DiamondCorp Plc on Jan. 13 said it plans to launch a £1 million placement to avoid impending bankruptcy.
The company slipped closer to bankruptcy after funding discussions with a third party ran aground in October 2016, while its 74%-owned operating subsidiary, Lace Diamond Mines Pty. Ltd., was placed under business rescue a month later due to severe flooding of the Lace diamond mine in South Africa.
Proceeds from the financing, along with the company's current cash on hand and expected insurance claim payments, will be used for critical expenditure requirements, such as costs related to the business rescue process, the care, maintenance and rehabilitation of the Lace mine, and cash settlement for a labor deal with the Association of Mineworkers and Construction Union, or AMCU.
DiamondCorp expects to price the placement shares at about 4 pence apiece, with 1 attaching warrant per share exercisable at 1 pence between Nov. 1, 2017, and June 30, 2019.
The placement will be conducted through a bookbuilding process to be managed by Panmure Gordon, which is slated to close no later than Jan. 19, though Panmure Gordon reserves the right to close the books earlier, without notice.
The completion of the financing is subject to the company securing a labor agreement with the AMCU over retrenchments and outstanding wages and the admission of the placement shares to the London Stock Exchange's AIM by Jan. 25, or such other date agreed upon with Panmure Gordon but not exceeding Jan. 31.
DiamondCorp now has net debt of about £29 million, based on current exchange rates, and is Lace Diamond Mines' largest creditor, with £36 million owed in a subordinated shareholder loan. The unit also owes £18 million to secured lender Industrial Development Corp. of South Africa, or IDC, and £1.5 million to trade creditors.
In December 2016, IDC agreed to a standstill with respect to its rights under the £18 million project loan until the completion of Lace Diamond Mines' business rescue process, and DiamondCorp has been able to secure similar agreements with the group's bondholders in South Africa and the U.K.
DiamondCorp's management continues to evaluate the group's capital requirements, in conjunction with business rescue practitioner Deloitte & Touche, throughout the business rescue process and in the event of a successful business rescue process for Lace Diamond Mines.
Meanwhile, the Lace mine remains nonoperational, pending the funds to place the operations under care and maintenance and start the remediation process.