Firestone Diamonds PLC (LON:FDI) is raising £13 million to enable accelerated development of the Main Pipe at the recently acquired Liqhobong mine in Lesotho.
It has conditionally placed 52 million shares with institutional and other investors at 25 pence a share, yesterday’s closing price. Investors sent the shares up 6 percent in reaction to trade at 26.5p shortly after the announcement was released at lunchtime.
Chief executive Philip Kenny said: "We believe that the Liqhobong mine has the potential to be a highly profitable mining operation and the company is now well financed to restart production and commence work on the planned Plant 1 expansion programme in Q1 2011.
“With BK11 (mine in Botswana) in full production in 2011 and the expanded Plant 1 at Liqhobong expected to reach full production capacity in Q4 2011, Firestone is very well positioned to reach its target of producing 1 million carats per annum by 2014."
The new funds will be used to accelerate plans to restart production and to expand the production capacity of Plant 1 at the Liqhobong and for general working capital purposes.
Preparatory work for mobilising staff, equipment and contractors to site in January 2011 has already begun.
Design work for the proposed expansion of Plant 1, which will triple its production capacity to 1.3 million tonnes per annum (mtpa), is at an advanced stage and procurement of long lead time items has started. Firestone expects work on the expansion programme to begin in Q1 2011 and to be completed in Q4 2011.
At full capacity of 1.3 mtpa, Plant 1 is expected to generate revenue of US$36 million per annum.
The remaining work required on the Definitive Feasibility Study (NYSE:DFS) for the construction of Plant 2 with 4.2 mtpa capacity will be undertaken in 2011. Final specifications and design will rely on data from the operation of Plant 1. Firestone plans to make the decision to commence construction of Plant 2 in 2012, with production to start in 2013.
Firestone has a 75 percent interest in Liqhobong, where a resource of 91 million tonnes at an average grade of 34 carats per hundred tonnes (cpht) containing 31 million carats has been identified at the Main Pipe.
With an average estimated diamond value of US$86/carat and a contained value of approximately US$2.7 billion, Firestone considers Liqhobong to be one of the most attractive undeveloped kimberlites in the world.
Initial mine planning and pit optimisation studies on Liqhobong indicate that open pit mining operations can be undertaken to a depth of 390 metres and would result in the mining of approximately 60 million tonnes of kimberlite and 19 million carats over a period of approximately 17 years. No waste stripping will be required for the first 9 million tonnes.
Firestone is also the largest holder of mineral rights in Botswana's diamondiferous kimberlite fields, controlling approximately 10,000 square kilometres around the major Orapa and Jwaneng mines and the entire Tsabong kimberlite field. In addition to Liqhobong and BK11, Firestone has 108 kimberlites in its portfolio, of which 30 have been proven to be diamondiferous.