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Paragon Diamonds (LON:PRG) has been awarded a mining licence for the Lemphane Kimberlite in Lesotho, which puts it on the road to production.
The authorities have agreed a two-stage plan which will see the group mine 540,000 tonnes for the first 24 months followed by 3mln tonnes for an initial open-pit life of a decade.
Stage-one of the process has been “considerably enlarged” from the original 200,000 tonnes, and Paragon says this will shorten the development path.
At the same time, negotiations with the Lesotho government over its participation in the project and a royalty are “ongoing”. Any deal is expected to be in-line with other licences awarded in the region, Paragon said.
The news from Lesotho has been significant of late. Gem Diamonds (LON:GEMD), which is mining Letseng, a kimberlite similar to Lemphane, unearthed a rare blue diamond, which sold for US$7.5mln, or a record US$603,000 a carat.
Chairman Martin Doyle said: "The award of the mining licence is a significant event for the company and is the starting gun for the road to production. I am excited at the prospect of Paragon Diamonds becoming part of the select club of diamond producers in Lesotho.
“Our work to date indicates that the Lemphane Kimberlite has a potential multi-billion dollar resource.
“I look forward to the prospect of reporting on the recovery of exceptional Gem Diamonds for which the region is famous, such as the 12.47-carat blue diamond recovered from Letseng.”
The shares, up 28% in the last three months, rose 12% in morning trade to 6.72p.
The company’s broker Sanlam is encouraged by progress. Analyst Charlie Long said: “Receiving a mining licence is a very important step forward for Paragon.
“It demonstrates support from the Lesotho government and should mean that permitting for stage-two development is a relatively straightforward process.
“Paragon will publish an update soon providing details of the stage-one plan; presumably this will include some numbers and a planned timeline to production.”