Broker view
Diamondcorp PLC (LON:DCP) has raised exploration funding and working capital to the tune of £3.48 million, before expenses, in a placing of just under 26.8 million shares at the market price: 13 pence a share.
House broker Fairfax said the proceeds will enable the company to continue work and exploration at the Lace Diamond mine in South Africa and at the mini-bulk test on exploration in Botwswana. According to the broker, £1.5 million of the funds will be used for the mini-bulk test, including large diameter drilling of kimberlite exploration in Botswana, with the remainder of the funds being used for general working capital.
“The processing plant should now be processing kimberlite from the bulk sample [programme] to give a better indication as to the mine’s grade and economic value. We expect the company to update investors shortly on results from the extraction of the first part of this sample,” said Fairfax in a research note.
Bulk test results from the Lace mine are expected by the end of July.
"There were some big institutions involved wanting to get a toehold before the big financing at higher prices and pleasingly it has been done at the market price, with lots of unsatisfied demand," chief executive Paul Loudon told Proactive Investors.
Only last week, the group reported positive results of the cost review at Lace. The company achieved the main goal, which was keeping the operating costs to 105 rands per tonne and offsetting the anticipated increase in electricity tariffs.
With this main target met, the Lace mine could see its profit margins jump to over 70 percent if all goes to plan.
Loudon said last week: “The Lace mine has the potential to be a significant cash generator for DiamondCorp with more than 25 years of mine life. At current strong diamond prices, the initial minimum operating margin is expected to be a robust 46 percent, rising to very high levels if the diamond grade improves with depth as forecast in the geological model.”
About 400,000 tonnes of kimberlite is scheduled to be mined from stoping development in the first 17 months of mine development to November 2012, when full-scale commercial production is expected to be reached.
The 30,000 tonne bulk sample currently underway at Lace will determine the initial mining grade and carat value at the top of the first mining block. Mining of the first block of kimberlite is set to be undertaken at a rate of 4,000 tonnes per day.
In May, the new decline at Lace successfully accessed kimberlite at the -260 metre bulk testing level.
Since April last year, activities at Lace, which is located near Kroonstad 200 kilometres southwest of Johannesburg, have focused on completion of the 4.5 metres x 4.5 metres decline to access kimberlite resources below any areas stoped in the past.
At 10:39am today, DiamondCorp’s shares were up 3.6 percent at 13.6 pence each.