Stornoway Diamond climbs on closing of over $373 mln in financings

Shares of Stornoway Diamond (TSE:SWY) were on the rise Friday after closing a C$132.02 million public offering of subscription receipts, a precondition for the near $1 billion financing agreement penned last month for its Renard diamond project in Quebec.

The company sold 188.6 million subscription receipts at a price of 70 Canadian cents. The subscription receipts, under the ticker symbol "SWY.R", began trading today.

It also announced the closing of its previously announced private placement, selling 345.5 million subscription receipts at 70 cents apiece, for proceeds of C$241.88 million.

The company said the public offering and private placement were made under a binding financing agreement between Stornoway, Orion Co-Investments, Ressources Quebec (RQ) — a subsidiary of Investissement Quebec — and Caisse de depot et placement due Quebec (CDPQ), for the construction of the Renard diamond project in April.

This deal proposed a series of financing transactions totalling C$944 million, with funding commitments of US$360 million from Orion, C$220 million from RQ and C$105 million from the Quebec pension plan, one of Canada's largest institutional investors. It also includes a marketed offering of common share subscription receipts and an equipment financing facility with Caterpillar Financial.

The funds raised so far will be held in escrow pending the completion of the financing transactions, with holders of public subscription receipts to receive one common share and one half of a share purchase warrant. Every subscription receipt holder under the private placement will get one common share.

"The successful closing of the public offering of subscription receipts is an important milestone for Stornoway, and a precondition for the completion of the overall project financing agreement announced on April 9th," said president and CEO Matt Manson.

"This agreement contemplates financing commitments to fully fund the Renard Diamond Project through construction to the declaration of commercial production, including all contingencies, capital escalation allowances, working capital requirements, and financing costs."

The chief executive said the company is looking forward to submitting the equity, debt and streaming agreement that it has arranged to its shareholders for their approval at a special meeting on June 26.

Principal project construction is expected to begin once shareholder approvals are secured, while all remaining transaction conditions must also be met, including the completion of definitive documentation.

The Renard project, located 350 km north of Chibougamau in the James Bay region of north-central Québec, has the potential to become a significant producer of high value rough diamonds over a long mine life, according to a feasibility study released in 2011.

The property has an estimated 17.9 million carats in probable mineral reserves and total indicated resources of 27.1 million carats, with a further 16.85 million carats classified as inferred mineral resources.

Shares of Stornoway were last up 5.6% on Friday, at 75 Canadian cents, reaching a high of 82 cents during the session. The stock has a 52-week high of C$1.22.

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