Analysts at Fairfax and Cenkos issued upbeat write-ups on DiamondCorp (LON:DCP, JSE:DMC) after its latest exploration success in Botswana.
This morning the company announced results which confirmed that the J-05 kimberlite is diamondiferous, prompting the decision to begin a mini-bulk sampling programme. It recovered 2 macro-diamonds and 49 micro-diamonds from a drilling programme at the J-05 kimberlite in Botswana.
DiamondCorp shares advance with a modest 2.5 percent rise in early trading, reaching an intraday high of 11 pence per share.
Fairfax analyst John Meyer said the exciting news shows that there is potential for significant further value in the company in addition to the Lace Diamond Mine.
“The company remains significantly undervalued and we look forward to progress updates at Lace and exploration results from PL/71 that should provide additional shareholder value,” Meyer said.
The analyst rates DiamondCorp as a ‘buy’ with a 17 pence per share valuation.
Similarly Cenkos Securities analyst Will Dymott also has a bullish view on DiamondCorp, with a ‘buy’ rating targeting 20 pence.
“DiamondCorp now has two diamondiferous kimberlites in PL/71 Botswana ... providing a pipeline of diamond exploration projects,” Dymott said.
The analyst emphasised that decline development at Lace is continuing on track and bulk sampling is due to begin during the first quarter of 2011.
“If the Lace bulk sample results are positive, Diamondcorp will have an operational plant, a decline completed to the production levels, and a capital requirement to repay £2.5m of debt and complete the final development of a 25 year diamond mine.”
At J-05 the latest samples were taken from ‘volcaniclastic’ and ‘coherent’ kimberlite intersections in the initial five drill holes. They yielded 51 diamonds, comprising two macro-diamonds and 49 micro-diamonds.
This makes J-05 the second diamondiferous kimberlite in the PL/71 licence area, and consequently the company said it has "sufficient encouragement" to start a mini-bulk sampling programme with large diameter drilling (LDD).
Macro-diamonds are larger diamonds, greater than 0.5 mm in diameter.
“We are very pleased that we now have two diamondiferous kimberlites in PL/71 for bulk testing in 2011,” chief executive Paul Loudon said.
“[We have] a pipeline of promising diamond exploration projects in Botswana in addition to our long-life Lace diamond mine development in South Africa.”
“Encouragingly, the presence of two macro-diamonds suggests the possibility of a coarse stone size distribution,” the company said.
Subsequent drilling of three angled boreholes at J-05 has enhanced the company’s understanding of the project.
They have shown J-05 to be an elongated kimberlite that narrows to the east and widens to the west.
Based on drilling to date the kimberlite has an estimated surface area of approximately 1.5 hectares.
DiamondCorp is currently earning into a 77.5 percent stake in the license.
It is currently finalising its planning of the LDD programme. The cost of the programme will be covered by a fundraising in the first half of 2011.