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Paragon Diamonds (LON:PRG) has gained access to a new kimberlite discovery near its Lemphane project in Lethotho.
This morning it announced that it was awarded a prospecting licence over a 23 square kilometre area that hosts the Motete kimberlite dyke. The license lets Paragon explore the area for at least two years.
The response among investors was rather muted. On AIM the shares edged slightly lower, dropping 0.5p each to trade at 27.5p a share.
Analysts however had a notably more upbeat response to the news. In a note to clients today City broker Fox Davies repeated a ‘buy’ recommendation on the stock, with a 34p a share price target.
“This is an exciting new discovery for Paragon,” said analyst Juan Alvarez.
“The company geologists who found the dyke discovered evidence of extensive artisanal mining, therefore suggesting that the dyke is diamondiferous, although this has not yet been backed up by systematic sampling.”
Alvarez added: “The dyke outcrops at surface and along the deeply incised walls of the Motete River, and therefore stripping ratios for any future mining or sampling programme should be minimal.
“The dyke is also located only 10 km from existing infrastructure and sampling equipment at Lemphane and therefore a small sampling programme on the dyke should be relatively easy to begin.”
Paragon said that an exploration team will be mobilised to the site before the end of this year.
The company said that the kimberlite dyke has been traced continuously over at least 1 kilometre. According to Paragon the kimberlite attains widths in excess of 2 metres, with an average widths exceeding 1 metre.
Motete is located about 10 kilometres north east of the company's flagship Lemphane kimberlite project, where it is currently carrying out a bulk sampling programme. Additionally it is around 23 kilometres from Gem Diamonds Letseng mine.
Paragon chairman Luc Huyghebaert said: "The conferring of a licence over such a substantial, continuous and accessible kimberlite dyke, with obvious apparent diamond potential presents the company with an opportunity to develop a fast-track diamond production operation, subject to determining an economic grade and value, and a viable resource.
“As such it is our intention to immediately commence a detailed evaluation of this kimberlite in the coming weeks and months."