Paragon Diamond gets $10 million to finish its Lesotho mine

Paragon Diamonds (LON:PRG) has signed a financing agreement for its Motete Dyke project in Lesotho, paving the way for production to start in 2013.

The company announced Tuesday it had signed a memorandum of understanding (MoU) with Lesotho partner Matekane Group of Companies (MGC) to provide up to $10 million of project financing, which would bring the Motete Dyke project into full production, without any dilution to shareholders.

“This is a significant milestone for the company especially considering we only started exploring at Motete in December 2011,” said Paragon Diamonds' chairman Francesco Scolaro.

The African focused diamond explorer and developer said the funding would be used to undertake predetermined capital investments as required and agreed between the shareholders in Botle, a subsidiary of Paragon, which owns 100% of the project.

A recovered grade from bulk sampling returned 56.2 carats per hundred tonnes (cpht) in July. The quality of diamonds was generally high, with abundant clear white dodecahedra encountered in the majority of size fractions, as was also the case in the micro-diamond population, according to the company.

Paragon expects the funding to be fully repaid within one to two years out of free cash flow generated by the Motete Dyke project, subject to anticipated production schedules and sales revenues being achieved, which will be based on the awaited scoping study and the resource statement it will contain.