News

July 02, 2009

Diamondcorp Looks To The Longer Term Upside, As Short Term Production Targets Slip Away

By Alastair Ford

The market wasn’t exactly thrilled by the most recent operational update from Diamondcorp, the Aim-traded junior that’s re-opening the old Lace kimberlite mine in South Africa. To say it was nonplussed would be an over-exaggeration too. Downright depressed is perhaps closer to the mark, given that traders’ immediate response was to wipe out around a third of the company’s value and drive the shares down to a lowly 20.25p. It’s not that long ago that Diamondcorp’s shares were trading at over 100p, but that was before the market mayhem of late 2008. In the wake of the severe hit to the diamond market that follwed, Diamondcorp's shares tumbled. Now it turns out that much of the rock that Diamondcorp was hoping to mine short-term has already been mined out. And the shares have tumbled further. Previous production from tailings had already been curtailed some time ago as uneconomic in the new economic climate. All of which left markets wondering just exactly where any immediate value in Diamondcorp lies, and Diamondcorp scrabbling around looking for new money to tide it over.

So it was interesting to see the commentary that issued forth from broker Fairfax following the announcement, given that it focused much more on the positive elements in the operational update from Diamondcorp, and took a much more long-term view. Fairfax shares the disappointment occasioned by the discovery from newly unearthed historic data that much of the kimberlite rock down to the 240 metre level has been mined out. Production will now run at 1,000 tonnes per day, far lower than...