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Paragon's high-grade promise

The acquisition of a stake in a Lesotho mine could transform prospects for Paragon Diamonds
May 14, 2015

A Memorandum of Understanding for Paragon Diamonds (PRG) to buy the Mothae diamond mine from Canada's Lucara Diamond Corp could transform this Aim-traded miner into a significant supplier of investment grade diamonds to global markets and send the shares soaring.

IC TIP: Buy at 6p
Tip style
Speculative
Risk rating
High
Timescale
Short Term
Bull points
  • Prospect of near-term production
  • Improved ratio of investment grade stones
  • Proximity to successful Letseng mine
  • Initial debt funding in place
Bear points
  • Illiquid shares
  • Deal still subject to approvals

Paragon has agreed to buy a 75 per cent stake in the Mothae diamond mine in Lesotho from Lucara for $8.5m (£5.7m), as the latter miner has opted to focus on its flagship Karowe mine in Botswana. Mothae is adjacent to Gem Diamonds' (GEM) highly lucrative Letseng mine and Paragon's existing Lemphane project. Based on early appraisal work at Mothae has an indicated-and-inferred mineral resource estimated at 39m tonnes, to go with the 48m tonnes currently undergoing evaluation at Lemphane.

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