DiamondCorp (LON:DCP) now has full funding in place to take its Lace mine through to full development, and broker SP Angel argues that there is significant value to be gained when the company reaches full production.
House broker SP Angel estimates a net present value of £60mln to DiamondCorp, 74% of which is attributable to shareholders.
One of the key attractions of the Lace Mine is an installed and operational 1.2mln tonnes per annum plant with 1.3mln tonnes of tailings treated to date through the plant, the broker asserts.
600,000 tonnes of kimberlite can be processed over the development period, generating revenues for the company; this is likely to come through towards the latter part of 2014, with full production ramping up in 2015, the broker notes.
“Interest and loan repayments on the total debt including the convertible are comfortably covered with operating cash flow of around £20mln a year at full production,” SP Angel calculates.
Development risks remain, but SP Angel believes the company has set out a detailed plan of works and it has faith in the competency of the management team.
The City broker rates DiamondCorp shares a ‘buy’ and has a target price of 23p.