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DiamondCorp plc is an emerging diamond producer focused on maximising shareholder value through the development of high margin diamond production assets. The company is incorporated in the UK and the highly prospective diamondiferous regions of South Africa and Botswana are its chosen areas of operation.
DiamondCorp shares should rise once IDC funding is finalised - analystsJune 13 2012, 11:29am
There has been more bullish broker comment on DiamondCorp (LON:DCP) following yesterday’s operational update on its flagship Lace mine in South Africa, when it reported that diamond recoveries have been well ahead of expectations.
Particular focus is on the project finance from the Industrial Development Corporation of South Africa (IDC) which agreed a funding term sheet with the company last month.
The IDC agreed to grant DiamondCorp’s 74 per cent-owned subsidiary Lace Diamond Mines a loan of 280 million Rand, approximately US$33.6 million, subject to due diligence.
In reaction to yesterday’s update, Fairfax analyst John Meyer had already said he believes there should be considerable upside to the current share price level once the loan agreement is finalised.
The funding, expected to become available early in the third quarter, will enable the company to rapidly restart underground development at Lace.
Ocean Equities analyst Christopher Welch said in a note today that while the update was positive, tailings production at the mine is a side show to the main event, and that he eagerly awaits news of the funding deal’s completion.
“This deal will bring the Lace mine back into production with minimal dilution to DiamondCorp shareholders, making DiamondCorp an enticing investment opportunity while diamond demand appears comparatively robust compared to the overall commodity market,” said Welch.
Over at Northland Capital, Dr Ryan Long said he believes that Lace is likely to become one of the most significant diamond operations to be developed in the next 10 years.
He pointed to the mine’s total resource of 13 million carats and that it is expected to generate US$77 million in revenue from the production 0.5 mcts during its first year of full production.
“We maintain our ‘buy’ rating and price target of 15 pence,” analyst Long said.
Fairfax’s Meyer currently also has a ‘buy’ recommendation with a price target of 22 pence.
DiamondCorp shares were last trading at 4.88 pence.