Stellar Diamonds (LON: STEL) is "on course to deliver substantial value to shareholders” said house broker Northland Capital Partners after an analyst visit to Stellar’s operations in Guinea and Sierra Leone.
Northland said that progress on the key Tongo and Droubja kimberlite projects is encouraging while there are some significant improvements from the Mandala alluvial operations.
At Tongo, underground stope mining will be pushed out to the first quarter of 2011, thereafter taking three to six months to complete. “However, we welcome this as a move that should improve confidence in the final location for the stope,” said Andrew McGeary, Northland’s analyst, who added that “slippage is also mitigated by a fuller programme of core drilling along strike” that could culminate in a resource statement in Q3 or Q4 2012.
McGeary witnessed at first hand the good gem quality diamonds processed at Tongo. “These will be evaluated for sales in the coming months and could provide a positive near-term share price catalyst,” he said.
Meanwhile, the broker said that the case for Droujba is improving after recent holes have boosted the firm’s modelling and a three-to-five million ton resource “seems entirely feasible”, suggesting a 2.5 to five million carat target. “Management also expects to delineate an inferred resource next year, which should trigger a rerating,” added McGeary.
Northland believes that Mandala could see a “reprieve” as the troubled alluvial operations there may have been reinvigorated by moving production to an area known as “Two carats flats” due to its high grade.
Nearer term, the broker added that positive share momentum may be driven by news on grade and diamond value and it maintains its price target range of 9.6 pence to 13.8 pence for the shares.
At 12:51 today Stella’s shares were unchanged at six pence each.