The transaction is part of the company’s strategy to generate significant value for shareholders, and coincides with its planned stage one production of large stones at its Lemphane kimberlite diamond project in Lesotho.
Paragon Diamonds is preparing to fund the stage one production, and ensure minimum dilution for existing shareholders, including provision of debt finance to create maximum value.
The company also agreed to settle around £553,000 outstanding equity swaps held with Lanstead over the share capital.
Paragon will secure a loan of £1.3m from Titanium Capital Investments, a private equity investment firm, to finance the transaction and equity swap.
The loan is repayable on demand, carries no interest and is convertible into shares at a price of £0.03p per share.
Paragon chairman Philip Falzon Sant Manduca said: "The acquisition of Lanstead’s interest highlights management’s commitment to building a vertically integrated diamond company, while ensuring the issued share capital is kept to a minimum so that shareholders capture as much of the value generated via positive share price performance.
Planned to commence in the first quarter of 2015, Stage 1 will include one million tons of ore mined, which is expected to recover more than 100 diamonds larger than 9 carats, including stones up to 100 carats.
