Lucapa raising $17m to fund diamond acquisition

Lucapa Diamond Company is paying $8.5 million in cash to acquire a past-producing project in Western Australia, with the purchase to be funded by a planned capital raising.

Lucapa will fund its purchase of the Merlin diamond project, located near Borroloola in the Northern Territory, using proceeds from a $17 million placement and $3 million share purchase plan.

Lucapa said the Merlin project, which had previously been mined by Rio Tinto and Victoria’s Ashton Diamonds between 1999 and 2003, had the potential to be the only producing diamond operation in Australia, following the closure of Rio’s Argyle mine last year.

Merlin will also add a near-term development opportunity to Lucapa’s two producing assets - the Lulo and Mothae diamond mines in Angola and Lesotho, respectively - with the potential to more than double the company’s revenue, Lucapa said. 

The company also has early-stage exploration projects in Australia and Botswana.

It said the Merlin acquisition included all existing equipment and assets on the Merlin mining lease, including an airstrip and mine infrastructure.

About 340 million shares will be issued under the placement, in two tranches, with the offer priced at 50 cents per share. It represents a 9 per cent discount to Lucapa’s last closing price.

Ashanti Capital is acting as lead manager to the raise and Foster Stockbroking as co-manager.

The SPP is priced on the same terms as the placement.

If fully subscribed, Lucapa’s market capitalisation is expected to increase from $45.8 million to $58.7 million, post transaction.

The company requested a trading halt on Thursday, expected to lift on May 24.