AIM-listed West African Diamonds has agreed to acquire Stellar Diamonds for £10.4 million in a reverse takeover.

If the deal is successful, West African Diamonds will be readmitted to AIM and trading of its shares will commence in February. The company intends to raise £5 million in a placing led by RBC Capital Markets and Astaire Securities, which is conditional on the completion of the acquisition. Both companies focus on diamond production and development in West Africa.

John Teeling, chairman of West African Diamonds, said: 'The enlarged group will be on a stronger financial footing due [to] the placing and cashflow from two producing mines.'

The company generated turnover of £135,000 in the six months ending October 2009, an increase of 400 per cent on the previous year, while pre-tax losses were up 4.8 per cent to £130,000.