Paragon Diamonds

Gem play Paragon Diamonds (PRG) hopes for full 25,000-tonne bulk sampling results from Lempane in Lesotho in February.

The AIM-quoted company acquired Lempane, which is five km from the 30m-carat Liqhobong kimberlite pipes worth an estimated £1.5bn, in April, when entrepreneurial former chairman Frank Scolaro upped its stake in International Diamond Consultants to 98.5% for £12m in shares.

Now chaired by Belgian financier and mining sector player Luc Huyghebaert, Paragon says heavy rains have set back the full sampling results from December, but reports samples so far have not disappointed. The company, steered by experienced managing director Stephen Grimmer, cites recent indications suggesting the Lemphane pipe may contain 30m tonnes of kimberlite rock, with 19 white diamonds so far recovered.

Guernsey-based Paragon has so far recovered around 3,000 carats from the low-cost Koniomo alluvial diamond mine in Sierra Leone, including one 'special' stone of 34.1218 carats and others of 10.18, 10.46 and 9.86 carats, and has projects at Kaplamp, Kopje and Kabale in Zambia and Mabuki in Tanzania. If the sampling results at Lempane meet expectations, Huyghebaert suggests drilling could start there in the second quarter of next year.

If all goes well, analysts suggest it could cost around £62.5m to take Lempane into production. They argue Paragon, which had £3.6m cash at the end of June after losing £6.1m in the first half year, should be able to muster support and finance, as others have recently done, in the present state of the rough diamond market, provided the project is up to scratch.

Highlighted by Growth Company Investor at 22p a year ago, Paragon shares reached 38.5p, but have now eased back to 27.5p on sampling hold-ups. Those who do not mind the obvious sector and exploration risks, should hold on.