Paragon Diamonds (LON:PRG) – BUY*: Mothae update
Market Cap: £15m; Current Price: 5.4p; Target Price: 12.9p
Paragon receives Government approval for Mothae acquisition
- Paragon Diamonds has now received formal approval from the Government of Lesotho for the acquisition of a 75% interest in the Mothae Kimberlite Project from Lucara Diamond Corporation.
- Paragon now intends to proceed with the finalisation and completion of the acquisition.
- Paragon is having discussions with several other parties in addition to ITGT who remains committed to investing.
- No change to forecasts, rating or price target.
NORTHLAND CAPITAL PARTNERS VIEW: Paragon Diamonds receiving approval from the Government of Lesotho is an important milestone for the Company as it begins its transition to a multi-asset diamond development company. The Company is now evaluating the best option for financing the acquisition whether that is through the existing offer of a debt financing package from ITGT or from another provider of finance.
Premier African Minerals (LON:PREM) – SPECULATIVE BUY*: Circum update
Market Cap: £17m; Current Price: 2.5p
Completion of DFS for Danakil
- Circum Minerals a private company that Premier African Minerals owns 2m shares in (c. 2%) has published a Definitive Feasibility Study at its Danakil Potash Project highlighting a post-tax NPV10 of US$2.1bn and an IRR of 22.4%, assuming prices of US$350/t MOP and US$580/t SOP.
- The project has a measured, indicated and inferred mineral resource estimate of 4.9bt at a grade of 18.1 KCl, with proven and probable reserves of 107.8mt of KCl equivalent.
- Expected production levels are 2mt of MOP and 750,000t of SOP per annum during Phase 1 that will have a mine life of 26 years. The potash will be extracted by solution mining and production is expected to commence in mid-2018.
- Development capex is estimated at US$2.58bn and total opex (FOB Djibouti) is estimated at US$83.89/t of MOP and US$114/t of SOP.
- Circum expects to receive a mining licence in H215.
- A scoping study is planned for 2016 to look at an expansion to 5mt per annum.
NORTHLAND CAPITAL PARTNERS VIEW: The completion of the definitive feasibility study from private Circum Minerals has positive implications for Premier African Minerals highlighting that the Company has an interest in what is clearly a major potash deposit at Dankail. This large mineral resource estimate of 4.9bt at a grade of 18.1KCl only comes from 40% of the concession area with seismic data indicating that the total amount of potash within the area could be 11 to 13bt, though the majority of this mineralisation is located at a greater depth than the existing resource. Circum is now commencing its search for a strategic development partner as it continues to refine its financing plan for the project.