Paragon Diamonds (LON:PRG) – BUY*: FY14 results
Market Cap: £15.3m; Current Price: 5.5p; Target Price: 12.9p
Results reflect refocusing on Lemphane
- LBIT in FY14 was £1m down from £1.3m in FY13 but ahead of our forecasts of £0.8m. LBT in FY14 was £10.3m significantly higher than £1.3m in FY13 and well ahead of our forecasts of £0.8m, due to a £9.2m impairment charge associated with the sale of the non-core Motete Dyke project.
- Net debt increased to £3.3m in FY14 from £2.4m in FY13 and ahead of our forecasts of £3m. Post period end, Paragon secured a MoU with International Triangle General Trading Limited, a Dubai based investment group, to provide $26m financing for the development of both Lemphane and Mothae. This is subject to contract and the conclusion of the acquisition of Mothae.
- Forecasts updated, rating and price target maintained.
NORTHLAND CAPITAL PARTNERS VIEW: Paragon Diamonds’ FY14 results reflect the transition the Company went through as it divested non-core assets and refocused its efforts on moving the Lemphane kimberlite pipe project towards Stage 1 production. Following these results, we have updated our forecasts for the Lemphane project lowering our FY15 mining expectations for Stage 1 to 150,000t from 310,000t and production expectations to 1,850cts from 4,903cts. We have also increased our 2017 mining expectations to 475,000t from 315,000t in FY17 and production expectations to 9,713cts from 6,660cts for Stage 1. We have not made any adjustments to our stage 2 production. We do not include the proposed acquisition of the Mothae Kimberlite project from Lucara for US$8.5m, as it remains subject to approval from the Government of Lesotho, a binding share purchase agreement, contracted albeit agreed funding and certain other regulatory approvals. This acquisition would add significant upside to our forecasts and price target.
Connemara Mining Company (LON:CON) – CORP: Inishowen update
Market Cap: £0.8m; Current Price: 1.375p
Target generated for follow up work
- Connemara Mining has completed its first phase of prospecting on the recently acquired Inishowen Block, located in Donegal, Ireland.
- Quartz vein material (float) with grades up to 15g/t Au has been traced to a possible proximal source.
- A follow up soil sampling programme to further refine targets has been completed.
NORTHLAND CAPITAL PARTNERS VIEW: A positive start to Connemara Mining Company’s initial exploration programme at Inishowen with a potential source identified for the quartz float and follow up soil sampling is now planned.
Rockwell Diamonds (TSE:RDI) – CORP: Q116 sales and production results
Market Cap: CAD$11.7m; Current Price:22c
From yesterday: Q116 reflects transition from existing operations to the Remhoogte/Holsloot Project
- Following the acquisition of the Remhoogte/Holsloot Project (28/05/2015) grades and volumes have been on plan for the first four weeks of operation.
- Rockwell is focusing on advancing its Lanyonvale and Wouterspan development projects and aims to replace the production from Saxendrift as it reaches the end of its economic life.
- Saxendrift Hill gravels were processed at the Saxendrift plant.
- Reduction in production at Niewejaarskraal following the suspension of operations.
- Forecasts, rating and price target remain under review.
NORTHLAND CAPITAL PARTNERS VIEW: Q116 reflects the refocusing of Rockwell Diamonds’ operations on its latest acquisition, the Remhoogte/Holsloot Project, and the rationalisation of its existing Middle Orange River operations. As a result, this quarter has seen a decline in production at both Saxendrift at Niewejaarskraal with a slight increase in production from Saxendrift Hill though this was processed at the Saxendrift plant. We expect production from Saxendrift to continue to decline to 130,000m3 per month (from 220,000m3). The Remhoogte/Holsloot Project only contributed a nominal three days of production to the first quarter and in the second quarter we expect to see a steady ramp up in production as it builds up to become the focus of Rockwell Diamonds’ Middle Orange River operations.