The London brokerage Panmure Gordon & Co has the coverage to the working in Angola diamond producerLucapa Diamond Company (WKN A0M6U8 / ASX LOM) with the "buy" rating and received a target price of 0.39 AUD. And the potential of running Kimberlitexploration is it not even considered ...
Panmure considered Lucapas two-pronged strategy - the alluvial diamond production with the already cash is generated and the Kimberlitexploration, with the source of such diamonds mined to be found - as "unique".
And Panmures renowned diamond analyst Kieron Hodgson states in its report that the cash from the sale of alluvial diamond reducing the need for capital and the resulting dilution, which enables it to investors, to review increases due to the discovery of exceptional diamonds - such as the 404 , 2 Karäters, sell the Lucapa for USD 16 million was - to benefit.
The Lucapa management have identified a clear path to create value for its shareholders by put the proceeds from the promotion of alluvial diamonds in a highly prospective Kimberlitexplorationsprogramm in the same area.
The Panmure analyst also pointed out that Lucapa have now a total of 12,125 carats found 115 so-called "special diamonds" (diamonds larger than 10.8 carats) on the Lulo project in Angola. Thus, the company had achieved revenues of more than $ 38 million.
Hodgson also stated that the most important exploration target L259 directly under the mining area block 8 and adjacent to Block 6 are where Lucapa've found since August last year alone more than 70 special diamonds.
Panmure has as stated a target price of 39 Australian cents for Lucapa called but explicitly points to the additional upside potential. The current target price is based on a long-term price forecast for diamonds, estimates on exchange rates, the full dilution due to outstanding options and the extremely conservative valuation of alluvial diamond projects, so Hodgson continued.
We see at least 30% upside to the baseline scenario of 98.9 million AUD, supposing the baseline scenario of management to production, an average salary of the resource, which agree with the resource estimate and an average production value of 2,000 USD per carat.Thus, as Panmure further Lucapa would generate AUD 130 million or 47 cents per share in value.
In addition, the analyst continued, currently cheap to the Kimberlitexplorationsprogramm still no value. So should the upcoming drilling program prove successful, therefore resulting a "significant investment opportunity."
LOM Price at posting:
34.5¢ Sentiment: Buy Disclosure: Held
