By Steve McGrath, Alliance News; From London South East

Firestone Diamonds makes further progress on financing for Liqhobong

LONDON (Alliance News) – Firestone Diamonds PLC Friday said it has agreed a USD15.0 million standby debt facility, satisfying one of the remaining conditions to the drawdown of a separate debt facility, and has also agreed a restructuring of its existing USD30.0 million mezzanine facility to a Eurobond facility with no changes to its commercial terms.

The AIM-listed diamond development company said the standby facility will be provided by Resource Capital Fund VI LP, and the move will satisfy one of the remaining conditions that would allow the company to drawdown on a debt facility of up to USD82.4 million provided by Absa.

The Absa facility was part of a bigger USD225.2 million financing agreement the company did last May to fund the building of a main treatment plant and supporting infrastructure at its Liqhobong Diamond Mine in Lesotho.

One of the conditions of the Absa facility was that Firestone secured a separate standby debt facility to fund any potential cost over-runs or delays in respect of the development of the plant.

Firestone now needs to get shareholder approval for the standby facility, and hopes to fulfill all the requirements if the Absa facility by the third quarter of 2015.

“The project currently remains within budget and on schedule to achieve initial production at the end of the first half of 2016 and, accordingly, the board does not currently envisage that it will need to drawdown the USD15.0 million standby debt facility,” it said.

If the standby is required, it will be drawn down at the option of the company in up to three equal tranches and will be structured by way of Eurobonds, quoted on the Cayman Islands Stock Exchange, attracting an interest rate of 8% a year, the company said.

In order to facilitate Resource Capital Fund’s ability to elect to receive shares, as opposed to cash, on the redemption of the standby debt facility, Firestone would also issue the fund with warrants that can only be exercised by way of a redemption of the standby debt facility, it added. Again, this would only be done if the standby is needed.

“The standby facility provided by RCF is a sign of their and Firestone’s confidence in the project and further strengthens the contingency reserves should it be needed in the future,” Chief Executive Stuart Brown said.

Last May’s broader financing package also included a USD30.0 million mezzanine debt facility that was provided by Resource Capital Fund and Pacific Road.

“It has now been agreed between the mezzanine parties that it is more efficient for the mezzanine facility to be restructured by way of an issue of quoted Eurobonds. Accordingly, the mezzanine parties have agreed that the company will issue up to, in aggregate, USD30.0 million principal amount of secured quoted USD1,000 Eurobonds, which will be listed on the Cayman Islands Stock Exchange, to replace the existing mezzanine facility,” it said, adding that these Series A Bonds will have the same commercial terms as the mezzanine facility.

Firestone said orders of ZAR1.3 billion from the total ZAR1.4 billion budget related to the engineering, procurement, construction and management contract for the treatment plant had been placed by the end of March.

“The project team’s budget of ZAR280.0 million continues to be spent according to the project schedule. In total, as at the end of March 2015, approximately ZAR635 million had been spent on the project, which is in line with the forecast completion schedule,” the company said.

Firestone added that the grid power project to connect the project to the grid power, a project that also started last June and has a separate project budget of ZAR165.0 million, is proceeding well and is expected to be completed during the second half of 2015, ahead of the initial schedule.

Firestone Diamonds shares were down 0.7% at 26.80 pence Friday morning.

[email protected]; @stevemcgrath1

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