The London-listed diamond development company said the placing was scaled back so as not to exceed Stellar Diamond’s existing share authorities.
In order to provide all shareholders with an opportunity to participate in the proposed issue of new ordinary shares of the company, Stellar Diamonds is providing qualifying shareholders with the opportunity to subscribe for new ordinary shares to raise up to approximately £250 000 at 5.5 pence each through an open offer.
Subject to completion of the placing, investors participating in the placing will be qualifying shareholders for the purpose of the open offer, said Stellar Diamonds.
The completion of the placing is expected to take place on or around 27 February 2017, subject to resumption of trading of Stella Diamonds’ ordinary shares on AIM and admission of the placing shares to trading on AIM.
Completion of the open offer is subject to shareholder approval, which will be sought at the company’s annual general meeting in March 2017.
Use of proceeds, working capital position and suspension update
Stellar Diamonds currently has limited working capital and therefore expects that its shares will remain suspended until completion of the placing.
In addition to the placing, certain investors have subscribed for the number of ordinary shares at 5.5 pence per share that will equal gross proceeds of approximately £76 000 pursuant to the conditional placing, so that the total gross amount raised is expected to be at least £400 000.
Stellar Diamonds also expects to receive the management fee of $175 000 from its joint venture partner, Citigate Commodities Trading, by the end of March 2017.
The company announced on 20 February 2017 that it no longer intends to acquire Tonguma and instead intends to enter into a tribute mining agreement with Octea Mining, which would allow Stellar Diamonds to mine the Tonguma licence area alongside its own Tongo project in Sierra Leone.
The net proceeds of the placing, the proceeds from the open offer of up to £250 000 and the management fee will be used to conclude the tribute mining agreement, pay existing creditors of the business and for general working capital.
Subject to the final quantum of funds raised in the open offer, Stellar Diamonds also intends to pay the Tongo environmental licence fee of $150 000, which the directors believe will result in the issue of the Tongo mining licence.
“The company’s working capital position will remain constrained following completion of the placing and open offer,” Stellar Diamonds cautioned. It noted that it will need to raise further funds to allow implementation of the mine plan should the tribute agreement be finalised and may need to raise additional funds for working capital and payment of the Tongo environmental licence in the short term.