Why the Lucapa Diamond share price has rocketed up 31% today

The share price of Lucapa Diamond Ltd (ASX: LOM) jumped 31% to 42 cents today, after the miner announced the discovery of the world’s 27th biggest recorded diamond in the world.

It’s the biggest diamond ever discovered in Angola, Africa at 404 carats and the fourth 100+ carat diamond recovered from Lucapa’s Lulo mine since officially opening in August 2015.

Lulo diamond - source Lucapa Diamond ltd

Source: Lucapa Diamond Ltd

Lulo has already produced more than 60 large special diamonds (single diamonds weighing more than 10.8 carats) with mining operations beginning in January 2015. Underlining the quality and size of the diamonds, is the fact that the average price the company has received so far for its diamonds is A$1,910 per carat compared to the global average of roughly A$168 per carat.

Lucapa has a 40% interest in the Lulo project in partnership with the Angolan government’s diamond concessionary Endiama and private group Rosas & Petalas.

Endiama chairman Antonio Carlos Sumbula said, “We are delighted to have recovered the biggest diamond ever found in Angola – it is a significant day for our country, our diamond industry and for the Lulo Diamond Project. The Lulo diamond field is an example of what we would like to showcase to the world to encourage international investment in Angola’s diamond mining industry.

Lucapa CEO Stephen Wetherall added, “We have always emphasised the very special nature of the Lulo diamond field and this recovery – together with the other 100 carat-plus diamonds recovered this year alone – is further evidence of that.

Lucapa operates the Lulo mine and says its exploration program is progressing to find the kimberlite source of these diamonds. Diamonds are often found within kimberlite formations, and Lucapa is essentially finding loose diamonds while it searches for the kimberlite.

Foolish takeaway

One diamond (or several) does not a profitable miner make – just yet. And whether shareholders will see a return on their investment is also up for question. As such, Lucapa is a speculative investment, and should represent a very small portion of a well-diversified portfolio (if at all).

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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