes that are being driven by China and Indian markets.
In the next 10 years, diamond prices are expected to rise by 50 percent.