DiamondCorp faces further setbacks with Lace mine

12th Oct 2016 09:59

(ShareCast News) - DiamondCorp, the AIM-listed diamond miner, has arranged to defer debt payments and is looking at raising new funds after new problems with its Lace diamond mine in South Africa led to further scaling back of production targets.Mining has been constrained by large fallen pieces of kimberlite obstructing operations, which is likely to require more difficult drilling conditions until at least the end of the year.As a result, the company is now expecting production of 14,000-15,000 tonnes per month for September-December 2016, with full commercial production of 30,000 tonnes per month now only expected around February 2017.Diamond grades have also been negatively impacted, though dilution has reduced recently so that recoveries are now averaging at 25 carats per hundred tonnes (cpht) with a budget of 29cpht, from 18cpht in August 2016.Despite the board's confidence that diamond values will continue to be in line with its estimated $164 per carat base case, the slower production ramp will negatively impact inventory, which could lead to lower diamond sales or a rescheduling of tender sales, increasing pressure on the group's cashflow.The company is finalising a convertible debt facility of around £500,000 and negotiated a deferral of its debt payments until "significant" cash flow is achieves from the first 100,000 tonnes per month mined, with interest payable in the meantime.The group is planning to boost its funds through additional equity of £2.5m to £3m and is in discussions with parties outside the UK and South Africa to strengthen the balance sheet and bring on board additional board expertise.Broker Shore Capital said it expected a negative reaction from what is a "significant setback".The share price fell 28.73% to 2.94p at 1141 BST on Wednesday.