Gamble of the week: a diamond miner to keep your eye on
Diamond mining is always a risky investment, says Alex Williams. But this miner appears to have hit the motherlode.
Diamond exploration in Angola isabout as risky as it gets, but LucapaDiamond Co (Sydney: LOM) is worthkeeping an eye on. The company hasa 3,000 sq km concession in northeast Angola, a vast green landscapeof rivers and swamps. It has beenexploring in the country for more thanseven years, but in the last 18 monthsappears to have zoned in on themotherlode.
Lucapa is currently sifting throughgravel beds on the banks of the Cacuiloriver (this is known as alluvial mining),pumping gravel into a processing plantand pulling out diamonds. In February,Lucapa recovered a 404-caratdiamond, the largest ever found inAngola, which it promptly sold for$16m.
It has also found pink diamondsand Type IIA stones, which are therarest type of diamond found. In total,Lucapa has generated sales of morethan A$50m since it began alluvialproduction last year very respectablefor an exploration-stage company,valued at A$107m.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Lucapa doubled its mining rates lastyear and plans to double them again,but the chief executive, StephenWetherall, is looking for a much biggerprize: the source of the diamonds itself,known as a kimberlite pipe. Most of thediamonds Lucapa has found have beenrecovered from one area, "MiningBlock 8".
The diamonds have jaggededges and they have also been largeon average, suggesting they have nottravelled far from the original source.Lucapa has done gravity surveys,pointing to a large geological bodydirectly under Block 8. It has shippeda drill rig to Angola and plans to begindrilling immediately.
If the body is a kimberlite pipe, theupside could be enormous. Lucapa'sconcession is in the same postcode asCatoca, one of the biggest diamonddeposits ever found. But the risksare also hefty. Angola is a "highrisk"jurisdiction, says broker ParetoSecurities, after a civil war that endedin 2002.
Under Angolan law, Lucapaonly owns 40% of its mining licence,with renewals due at the end of May.Drilling, meanwhile, is always a lottery but Lucapa is hoping to win big.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
-
Investors pull money from UK equities as government warns of “painful” Budget
The government’s post-election honeymoon period has been short-lived, and investors are shying away from UK equities as a result
By Katie Williams Published
-
Top global fintech companies to invest in
One British fintech hogs the headlines, but there are two top performers in the US. We explain where you should put your money
By David C. Stevenson Published
-
These 2 stocks are set to soar
Tips The returns from these two aluminium and tin stocks could be spectacular when the commodity cycle turns says David J Stevenson.
By David J Stevenson Published
-
A lesson for investors from a ill-fated silver mine
Analysis Mining methods may have changed since the industry’s early days, but the business hasn’t – digging ore from the ground and selling it at a profit. The trouble is, says Dominic Frisby, the scams haven't changed either.
By Dominic Frisby Published
-
The natural resources industry is in a tight spot – which is bad news for the rest of us
Opinion The natural resources industry is in a bind. We need it to produce more energy and metals, but it has been starved of investment, plagued by supply chain issues, and hobbled by red tape. That’s bad news for everyone, says Dominic Frisby.
By Dominic Frisby Published
-
How to invest in the copper boom
Tips The price of copper has slipped recently. But that’s temporary – the long-term outlook is very bullish, says Dominic Frisby. Here, he explains the best ways to invest in copper.
By Dominic Frisby Published
-
Why investors should consider adding Glencore to their portfolios
Tips Commodities giant Glencore is well placed to capitalise on rising commodity prices and supply chain disruption, says Rupert Hargreaves. Here’s why you should consider buying Glencore shares.
By Rupert Hargreaves Published
-
How to invest in the multi-decade boom in industrial metals
Tips The price of key industrial metals has already begun to rise. The renewable energy transition will take them higher, says David Stevenson. Here's how to profit.
By David Stevenson Published
-
Avoid China’s stockmarket – here’s what to invest in instead
Opinion China’s stockmarket is not a good place for investors to be. But you can't just ignore the world's second-largest economy, says Dominic Frisby. Here, he picks an alternative China play.
By Dominic Frisby Published
-
6 gold funds to buy to add exposure to the yellow metal
Gold Gold funds are one of the best ways of adding gold to your portfolio. We pick some of the best gold and gold-mining funds.
By Rupert Hargreaves Last updated