Shares in DiamondCorp (LON:DCP) ticked higher as progress on the development of its Lace mine in South Africa won plaudits from brokers.
The miner is in the middle of a development of a new block cave at the 47 level at Lace, located in Free State province in South Africa. At full capacity, Lace will produce up to 500,000 carats of diamonds a year.
In an update, DiamondCorp (DCP) said it had received the final US$3mln loan advance from Tiffany subsidiary Laurelton Diamonds.
The Tiffany loan completes the US$36m funding package for Lace's development and was a pre-requisite for the draw-down of a US$24mln loan from the IDC.
House broker SP Angel said the US$3mln would enable the development work to continue until the IDC loan kicks in later this year.
If development continues on course, kimberlite will be accessed in 12 months’ time 30 metres (m) above the current production level (470m), with first revenues expected from development ore in the second half of 2014.
At the mine itself, the boxcut that will provide the surface entrance to the twin conveyor belt and services declines for the life of the mine is on schedule for completion this quarter.
Blasting on a ventilation shaft to allow the development down to the 47 level (at 470 metres down) has also got underway.
The kimberlite at Lace is open at depth, added DiamondCorp, and also contains a significant bulge between 250m and 360m with the potential to add additional tonnage and diamonds not currently included in the resource statement.
An underground diamond drill rig has been ordered with the definition of this bulge "a priority" said the company.
This drilling of the bulge area will give more insight into the resource, which currently has an indicated and inferred resource of 33.1mln tonnes (Mt) at 40.1 carats per hundred tonnes, giving them 13.4 mln carats down to 855m, added SP Angel.
“All in all this is a good update” said the broker, which has a target price on the shares of 23p based on a net present value on the project (74% attributable) to DCP shareholders and said the shares could double as the project advances.
Another broker, Shore Capital, added that DiamondCorp is already unusual amongst junior diamond miners in that its flagship project (the 47 level block cave) is essentially fully-funded.
The peak funding requirement should be covered by the funding already in place, while the costs of establishing the block cave thereafter are expected to be offset by revenues from diamonds recovered during development.
Shore notes that according to DiamondCorp, the c£18mln invested in the 1.2Mt per annum plant and underground development at Lace as of January 2013 was worth 6.6p/share – more than the current share price.
Shares rose 5% to 5p.