Are you looking for massive potential upside but, to get to it, you're willing to retain confidence in distant operations that take much longer and absorb much more cash than initially expected? Are you willing to live with the price of your shares fluctuating, over a twelve month period, from 1.38p to 18p? If so, then diamond group, Kopane Diamond Developments, currently mining in Lesotho, Africa may be one for you...
The current price (02 November 2009) is 14p which capitalizes the company at £31.3m, a mere fraction of its potential $2.6bn value if remaining exploration yields hit the spot within the main pipe development. [1] , But there's that little word ‘if’ - as with so many mining and exploration companies.
The shares hit 18p last month following a press release relating to a favourable mineral survey and a potential agreement with an unnamed mining group with the ‘technical, operational and financial ability to take the project to full scale production’. [2] This announcement made no mention of the possible terms of this agreement. Given KDD’s need for cash, it may be that the conditions extracted by the potential partner will not be all that favourable to KDD. As apparent confirmation, the shares fell back to their present level on news, in the past week, of the latest rights issue [3] – see below.
The Company
Formed in 2001, the Company’s diamond mine operations are centred on Liqhobong at the northern most edge of Lesotho, 120 kilometres north of the country’s capital Maseru and, usefully, probably the nearest point in Lesotho to Johannesburg which is 350 miles to the north of Liqhoborg and the acknowledged centre of the African diamond industry. [4]
The mineral rights and resources in Lesotho are actually owned by the Liqhobong Mining Development Company, in which KDD has 75% of the equity and the remaining 25% is held by the Government of Lesotho.
Extraction and consequent product revenue did not come through until the year ended 30 June 2006 and then in the nominal amount of £630,000 with not much more following during the next two years. Operating losses borne to 30 June 2008 were over £20m.
What does not appear to have helped KDD’s overall position has been the prospective mining for diamonds in Lahtojoki, Finland. The initial attractions of…
