FDI.L Share News (FDI)

(Adds executive comment.) By Jason Douglas Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Diamond miner Firestone Diamonds PLC (FDI.LN) Wednesday said it agreed to acquire peer Kopane Diamond Developments PLC (KDD.LN) for GBP52.7 million in shares, in a deal that brings together assets including Firestone's mine in Botswana and Kopane's Liqhobong project in Lesotho. Firestone Chief Executive Philip Kenny told Dow Jones Newswires Liqhobong is one of the most promising kimberlite diamond projects in the world, and potentially one of the top three not yet in development. Liqhobong, located roughly 120 kilometers from Lesotho's capital, Maseru, is 75% owned by Kopane and 25% owned by the government. It has a resource of 90 million metric tons containing 31 million carats but has only been producing on a small scale so far. About 350,000 carats were produced between 2005 and late 2008, when production stopped because diamond prices plunged. Liqhobong is about 20 times the size of Firestone's BK11 mine in Botswana in terms of the value it contains, Kenny said. Firestone said the acquisition of Kopane will enable the enlarged group to become one of the leading mid-tier diamond producers, with the potential to produce in excess of 1 million carats a year. "Diamond prices have been going up and are continuing to go up and this is the time to secure attractive diamond resources," Kenny said. Firestone is offering 0.4657 new shares for every one Kopane share held. Based on a Firestone share price of 36.5 pence, the offer values Kopane at 17 pence a share, or GBP52.7 million. The offer represents a premium of 33% to Kopane's closing price Tuesday. The acquisition would require Firestone to issue roughly 140 million new shares to Kopane shareholders, who would end up with more than half of the company. Shareholders at both firms must sign off on the deal, and at 1512 GMT, shares in Firestone were down 4 pence, or 12%, at 29 pence, while Kopane shares were flat at 12.75 pence. Kenny said he is confident Firestone and Kopane will be able to persuade shareholders to approve the acquisition. Shareholders with 36% of Kopane and investors holding almost 30% of Firestone have already formally agreed to back the deal, he said, and others have indicated support. The enlarged company's operations will include diamond production, exploration and development and Firestone's toll treatment projects, which process waste from mining. Firestone added that putting the two companies together would allow the enlarged firm to trim costs by sharing corporate and technical support services. -By Jason Douglas, Dow Jones Newswires; 44-20-7842-9272; jason.douglas@dowjones.com (END) Dow Jones Newswires July 21, 2010 11:18 ET (15:18 GMT)