JOHANNESBURG (miningweekly.com) – London-listed Stellar Diamonds has raised $330 000 through the issue of a new unsecured convertible loan note to Germany-based investment group Deutsche Balaton, providing the West Africa-focused miner funding to advance development of a “significant” hard rock diamond mine from its portfolio of projects in the region.

The company had additionally granted Deutsche Balaton a warrant to subscribe for new ordinary shares for an aggregate subscription price of $330 000.

“In what remains a challenging market for the natural resource sector, we welcome and value the support and credentials of Deutsche Balaton, who we believe will be a long-term strategic investor in the company,” commented CEO Karl Smithson. 

He added that it had become necessary for Stellar to undertake a capital reorganisation to amend the nominal value of its shares relative to the price at which the group was currently able to issue new shares.

As such, the company's shares would be consolidated and subdivided.

“The directors consider that the participation of Deutsche Balaton and the proposed share reorganisation are important developments in the transformation of Stellar from a junior explorer into an established diamond producer,” he said in a statement on Friday.

The proposed capital reorganisation, which remained conditional on approval by an appropriate resolution of the shareholders, was expected to result in the number of ordinary shares in issue being reduced by a factor of 50 times and would increase the price at which the company's ordinary shares would trade to some 50 times the value at which the existing shares currently traded.

Elaborating on the key terms of the note, Stellar outlined that it could be converted into 7.47-million existing shares at an effective price of 0.56p apiece, transferring 4.4% of the company’s enlarged share capital to the German investor.

The warrant would, meanwhile, enable Deutsche Balaton to subscribe for 59.95-million existing shares for an aggregate subscription price of $330 000, equivalent to an exercise price of about 0.35p a share.

Assuming the full conversion and exercise of the warrant – which was only exercisable following conversion of the note – Deutsche Balaton would own, in total, up to 10.7% of the company's enlarged share capital.

Elaborating on the proposed capital reorganisation, the group stated that the process would see every 50 existing shares of 1p each consolidated into a single consolidated share and, immediately following the consolidation, it was intended that each consolidated share then be subdivided into one new ordinary share of 1p and one new deferred share of 49p.

In the event of implementation of the proposed capital reorganisation, shareholders would own one proposed new share of 1p nominal value and one new deferred share for every 50 existing shares that they owned prior to the capital reorganisation.

The nominal value of 1p each per existing share would remain unchanged at 1p per proposed new share under these proposals.

“It is not expected that the percentage holding of individual shareholders in the company would change as a result of this,” the company held.

Stellar was currently continuing trial mine evaluation of its Baoulé kimberlite, in Guinea, and was progressing the 1.45-million-carat Tongo Dyke-1 resource through the mining licence application process.

In addition, Stellar held the three-million-carat Droujba project, in Guinea, and continued to pursue channels to ensure the proper reinstatement of its Kono licences, in Sierra Leone.