JOHANNESBURG (miningweekly.com) - Aim-listed Firestone Diamonds said on Wednesday that it had agreed terms for the acquisition of junior diamond-miner Kopane through a scheme arrangement.

The purpose of the scheme was to allow Firestone to become the owner of the entire issued ordinary share capital of Kopane. An all-share offer by Firestone would involve 0,4657 of a share for every Kopane share.

Firestone chairperson James Kenny said that the acquisition would support the company's aspiration to evolve into a midtier diamond producer, with the potential to produce more than one-million carats a year by 2014.

The enlarged group's larger market capitalisation could also result in more share liquidity, which might improve its rating and its access to capital.

Further, Firestone was expected to generate cash flow from its BK11 project in Botswana, which was expected to reach full production capacity by the end of the year, and, subject to the successful completion of discussions with Debswana, from the company's Jwaneng tailings project in 2012.

With revenue of $29/t and Firestone's estimated operating costs of $12/t for a kimberlite mining operation in Lesotho, the company would have added value to exploit and develop the economic potential at Kopane's Liqhobong mine.

"Firestone recently became one of only three listed kimberlite producers worldwide outside of the major mining companies, and the opportunity to acquire a kimberlite with the potential of Liqhobong is one that we believe complements our broad portfolio of exploration and development projects and offers Firestone shareholders very significant benefits," Kenny said.

He noted that Liqhobong, which was undergoing a definitive feasibility study (DFS), was substantially larger than BK11.

Firestone intended to construct a four-million-ton a year plant following the completion of the DFS, and assuming a successful design and build process, the project could be commissioned in about three years.

Kopane chairperson Frank Scolaro said that the company's board believed that the value that the offer from Firestone placed on Kopane was fair in current market conditions and that the all-share offer would afford Kopane shareholders the opportunity of benefiting from the growth profile of Firestone's broader asset base of diamond projects and the likely acceleration of the development of Liqhobong.

"The synergies that can be achieved by combining the two groups will create greater value for shareholders and we look forward to an exciting next phase for the group," concluded Scolaro.

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