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Top diamond analyst tips big gains for Lucapa shares

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Special Report: A leading diamond analysts has reinforced his bullish view of Lucapa, saying the company was on track to become a “globally significant producer of large high-value diamonds”.

Panmure Gordon analyst Kieron Hodgson says he was “very pleased” with what he saw on a recent visit to Lucapa’s new Mothae mine in Lesotho and was retaining his buy recommendation and 50c price target, well up on its current price of ~19c.

“In our view, Mothae is an asset that is going to deliver significant value to Lucapa shareholders,” Hodgson said.

“The Mothae operation is being brought into full-scale production in a sensible, phased and economically prudent manner.

“We believe the propensity for large, high-value diamonds to be recovered from Mothae as well as the potential for a significant expansion of resources can complement the existing Lulo production perfectly.”

Hodgson says that at 19c a share, the market “materially undervalues the growth opportunities within the group’s portfolio of assets”.

His strong outlook for Lucapa is shared by Perth broker Euroz, which has just set a 61c price target following the site visit to Mothae.

“The simplicity and quality of the operation was remarkable, a direct reflection of the experience and calibre of management in designing and delivering the project on time,” Euroz analyst Michael Emery wrote.

“Plans for Phase 2 to double production to 2.2Mtpa by CY21 are being advanced, with original management estimates of a ~US$50m capex likely to reduce substantially with a number of savings already identified.

“Given the successful development and early higher tonnes throughput, management may well deliver an intermediary expansion stage which could be part of the update in Q2 CY19.”

Lucapa announed earlier this week that a 128-carat diamond had been recoveredfrom the Lulo alluvial mine in Angola.

It said the 128-carat diamond was the twelfth +100 carat diamond recovered from Lulo, continuing to underline the large-stone nature of the prolific Lulo diamond field.

Lucapa said the Lulo partners would probably include the 128-carat diamond and the recently-recovered 7.5-carat fancy purple pink diamond in the next international tender, along with the 75-carat Type IIa top-colour diamond recovered in Q4 2018 and other Specials recovered.