Burgundy raises $50m for diamond strategy

Burgundy Diamond Mines has raised funds for a restart at its Ellendale mine in Western Australia and expand its downstream capabilities.

Burgundy (formerly EHR Resources) says it has received commitments to raise $34.5 million from an unsecured convertible notes issue and $15.2 million from a placement, priced at 24 cents per share.

The company plans to restart operations at the past producing Ellendale mine in the Kimberley, which it acquired from Gibb River Diamonds earlier this year.

Production is expected to resume in 2022.

It has previously revealed downstream plans including a premises in Perth for valuing and cutting diamonds.

Managing director Peter Ravenscroft said Burgundy was now fully funded to executive several key initiatives including building its downstream market capability for Fancy Yellow diamonds produced from Ellendale.

“Since commencing our diamond strategy, we have methodically and significantly expanded our portfolio across favourable mining jurisdictions, and are now pursuing rapid cashflow through early production and significant vertical integration,” he said.

“This positions us well to achieve our goal to become the world’s leading mid-cap diamond company.”

Burgundy’s portfolio also includes the Nanuk project, acquired in December 2019, and an interest in the Naukaat project, both located in Canada.

The company can also earn a 50 per cent interest in discoveries made by Botswanan business Diamond Exploration Strategies, through an agreement signed in June last year.

Mr Ravenscroft said Burgundy’s recent deals had given the company a pathway to near-term revenue.

“In view of this, Burgundy has taken the opportunity to broaden its sources of funding beyond just equity, in order to minimise dilution whilst maintaining a robust balance sheet,” he said.

“Importantly, the funding package also gives us significant financial flexibility to advance our downstream initiatives and continue to consolidate the 'fancy-colour' diamond segment.

“This is a transformative stage in Burgundy’s unique growth strategy, bringing an innovative and cutting-edge approach to developing end-to-end diamond business in a high-value niche sector of the market.

“We are excited to now be in a position to pursue the substantial value opportunities that we have identified.”

Burgundy will issue 34.5 million notes valued at $1 each, with a three-year term to maturity and a 6 per cent coupon rate (subject to shareholder approval).

More than 63 million shares will be issued under the placement, with settlement expected to occur on July 30.

Burgundy will use $13 million raised to expand its downstream business; $25 million to fund existing projects; and $6 million to explore new business opportunities.

Aitken Murray Capital Partners and Euroz Hartleys are acting as joint lead managers to the raise.

Burgundy’s shares closed up 9.6 per cent today to trade at 28 cents.