Lucapa Diamond Company (ASX: LOM) has attained a funding package of up to A$19 million to fund the acquisition and advancement of the high-value Mothae kimberlite diamond project in Lesotho, southern Africa.
The funding package includes the underwriting of LOMOA options, a bridging loan and the issue of new options. When combined with the cash repatriated from the Lulo diamond mine in Angola, the funding package leaves Lucapa on track to commence commissioning Mothae in the first quarter of 2018 under a staged, low-risk development plan.
Mothae’s production will complement the high-value production from the Lulo alluvial diamond mine, which delivered the world’s highest average US$ per carat prices in 2016.
Like Lulo, Lucapa 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 5km of Letseng (the highest $ per carat kimberlite mine in the world) and close to the Liqhobong and Kao mines.
Lucapa is able to commit to developing Mothae because the 8.8 hectare 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 per 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 per 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 (unclassified) modelling of the Mothae kimberlite pipe extends to 500m (See ASX announcement 24 March 2017).
The Mothae funding package comprises:
- A $9.2 million underwriting agreement with Westar Capital Limited (“Westar”) for the 46.2 million listed A$0.20 options due to expire on 30 September 2017 (“LOMOA”). 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’s two largest share and option holders.
- A $5.5 million six-month secured bridging loan facility (“Facility”) with First Class Securities Pty Ltd. 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 (“Fee 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 at a time when Lucapa commences the studies for the 2 million tonne per annum Phase 2 development of Mothae.
The funding package, when combined with Lucapa’s existing cash resources (including the cash repatriated from Lulo), will enable Lucapa 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 plans to process ~2 million tonnes of mainly weathered, near-surface kimberlite material at 720,000 tonnes per annum over the first three years. This material is primarily free-dig, which means it will require limited drilling and blasting. Lucapa will scope the Phase 2 development plan for Mothae once Phase 1 is fully commissioned.
In developing Mothae, Lucapa will also leverage off the significant operating experience its Board and management team have in Lesotho, including at the neighbouring Letseng and Kao mines.
Lucapa continues to advance additional project financing options to complete its development plan and timetable for Mothae, as set out in the ASX announcement of 31 January 2017.