Lucara Diamond has applied to the Toronto Stock Exchange (TSX) for a financial hardship exemption to proceed with a $165 million private placement without obtaining shareholder approval.
It said that the funds are urgently required to address a liquidity shortfall and continue the development of its flagship Karowe Underground Project (UGP) in Botswana.
The proposed non-brokered private placement involves issuing about 1.03 billion common shares for $0.16 per share. The offering price represents a discount of roughly 23.6% to the volume-weighted average price in the days leading up to the initial announcement.
A significant portion of the placement is subscribed by the Lundin Family Trusts, the company's largest existing shareholder.
Their participation classifies the transaction as involving a "related party," triggering multiple TSX rules that would normally require approval from minority shareholders.
The issuance size and insider participation levels exceed TSX thresholds, prompting Lucara to apply for an exemption under Section 604(e) of the TSX Company Manual, which applies to issuers in serious financial difficulty.
A special committee of independent directors unanimously recommended the application after determining that the company is in serious financial difficulty, the private placement is designed to improve the situation, and the terms are reasonable under the circumstances.
The company has fully drawn its $190 million project facility, a $30 million working capital facility, and a $28 million shareholder standby undertaking.
Declining cash flows from processing lower-grade stockpiles, coupled with the capital-intensive transition to lateral underground development, have created an urgent funding need.
"We remain fully committed to protecting long-term shareholder value while advancing the UGP," said Lucara president and chief executive William Lamb.
"This application is a prudent and temporary step that provides added flexibility as we complete this capital-intensive phase of development."
The company warns there is no guarantee the TSX will grant the exemption. If approved, the TSX will place the company's shares under a delisting review, which could potentially result in the shares moving to the TSX Venture Exchange.
The private placement is expected to close in late January, subject to final documentation and regulatory approvals.
Mathew Nyaungwa, Editor-In-Chief, Rough & Polished
