Stellar Diamonds agrees German investment as mining halted by rains

Stellar Diamonds has agreed to issue warrants and convertible loan notes (CLNs) to a German investment company as it raises an initial net £1.26m working capital to aid its completion of a mining licence in Sierra Leone.

Stellar, which has proposed a 50-for-one share consolidation, has agreed a $1.65m (£1.06m) convertible loan from Frankfurt-listed Deutsche Balaton, and issued the German company with warrants with aggregate exercise price of $1.65m with an effective exercise price of 0.35p per existing ordinary share, which will be equivalent to 17.61p at the newly consolidated share price.

The AIM-listed company, which is being advised by broker Daniel Stewart, is also issuing new shares to Deutsche Balaton in a subscription to raise £0.497m at an effective price per existing ordinary share of 0.131p, or 6.55p at the new price.

After this, Deutsche Balaton will be interested in 29% of Stellar's enlarged share capital, or if the warrants are exercised this could rise to 37.5%.

Stellar wants the new cash as it closes in on the completion of the mining licence application for the Tongo project in Sierra Leone and plans to resume the trial mining of the kimberlite pipe at Baoulé in Guinea that has so far yielded over 6,400 carats but has been delayed by the rainy season.

Due to current weak rough diamond market conditions, Stellar expects the next diamond sale to be pushed back to the first quarter of 2016.

It expects trial mining to begin before the end of November, which it said should result in an increase in diamond inventory for the next export and planned sale.

"The application for the Tongo mining licence will be formally submitted in the near future and the approval process is anticipated to be completed later in 2015 or in early 2016," the company added.

Shares in Stellar fell 33% to 0.25p by midday on Monday, having already fallen from 1.4p over the last 12 months.