Firestone Wins Credit Approval for Diamond Mine in Lesotho
Issue 66, November 2013
Firestone Diamonds has won credit approval from Absa Bank, majority owned by Barclays, for debt funding of up to $82m for construction of its Liqhobong mine in Lesotho.
Liqhobong is due to become the world’s fourth largest diamond mine outside of the control of De Beers, Rio Tinto or Russia’s Alrosa, producing 1m carats per annum for 15 years. Construction is slated for early 2014 with full output in 2016.
“It marks an independent endorsement of Firestone and our project,” said incoming chief executive Stuart Brown, “in what we believe has been one of the most challenging periods that mine funding has encountered in recent years.”
Appointed in August, Brown was previously finance director and interim group head at diamond giant De Beers. “It’s a huge signing,” Charles Stanley analyst Kieron Hodgson told Global Mining Observer. “Taking someone of Stuart’s calibre and experience to a smallcap mining company is a bit like signing Gareth Bale for Southend.”
Lending is subject to Firestone raising the balance of funding for the project, with total capital costs projected at $185m. Backed by hedge fund Audley Capital, Firestone plans to raise further money through off-take agreements, cornerstone investors and a conventional equity component. Headed by Julian Treger and Lucio Genovese, who both sit on Firestone’s board, Audley famously led the turnaround of failing coal minnow Western Coal, sold to US-listed Walter Energy in late 2010 for $3.3bn. Focusing on large assets trapped by underinvestment, Audley has followed a similar strategy at Firestone, securing a dominant position on the shareholder register, orchestrating access to finance and appointing top tier management.
Hodgson values Firestone at 7p per share, versus 3p currently. “Once the company can demonstrate that the other aspects of the financing requirements are being achieved,” he says, “as it has with the debt financing, the company will start to be seen in a different light by investors. They won’t continue to be capitalised at these levels then.”
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