UK-based diamond development company Paragon Diamonds has signed a non-binding term deal to secure a funding package with South Africa’s Acrux Resources to develop the Mothae and Lemphane projects.

Paragon Diamonds will use the $15m funding to purchase and start the first production of potentially high-value diamonds at Mothae Kimberlite Resource and Lemphane Kimberlite Pipe Project.

During the first full-year of production at both mines, the acquisitions are expected to target combined revenues of around $36m.

Paragon Diamonds executive chairman Philip Falzon Sant Manduca said: "Firstly, the terms set out reduce equity dilution over the short-term as we have not even had to re-issue the former Lanstead owned shares, which Paragon repurchased and then cancelled earlier late last year.

"We see significant value in these projects, especially with regards to the potential for generating the large, special stones for which Lesotho is renowned."

"Secondly, the board considers the proposed terms to be very strong and in direct contradiction to the market consensus that told us we would be unable to do so at this stage of Lemphane’s development and would need to issue a sizeable quantity of new shares at a significant discount to the market price to raise new money."

The latest funding will enable Paragon Diamonds to acquire and start production at Mothae, while also developing Lemphane.

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According to the company, initial production at both Mothae and Lemphane is scheduled for the first quarter of 2016.

The total funding package is secured through the company’s shares in Mothae Diamonds and Meso Diamonds.

Geoff Linnell from Acrux Resources said: "We are pleased to have agreed terms with Paragon for an investment that will bring both the Mothae and Lemphane kimberlite projects into production.

"We see significant value in these projects, especially with regards to the potential for generating the large, special stones for which Lesotho is renowned."

The revenue sharing rate is expected to fall to 4%, in case the company increases financing to boost production at Mothae to 2mt a year within a period of three years.

In May, Paragon signed a memorandum of understanding (MoU) with Lucara Diamond to acquire a 75% interest in and operate the Mothae Kimberlite Resource.