It's a highly exciting time for DiamondCorp (LON:DCP) as it stands on the brink of moving from developer to commercial producer at its flagship Lace mine in South Africa.
The firm's steady but impressive progress over the last few years to get to this point should not go unnoted, with first commerical production from underground mining at the site in Free State Province now earmarked for the first half of 2015.
What's more, that is six months ahead of what was previously scheduled, thanks to the discovery of a high grade underground block, dubbed UK4, which studies have shown could achieve steady state production of 30,000 tonnes by the second quarter next year.
Panmure Gordon sees 2015 as "highly exciting" for the company and rates the shares a 'buy'.
"Accessing this block not only has the potential to add over a year to the Lace mine life, but provides a more rapid ramp-up of commercial production helping to smooth "potential lumpiness" at the start of the 47L block cave," the broker said in a note to clients. The current mine life for Lace is 25years.
"The cost of development of approximately R75m will be financed from existing facilities with some of the 47L development rescheduled," added the broker.
The firm is already producing and selling carats from tailings and this will continue while the underground development takes place, mainly so the processing plant can be kept running to in readiness for fresh ore.
Broker Northland Capital points out that it has already factored in the the step up in "run-of mine" production when the Upper K4 block gets going.
It said this production should generate an operating profit at Lace of around US$4.5mln in 2015 as well as credit to capex of $13.1mln.
Analyst Ryan Long said this growth would be expected to continue into full year 2016 and 2017, with an operating profit at the mine of around US$13.9mln in 2016.
DiamondCorp is a "very attractively priced development story", says the analyst, rating the stock a 'buy' with a punchy price target of 11p (current price 7.25p).
Previously, analysts have also pointed to the earlier cash flows from UK4, which will ensure the firm's debt payments are comfortably covered and improve the project's overall value.
Since DiamondCorp is in pre-production, today's half year numbers provided little insight into progress at the main Lace site, though did show a reduction in the firm's operating expenses to £870,000 compared to £1.69mln last year as the firm has reduced admin costs.
From the tailings, carats recovered totalling 13,055 in the first half at an average grade of 5.78 carats per hundred tonnes – which was ahead of forecasts of around 5 carats.
Notably, after the period end (June 30), excitingly a 15.2 carat white octahedral diamond was recovered - the largest gem found since tailings reprocessing began six years ago.
This all augurs well for future production from Lace at a time when there is strength in the rough diamond market and commentators expect prices to go higher next year.
Increased demand is being boosted by improved credit in India - the world's biggest polishing market and increased income wealth in China.
DiamondCorp shares are up 1.75% on Thursday to 7.25p.