DiamondCorp’s (LON:DCP) progress to date towards starting underground production at the historic Lace mine in South Africa has been lauded by City brokers.
Their comments followed an update from DCP earlier, which revealed the proceedings had been slowed slightly by last autumn’s strike by mineworkers.
However, the operation will be up and running early in the second half - a full four months ahead of the original schedule.
“Despite the challenges from the strike action, the outlook for DiamondCorp is improving with productivity gains and that production will start well ahead of the original plan,” said broker Investec.
Those generally supportive comments were echoed by broker Sanlam, while resources boutique SP Angel applauded the firm’s move to re-run its valuation model for Lace.
Panmure Gordon’s Alison Turner repeated her ‘buy’ on the stock and her 19p valuation (current share price 7.3p)
“We remain positive on the outlook for DiamondCorp and see the bulk sample results in in the second quarter and first production in the third quarter as key positive catalysts for the stock,” she said in a note to clients.
Earlier, DiamondCorp told investors the six-week Association of Mineworkers and Construction Union strike in October and November slowed progress by a “few weeks”.
It means operations will commence in the second half of this year rather than the end of the first half.
DiamondCorp said productivity has improved 15% compared with the period before the strike, although mine development costs are currently around 8% ahead of forecast.
“Overall, mine development expenditure remains close to budget,” it added.
In a comprehensive update on progress, the firm told investors the underground conveyor serving the Upper K4 Block is 80% fabricated and 30% installed, and there is sufficient water for all of this year’s production.
Underground core drilling, meanwhile, continues to intercept high-grade kimberlite above 365 metres that will be bulk tested for inclusion in an updated resource statement planned for early in the second half.
Finally, diamond recoveries from Lace’s tailings totalled 18,354 carats in 2014 at a grade of almost six carats per hundred tonnes – well ahead of the forecast five carats. It sold 21,700 carats at US$63 a carat, which was slightly higher than expected.