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DiamondCorp’s (LON:DCP) discovery of a new high grade block in the upper levels of the Lace kimberlite pipe is excellent news, according to broker Sanlam.
The new discovery could bring forward significant cash flows by six months, with a subsequent beneficial impact on financial forecasts, valuation and debt repayment schedule.
The high grade zone, called UK4 block, is easily accessible and estimated to contain upwards of 1Mt of high grade kimberlite.
“Based on a 250Ktpa conventional stoping operation (30ktpm) and 45cpht it could produce over 100,000 carats over a 12 month period, although we note that this kimberlite type is thought top grade 57cpht.”
The current plan is to start mining in first quarter calendar 2015 and be at the 30ktpm run rate by the third quarter of 2015.
DiamondCorp has already started tunneling into UK4 to gather material for a bulk test.
“This discovery will result in a new mine plan, which should deliver a significantly higher project value and a more comfortable debt repayment schedule,” added Sanlam, which left its target price of 15p unchanged until
a final development decision.
Alongside the announcement of the next discovery, DiamondCorp said it remains on track to start underground production from Lace (in South Africa) next year, with development on schedule and within budget.
In the three months to March, the tailings retreatment plant at Lace processed 149,957 tonnes compared to a budget target of 140,000 tonnes.
Diamond recoveries totalled 6,953 carats at a recovered grade of 4.64 carats per hundred tonnes (cpht) against a budget of 5.00 cpht.
DiamondCorp started to sell the diamonds recovered from the tailings from February, with ten sales planned this year.
Sales for the year to date totalled 7,505 carats for proceeds of $471,160. The average sales price of US$63 per carat is in line with forecasts, the company said.
At current prices, the tailings re-treatment is forecast to generate positive cashflow of R9 (£0.50) per tonne.
Demand for rough diamonds has also improved, it added, and prices have increased 5-10% since December.
Shares rose 5% to 6.3p.