Exploration and development company Star Diamond will raise up to C$4.8-million from Luxembourg-based Spirit Resources as the company seeks to advance its Fort à la Corne diamond project in Saskatchewan.

The miner on Friday announced a C$4-million private placement and an interim C$800 000 unsecured loan from Spirit, which is ultimately controlled by mining entrepreneur Jean-Raymond Boulle. The funding will be used for working capital, general corporate purposes, and to progress a prefeasibility study.

Under the private placement, Spirit will subscribe for 133.3-million units at C$0.03 each. Each unit comprises one common share and one warrant. The warrants are exercisable at C$0.04 for the first 12 months, and C$0.05 thereafter for a total of 24 months, with a potential one-year extension if Star Diamond does not raise a further C$3-million within that timeframe.

Upon completion, Spirit’s stake in the company would rise to 25.82% on a non-diluted basis and 36.97% on a partially diluted basis, triggering provisions under the TSX company manual and the firm’s shareholder rights plan.

“We are very pleased to welcome Jean-Raymond Boulle as a transformative shareholder to move this incredible diamond project forward,” Star Diamond president and CEO Ewan Mason said in a statement. 

“Mr Boulle's reputation as a successful entrepreneur in the mining sector speaks for itself and his connections in the diamond industry will be extremely useful in the search for financing to build this world-class mine.”

As part of the agreement, Spirit will gain the right to nominate two directors to Star Diamond’s board, with an option to nominate a third and select the board’s chairperson if it exercises all warrants. A special shareholder meeting will be called to approve the transaction, which includes waiving the shareholder rights plan and allowing Spirit to “materially affect control” of the company.

Star Diamond has entered into a voting support agreement with Rio Tinto Exploration Canada, which has agreed not to vote against the key proposals at the upcoming shareholder meeting.

The deal is subject to shareholder and regulatory approvals, including from the TSX. The outside date for completion is set for August 29.