The Lucapa Diamonds funding package includes the underwriting of LOMOA options, a bridging loan and the issue of new options.
When combined with cash repatriated from the Lulo diamond mine in Angola, the funding package leaves Lucapa Diamonds on track to commence commissioning Mothae in the first quarter of 2018 under a staged, low-risk development plan.
Mothae’s production will complement the high-value production from the Lulo alluvial diamond mine, which delivered the world’s highest average US$/carat prices in 2016.
Like Lulo, Lucapa Diamonds considers Mothae to be a premium-quality diamond asset. Mothae has recovered large and valuable diamonds from historical bulk sampling and is located in the heart of the highest-price cluster of kimberlite diamond mines in the world – within 5 km of Letseng mine.
Lucapa Diamonds is able to commit to developing Mothae because the 8.8 ha kimberlite pipe has been well defined through drilling and trial mining.
The trial mining produced more than 23 000 carats of diamonds, which included individual stones of up to 254 carats and Type IIa diamonds which achieved actual sale prices of up to US$41 500/carat.
The high-value nature of the resource is also reflected in the independent JORC resource estimate for Mothae of more than 1 million carats of diamonds at a modelled average diamond value of US$1 063/carat – the second highest JORC average price per carat in the world.
While the JORC classified resource has been estimated to a depth of 300m, independent modelling of the Mothae kimberlite pipe extends to 500 m.
The Mothae funding package comprises:
- A$9.2 million underwriting agreement with Westar Capital for the 46.2 million listed A$0.20 options due to expire on 30 September 2017. Westar will earn a 5% underwriting fee, due at the LOMOA option expiry date, and a 1% management fee, due on signing;
- Westar’s sub-underwriting agreements were supported by Lucapa Diamonds’ two largest share and option holders;
- A$5.5 million six-month secured bridging loan facility with First Class Securities This facility will be used to meet the second acquisition payment of US$4.1m for Mothae;
- The issue to Westar of 11.6 million unlisted A$0.35 options, expiring 12 months from issue;
- The fee options are expected to be issued around 30 September 2017. If exercised, the fee options will generate additional cash proceeds of approximately A$4.1 million for Lucapa Diamonds at a time when Lucapa Diamonds commences the studies for the 2 Mtpa phase 2 development of Mothae.
The funding package, when combined with Lucapa Diamonds’ existing cash resources, will enable Lucapa Diamonds to meet the staged payment schedule to acquire the company’s 70% interest in Mothae from the government of the Kingdom of Lesotho and to further the phase 1 development.
Under the Phase 1 Mothae development plan, Lucapa Diamonds plans to process 2 Mt of mainly weathered, near-surface kimberlite material at 720 000 tpa over the first three years. This material is primarily free-dig, which means it will require limited drilling and blasting. Lucapa Diamonds will scope the phase 2 development plan for Mothae once Phase 1 is fully commissioned.
In developing Mothae, Lucapa Diamonds will also leverage off the significant operating experience its board and management team have in Lesotho, including at the neighbouring Letseng and Kao mines.
Feature image credit: Lucapa Diamonds
(A view of the Mothae kimberlite diamond project in Lesotho)