JOHANNESBURG (miningweekly.com) - AltX- and Aim-listed DiamondCorp seeks raise up to £7,1-million to resume underground development at its Lace mine in South Africa and to continue with exploration in Botswana.

The South Africa-focused company had placed 100 154 695 shares at 7p a share, which represented a discount of 26% to the closing midmarket price of 9,5p a share on Friday.

DiamondCorp MD and CEO Paul Loudon said that a positive market sentiment towards the diamond sector had returned, and that the company would take advantage of that to raise the capital it needed to resume the underground development of the Lace diamond mine.

"I am particularly pleased that the placing has been strongly supported by most of our existing institutional shareholders, as well as a number of new shareholders."

The placing and subscription would fund the ongoing development the company, with £4-million planned for the implementation of the decline development and completion of the sublevel caving plan, to resume underground mining of the Lace kimberlites between the 240-m and 330-m levels.

The diamond miner and explorer anticipated that the Lace kimberlite at the 240-m level would be accessed by the decline in the first half of 2011. A kimberlite sample of about 30 000 t would then be extracted and processed through the Lace plant to determine a definitive diamond grade at the mining level.

Full-scale production of 1,2-million tons a year from the underground mining operation would require additional capital, currently estimated by the bankable feasibility study at £3,5-million, which would not be provided for by the placing and subscription.

An additional £0,5-million of the placing and subscription would be used to finance further drilling in the Jwaneng south project in Botswana.

The company has 77,5% joint-venture interest in three exploration licenses in Botswana that contained nine identified kimberlites.

The company could earn its interest by funding exploration activities and completing a definitive feasibility study by May 13, 2014.

The balance of the funding would be used to meet scheduled debt repayments for 2010 and for working capital.