City broker Daniel Stewart believes Stellar Diamonds (LON:STEL) is now “considerably de-risked” after the company outlined an asset-enhancing strategy funded by a £2 million placing in May.
Stellar Diamonds’ key projects, located in the West African Diamond Fields, are the Droujba Kimberlite Pipe in Guinea and the Tongo Fissure in Sierra Leone.
In April, Stellar said its maiden resource estimate for Droujba was 2.47 million carats in the inferred category, with a grade of 70 carats per hundred tonnes.
The £2 million, raised through a three pence per share placing, will enable Stellar to target an additional 1.5 million carats at Droujba, and more than 1.1 million carats at Tongo.
DS said the “aggressive” exploration programme over the next 12 months will create value through increasing Stellar's resource base.
On the back of the plans the broker has upgraded the value of Stellar's shares with the target price rising to 27 pence from 21 pence.
Currently Stellar’s Kono Project licenses are under dispute with the Sierra Leone Ministry of Mines but DS added that the value upgrade of the assets offsets the current loss of the Kono permits.
“High level discussions are on-going with the Government of Sierra Leone to resolve this impasse and we are confident that the licence will be restored to the rightful holder, Stellar Diamonds,” added DS..
Daniel Stewart said it maintains a ‘buy’ recommendation.
On AIM the shares currently trade at 3 pence per share.