Stellar Diamonds lifted by encouraging early results from Tongo kimberlite sampling

Shares in Stellar Diamonds PLC (LON:STEL) were lifted by news of encouraging initial diamond grades from bulk sampling at its 100 percent owned Tongo kimberlite project in eastern Sierra Leone.

The stock was trading up more than 4 percent in midday deals at 10 pence.

Broker Northland Capital published a note this morning, saying that, while it is important to bear in mind that only approximately 3-6 percent of processing is complete, this is “a promising start”.

The company recovered an in-situ kimberlite grade of 130 carats per hundred tons (cpht) from the first 69 tons processed during the commissioning of the Dense Media Separation (DMS) plant.  Of the 59.25 carats so far recovered from the bulk sample 53.46 carats, 90 percent, are classified as being of gem quality.

A total of 1,000 tons of sample has been collected to date from a 70 metre long section of the 2.5 kilometre long kimberlite Dyke 1. The first 1,000 tons have been batched into 5 samples to date.

The company expects higher combined diamond value for new samples and, separately, has had a previous Tongo diamond package re-valued at US$169 per carat, up 17 percent from a valuation of US$144/ct last May. “We reiterate the early stage of the programme, but if Tongo results continue to deliver along these lines the project could herald very attractive economics,” Northland said.

It is too early to draw firm conclusions, but results of this small sample are encouraging, the broker believes. Gem quality is high and the categorisation of stones is also encouraging.

“With the DMS plant up and running, the processing of the bulk sampling is underway in earnest and is likely to take around two months to complete, during which we except regular updates. It is too early to revisit our valuation at this stage, but if follow up results are consistent with those achieved here, Tongo’s economics could substantially improve,” Northland said.

“Stellar is increasingly a kimberlite play. While the alluvial production provides useful supporting cashflows, the advanced kimberlites projects are the key growth and value drivers,” it added.

Stellar has a portfolio of projects in West Africa. It also owns full rights over four high-grade kimberlites that are the focus of exploration and development.

In Sierra Leone at the Tongo project a bulk sampling programme is ongoing on one key kimberlite to assess the diamond grade and value.  At the Kono underground trial mine, bulk sampling has produced 4,200 carats as part of an economic evaluation exercise. In Guinea drilling is continuing on the diamondiferous Droujba kimberlite pipe and bulk sampling is being planned on the high grade Bouro kimberlite dyke, which is adjacent to Stellar's Mandala alluvial diamond mine.