Firestone Diamonds raising £9.45m in institutional placing

Firestone Diamonds (AIM: FDI) has conditionally placed 30 million new shares with institutional and other investors at 31.5p each to raise £9.45 million before expenses.  The proceeds will be used in its operations to bring BK11 into production during Q2 2010, to cover certain costs of mines first year of production, and for the continued development of the Firestone project portfolio.

The BK11 kimberlite is located in the Orapa kimberlite field in northern Botswana.

"We are very pleased to have received significant support from existing and new shareholders for this financing”, Firestone Diamonds chief executive Philip Kenny commented. “The completion of this equity financing and expected cash flow from production at BK11 substantially strengthens the company's financial position and will allow us to increase the pace of development of our portfolio of over 100 kimberlites and our toll treatment projects.”

Last month, in an interim report, Firestone said that whilst BK11 remained on schedule, it required additional capital of approximately £2m, and it was is advanced discussions with its bankers in Botswana. Today, the company noted that £2.3m of the newly-raised capital will cover the additional requirement and it is still progressing discussions with its bankers in Botswana, in relation to debt financing.

Additionally, Firestone said that approximately £2.2 million of the newly-raised capital will cover earthmoving costs that have been brought forward into the first year of BK11’s operation.

The new placing shares will represent approximately 23% of Firestone's enlarged share capital, and an application has been made for the shares to be admitted to trading on AIM. It is expected that trading will commence on the 19 April 2010.

“With Firestone shortly to become one of only three kimberlite producers worldwide outside of the major mining companies and the significant shortfall in rough diamond supply projected in the coming years, we remain confident about Firestone's future prospects", Kenny added.

A mining lease application was submitted for BK11 in Q1 2010, and the lease is expected to be granted shortly. Additionally, pit optimisation and mine planning studies also commenced during Q1 2010.

Based on plans for selective mining and the presence of high grade grain flow deposits, the BK11 mine plan is now expected to result in approximately 11.5Mt (million tonnes) of kimberlite at an average grade of 8.5 carats per hundred tonnes (cpht), giving total production of approximately 1 million carats, which Firestone noted was a 22% increase on previous estimates. Furthermore, the overall value of BK11 diamonds is estimated to have increased approximately 13% since December 2009 to US$155/carat.

According to Firestone, with over 25,000 square kilometres around the major Orapa and Jwaneng mines and the entire Tsabong kimberlite field, it is the largest holder of mineral rights in Botswana's diamondiferous kimberlite fields.

Furthermore in March, the company said its Jwaneng Tailings project, the planned construction and operation tailings plant, remains on schedule to commence production at the end of 2011, with full production to be reached in 2012. Firestone also noted that its negotiations with Debswana in relation to the Jwaneng tailings project are at an advanced stage and it expects to update investors shortly.

Also in March, the company announced its intention to establish a secondary listing on the Botswana Stock Exchange in order to attract greater interest among domestic investors and emphasising the company’s focus on it Botswana operations.

Botswana is believed to be the world's largest and lowest cost producer of diamonds, with annual production worth over US$2.5bn, and is considered to be one of the most prospective countries in the world to explore for diamonds, Firestone said.

http://www.proactiveinvestors.com.au/companies/news/6486/firestone-diamonds-raising-945m-in-institutional-placing-6486.html