Stellar Diamonds (LON:STEL) may be set for significant share price catalysts in the near term, according to research by Northland Capital.
The broker, formerly known as Astaire Securities, had a meeting with Stellar’s management yesterday.
Stellar has a portfolio of projects in West Africa with the producing Mandala and Bomboko mines in Guinea, as well as the Droujba and Bouro kimberlites. In Sierra Leone it has the Tongo and Kono kimberlite projects.
Northland analyst Andrew McGeary believes the company presents significant potential. He rates the stock as a ‘buy’ and gives it a net present value of 18.9 pence per share.
The analyst highlighted that the meeting reaffirmed recent progress at Droujba and Tongo but also pointed to potentially significant newsflow for Tongo in Q1 2011.
“As we have come to expect, management’s forward programme is aggressive, aimed at delivering short terms results which, if positive, should provide a significant share price catalyst,” McGeary said.
“Following a challenging year ... the company can cite significant progress in restructuring the alluvial operations,
“With the appraisal of its two main kimberlite targets underway in earnest, we look to significant newsflow in Q1 next year from Tongo and from Droujba in Q2/Q3.”
Stellar is currently carrying out a bulk sampling programme at Tongo, and progress is believed to be gaining momentum.
McGeary is expecting the first piece of news as early as January or February.
“Results will relate to diamond content and value of Tongo Bulk sampling,” McGeary said.
“It is possible the company could reach a conclusion on whether to proceed to trial mining within Q2.”
Work is also underway at Droujba, and McGeary said that bulk sampling could start in H2 2011, after the current 3-6 month work programme.