Investors are starting to appreciate the potential of DiamondCorp’s (LON:DCP) Lace diamond mine in South Africa, but Northland sees more upside despite the recent 65% rise in the share price.
Potential share price catalysts are underground drilling on the bulge zone, currently underway, that should bring in additional tonnages and carats to increase the 13mcts resource and initial results from the tailings retreatment ooperation, also currently underway said the broker.
DiamondCorp has funding in place to develop the Lace Mine through a loan from Tiffany (£3.8m), issued convertible bonds (£4m) and an £18mln IDC facility, so dilution risk for equity holders is small.
After the interim results, Northland still expects DiamondCorp to generate £26mln from its tailings retreatment, prior to mine production commencing in 2015 and expected full production in 2017.
Northland has a ‘buy’ recommendation and target price of 12.5p.
Shares today were up 7% at 7.24p.