Firestone Diamonds has agreed to buy rivalKopane Diamond Developments in an all-share offer valued at $70.7 million, to diversfy and expand the group, Reuters reported.

The takeover, unanimously recommended by Kopane's board, includes a mine project that Firestone bills as the world's third largest undeveloped kimberlite resource, the report said.

"The acquisition of Kopane by Firestone 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 per annum," Firestone chairman James Kenny said.

The deal would leave 53% of the expanded firm in the hands of Kopane shareholders and the rest with Firestone investors based on Kopane's fully diluted share capital, a statement said.

Under the deal, Firestone will pay 0.4657 new Firestone share for each Kopane share, valuing Kopane shares at 15.37 pence based on Tuesday's closing prices.

Kopane's shares were up 2.0% at 13 pence while Firestone shares shed 9.1% to 30 pence following the announcement yesterday.

A key reason for the takeover is so Firestone can get its hands on Kopane's Liqhobong project in Lesotho, it said.

"Liqhobong ... is considered by the Firestone directors to be one of the most attractive undeveloped kimberlites in the world," it said.

Firestone, which currently has operations in Botswana and South Africa, said in April it expected to become cash flow positive in September after launching its first mine, the BK11 operation in Botswana.