21st to 25th of july, page-19

Old story and im sure sediment has changed. Not sure if it has been posted before

CANACCORD WEEKLY – 2 JUNE

Posted on June 2, 2014 by canaccord_admin

An exciting diamond story that can beat the malaise

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There has been nothing of note this week to change my expectations for a quite couple of months ahead. In markets where volatility frequently dominates, this boring time of the year is usually quite predictable.

The end of year tax selling always provides buying opportunities, though surprisingly few people have the inclination to take advantage of the selling as they fail to recognise what it is. Yes, there is no urgency to buy most stocks now, but isn’t that the best time to buy ahead of the pack?

There will always be one or two stocks that stand out from the crowd for reasons of their own. One such stock is Lucapa Diamond Company (LOM), which we have previously mentioned as an exiciting diamond producer and explorer about to make its mark.

30 INTO 1 CONSOLIDATION COMPLETED

This week we saw Lucapa Diamonds (LOM) go ex-reconstruction on a 30:1 ratio, taking the shares from 0.7¢ to 20¢. With over 4 billion shares on issue the previous capital structure was punitively unwieldy. The share price was caught in a trap where traders would buy at 0.6¢ and immediately put them on offer at 0.7¢, to get a place in the queue to lock in a 17% trading profit. Each tick in the share price below 1¢ is too great. The objectives of day traders overwhelm those of value seeking investors.

Everyone fears that a consolidation will lead to the destruction of shareholder value, with the higher price post construction just providing a higher level from which to fall. Sometimes that may be the case, where a company has a dim future, but it is a different situation with Lucapa. Recently cashed up following a $5.5m raising, the Company is set to take advantage of the dry season with continuing alluvial diamond production from the recently commission DMS recovery plant. Additionally, it is ramping up the exploration for hard rock diamonds in the kimberlite pipes that have been previously identified but not assessed for diamonds.

The style of the alluvial deposits suggests that the diamonds in these terraces have not travelled very far. In fact, there is a 220 ha kimberlite pipe beneath the alluvials that imply that this may be the source of the diamonds. It is simple logic to say that the alluvials were formed from erosion of the crater of the kimberlite. There is a chance that they came from a different pipe, but we will know for sure once the kimberlite and its many intrusive events have been properly tested. A positive outcome would dramatically transform Lucapa, especially if the grade and quality of diamonds recovered match those from the alluvial.



LOYALTY OPTION COMING UP

Apart from the excellent prospects for the Company’s operations, Lucapa has used the flexibility of the tighter capital structure to give something back to shareholders. Next month they will receive entitlement to a 1 for 2 issue of options at a nominal price of 0.1¢ per option. There is a strong bonus component to the options given that they are selling in the market at better than 5¢.



LICENCES RENEWAL BOOSTS SHARE PRICE

On Friday, the share price jumped 30% on the news that the alluvial and hard rock exploration licences had been renewed for a period of two years, thereby removing an element of uncertainty. The Company is now able to process bulk samples of the kimberlite material through the DMS plant already on site, recovering diamonds from the alluvial deposits. Positive results could have a significant effect on the share price


GLTA