28th Apr 2014 10:54
LONDON (Alliance News) - Firestone Diamonds PLC Monday said it has revised its mining lease agreement with the Lesotho government for the development of the Liqhobong diamond mine, while saying that 41% of the shares available in its 2-for-11 open offer were taken up.
Firestone owns a 75% interest in Liqhobong Mining Development Company Pty Ltd, with the remaining 25% owned by the Lesotho government.
The AIM-quoted diamond development company said that it has now revised its mining lease agreement with the Lesotho government, and will now shortly commence construction of the main treatment plant and supporting infrastructure at the Liqhobong diamond mine.
It said the revised mining lease agreement, entered into is for an initial period ending on June 30, 2021, although can be renewed for two further periods of 10 years each.
"The negotiations have been extensive and we believe that the concluded agreement is positive for all parties," said Chief Executive Stuart Brown in a statement.
As part of the negotiations, Firestone said it has been agreed that concessions regarding the exemption from paying withholding tax on interest and dividends contained in the previous agreement will no longer be available.
It said that in compensation for the requirement to pay withholding tax, the Lesotho government has agreed that the royalty rate on diamond sales will be reduced to 4% from 8% from first production, until Liqhobong Mining Development Company has obtained the benefit value of USD20 million from the royalty rate reduction.
"The obligation to pay withholding tax may result in an increase in the company's peak funding requirement of approximately USD12.0 million during the construction phase of the Main Treatment Plant in late 2015/early 2106," Firestone Diamonds said in a statement.
In a separate statement, Firestone Diamonds also said it raised gross proceeds of around USD2.8 million, after only 56.2 million shares at 3 pence per share from the open offer were taken up, roughly 41% of the open offer shares it had made available.
Firestone Diamonds shares were down 3.5% at 3.50 pence per share before midday Monday.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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