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UPDATE - Diamondcorp unearths largest diamond yet from undeground drive at Lace

Published: 23:53 30 Apr 2015 AEST

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-- adds CEO, broker comment, share price --

Diamondcorp (LON:DCP) has unearthed a 19.83 carat diamond at Lace, the largest stone yet recovered from its underground development at the mine in South Africa.

The diamond was found during the current work to develop the high grade Upper K4 (UK4) block, which Diamondcorp expects to start mining in the second half of the year, four months ahead of plan.

This underground work has also delineated substantially more ore than original envisaged.

So far, a total of 3,321 metres (m) has been drilled underground in 21 holes, which has identified 2.6mln tonnes of K4 (high grade) kimberlite above 370m. That is an increase of more than 2mln tonnes over the original Lace geological model.

The UK4 drilling has also provided the volume data required for an updated resource statement, but grades from bulk testing are now needed to enable a new estimate for the mine.

Processing of kimberlite from the development tunnels in the UK4 Block is being carried out in individual batches of 1,000 tonnes.

These results, combined with previous micro-diamond analysis that has predicted grades from the K4 unit of at least 60 carats per hundred tonnes, will provide the grade data.

The bulk sampling is scheduled to be completed by the end of this quarter.

Drilling costs over the three months to March were R38,961 (£2,150) per metre, lower than the previous quarter but above budget due to more maintenance on the truck fleet than expected.

For this reason completion of the tunnels and conveyor belt is now the priority, said the company. 

The underground conveyor system is 91% fabricated and on site, 51% installed and on schedule for commissioning ahead of the mining ramp-up.

Detailed technical and legal due diligence for the US$7mln royalty financing facility with Acrux Resources is also nearing completion.

Paul Loudon, chief executive, told Proactive that historically the mine had produced diamonds of up to 100 carats in size but the discovery was opportune given it was just starting to process its first underground kimberlite.

Getting the conveyor belt up and running would also be a landmark for the mine, he said. 

"It will be a game changer. We will be able to pull over 8,000 tonnes a day compared to less than 1,000 at present with trucks, while the cost per metre comes right down."

Northland said it was an encouraging update with the large discovery demonstrating the potential for large and higher value stones still lies within the historic mine. 

The broker also estimates that the conveyor belt would reduce load and haul costs by R6,800/£370m, a significant cost saving. 

"With production imminent and the potential for larger stones Diamondcorp looks significantly undervalued compared to its peers," it concluded.

Panmure Gordon added that the highlight was the delineation a total of 2.6Mt of K4 above the 370m level.

Charles Stanley, meanwhile, raised its target price to 14p from 12p, adding that the resources upgrade is likely to provide a further catalyst this half year.

Shares rose slightly to 9.82p.

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