Share price: 218c JSE code: DMC
SELL SHARES IN DIAMONDCORP, A SINGLE asset company, have been creeping steadily higher in the past year as its Lace diamond mine nears completion.
DiamondCorp, which is listed on both the JSE’s AltX and London’s Alternative Investment Market (AIM), is proposing, once the mine is in production, an “aggressive return of capital” for its shareholders. Its early cash flows dwarf the debt it plans to repay by the end of 2020.
CEO Paul Loudon is quite clear that DiamondCorp has looked for other assets. But, to date, none have matched the benchmark set by Lace, which will give it a 50% operating margin and a greater than 50% internal rate of return. This is pretty impressive for a bulk, underground diamond mining operation.
The longer term plan is to migrate to the main bourses in London and Johannesburg once the mine is in production later this year. Lace will be highly mechanised, with a mining and processing cost of about R200/tonne against anticipated revenue of R1,025/ tonnes based on achieving 60 carats per 100 tonnes mined and an average sales price of $150/carat.
Of course, there is risk in investing in the company. A single asset means if there are any prolonged stoppages at Lace, revenue and subsequently profit could take a knock with no other assets in the stable to generate income.
Still, this could eventually prove to be a great dividend play for investors with the stomach for a bit of risk.