DiamondCorp (LON:DCP) shares could nearly quadruple in value over the next 12 months.
That’s the view of City outfit Panmure Gordon, which slapped a 19p target price and ‘buy’ recommendation on the diamond group, valuing it at more than £50mln.
Analyst Troy O’Dwyer says there is potential for resource upside at the ‘Bulge’ section of its 74%-owned Lace diamond mine in South Africa, which is on track to start producing from 2015 and to reach full production from 2017.
Results from the ongoing drilling will form the basis for a resource upgrade and feasibility study that may see the Bulge included in the Lace mine plan, he adds.
The analyst values the mine, using a discounted cash flow analysis, at a net present value (NPV) of $316mln with an internal rate of return (IRR) of 40%, which provides the 19p target price.
A site visit to the mine in February showed O’Dwyer how “meticulous and precise” an operator the company is.
He said: “We see two factors that could be key to enable DiamondCorp to reach commercial production by H2 2015E within budget. Firstly, the onsite CEO, COO and CFO are expected to be instrumental in ensuring costs remain low, safety high and timelines are met.
“Secondly, the company’s ability to sure up a resource at the “Bulge” area of the main pipe.”