Stellar Diamonds, announcing a major reorganization of its shares, aims to raise around £1.26 mil ($1.94 mil) net via a convertible loan note agreement and subscription deal, which will be used for ongoing working capital. The company has prioritized its Tongo mining licence application in Sierra Leone and aims to resume the trial mining of the kimberlite pipe at Baoulé in Guinea, which has thus far yielded over 6,400 carats. The aim at Baoulé remains to process 100,000 tons of kimberlite to justify the next stages of project development. The results of a PEA study indicate the Tongo project has economic potential and a significant pre-tax net present value (US$53 million). The capital cost to develop the Tongo mine is estimated to be approximately US$24.8 million.
Stellar intends to seek this funding primarily via sources of debt, as weak rough diamond market conditions have likely pushed the next diamond back to the first quarter of 2016. The proposed capital reorganisation detailed in their press release goes like ths: every 50 existing ordinary shares of 1p each would be consolidated into 1 consolidated share of 50p. Each consolidated share would then be sub-divided into 1 new ordinary share of 1p and 1 new deferred share of 49p. There is a solid chance that this type of reverse split will likely not generate confidence among investors.