DiamondCorp (LON:DCP) is still "significantly undervalued", reckons City firm Northland, which issued a 'buy' note on the stock, following its 2014 results this week.
The South Africa-based miner is currently undertaking bulk sampling at its Lace mine, ahead of a ramp-up to full commercial production and sales of diamonds last year totalled 21,700 carats recovered from tailings at an average price of US$63 per carat generating revenues of US$1.36mln.
Losses for the year were £3.25mln, which was Northland noted, higher than the broker expected due to a £1.7mln fair value adjustment, relating to convertible bonds, which outweighed a sizeable reduction in corporate expenditure.
Northland analyst Dr Ryan Long noted this year will see maiden production from the Upper K4 kimberlite at Lace that is expected to commence in the second half of 2015.
"The extraction of diamonds during the ramp of production from the Upper K4 kimberlite is being treated as a credit to capex and not revenue," he said.
"As a result, our headline forecasts do not reflect the cash generative nature of the business with Lace generating US$5.8m to fund development capital expense."
The broker forecasts a loss before tax of £4.8mln in 2016 rising to a profit of £14.1mln in 2017.
Its target price has dropped to 16.4p from 17.7p - but this still represents hefty upside on the current price of 11.125p.