JOHANNESBURG (miningweekly.com) – Lace Diamond Mines (LDM) has signed a term sheet with resource-focused investment management company Acrux Resources for $7-million in financing in exchange for a 3% net revenue royalty on the first 12-million carats to be recovered at the Lace underground mine, in the Free State.
LDM, in which Southern African diamond development and exploration company DiamondCorp holds a 74% stake, would use the funds to “strengthen treasury” at the operating company level and provide working capital cover as it ramps up underground operations at the Lace mine in the second half of this year.
“The royalty with Acrux will provide significant cash at the operating company level without the dilution of a large equity issue or additional debt at a time when we consider DiamondCorp shares to be trading at a significant discount to the underlying value of the Lace mine.
“By creating an asset out of a small part of Lace’s future cash flow and exchanging that for cash now, we significantly boost cash reserves, while only incurring a small reduction in management’s assessed net present value of DiamondCorp’s 74% interest in LDM,” commented DiamondCorp CEO Paul Loudon.
The royalty was conditional on the completion of satisfactory legal, financial and technical due diligence by Acrux and consents from existing lenders to LDM.
It would be calculated on the net revenue received by LDM after the deduction of diamond marketing costs.
LDM would have the right, after eight years, to buy back the royalty at an independent valuation.
The Lace underground mine was expected to produce 300 000 ct/y of diamonds over the first ten years of the mine’s 25-year life. Deeper block caves in higher-grade areas of the mine could eventually push output to 500 000 ct/y.