Shares in DiamondCorp (LON:DCP) spiked almost 10 per cent after an independent assessment endorsed its plans for the Lace diamond mine in South Africa.
The engineering report compiled by outside consultants SRK found the company’s proposed block cave scheme was the most “appropriate” way of mining Lace.
“The SRK report mainly endorses the mine plan set out by DiamondCorp – they believe the block caving method being chosen is the cheapest and most efficient way to mine the Lace Mine,” said City broker Fairfax.
The update pushed the DCP share price 0.39 pence higher to 5.52 pence. It hit a session high of 5.75 pence.
As well as providing third-party validation of the project, the report will help progress negotiations with providers of project finance, DiamondCorp said.
The capital and operating costs of Lace, which is expected to produce 500,000 carats a year, are put at US$50 million.
Chief executive Paul Loudon said: "Our development plan has now been validated by SRK which paves the way for discussions with a range of potential project financiers to progress.
"The key driver for management in these discussions will be to find the optimum financing method which is the least dilutive for existing shareholders."
The Lace diamond mine is located 25 kilometres northwest of the town of Kroonstad within the Free State Province of South Africa and operated from 1896 to 1931.
According to mine records, it produced 700,000 carats from 4.5 million tonnes of kimberlite at a recovered grade of 16 carats per hundred tonnes.
The production was reported to be high quality, white diamonds, with the biggest stones recorded being 122 and 86 carats.
The kimberlite was mined by open pit to 100 metres, then by underground methods to 240 metres. De Beers acquired it in 1939 and promptly shut the operation.
Lace was acquired by DiamondCorp and its black economic empowerment partners, Shanduka Resources and Sphere Investments, in 2006.
Since then, the companies have invested heavily in their bid to restart full-scale mining.
Fairfax said in its note today: “We visited the Lace Mine in February and were impressed by the condition of the mine site, the quality of the development undertaken so far and the carefully thought out approach being taken by the management team.
“The dense media separation processing plant has been well designed and the modifications being proposed by SRK at this stage will give the company the opportunity to work out any stresses on the plant well ahead of getting to full production.
“This is a project well worth supporting.”