Paragon Diamonds’ (LON:PRG) new mine acquisition in Lesotho may be an even bigger gem than expected according to two new technical reports.
The studies, carried out by consultant MSA and based on 2013 work by owner Lucara Diamonds (TSX:LUC), pointed to a significant increase in the size of the diamonds present, which will boost potential revenues and its value over time.
MSA suggested there was also scope to reduce the amount of waste removed to a strip ratio of 1.1 from 1.5, which would reduce operating costs by US$1-2 per tonne.
Paragon cited indicated and inferred resources of 39mln tonnes of ore at 2.7 carats per hundred tonnes when it announced the acquisition of Mothae in May. The net present value was US$115mln – discounted at 12% over 13 years.
Stephen Grimmer, managing director, said: “It is clear that the combined SW+SC domains in particular represent a higher-value, relatively higher-grade resource, exceeding 25 Mt in total, with the potential for a significant percentage of carats present in large diamonds.”
Large Lesotho diamonds can achieve values of up to US$70,000/ct and Mothae itself achieved US$50,000+/ct for a large diamond in December 2011.
Mothae is only 5 km from the world class Letšeng diamond mine in Lesotho, which is situated within a cluster of kimberlites.
A 357 carat type IIa white diamond from Letseng was sold yesterday generating US$19.3mln (US$54,000 per carat) for mine owner Gem Diamonds (LON:GEMD).
Grimmer said the latest MSA reports had capped the upside at only US$11,000 per carat for the larger stones.
Paragon’s plan is to develop Mothae in tandem with its nearby kimberlite deposit at Lemphane.
It signed a binding deal to acquire Lucara’s 75% stake for US$8.5mln in August and has been putting together a package for the US$28mln required to cover that and get both mines up and running.
The company has received an offer of funding from Dubai-based International Triangle General Trading (ITCT) for both Lemphane and Mothae, but today confirmed talks over alternatives had made good progress.
Simon Retter, finance director, said: “Several funding options are in advanced stage negotiations, with due diligence now complete, and as previously announced it is possible that the company may seek ITGT to fund the downstream diamond operations in Dubai, with an alternative funder providing capital to initiate and accelerate mining at both Mothae and Lemphane.”