Why the Lucapa Diamond (ASX:LOM) share price leapt on open today

The Lucapa Diamond share price is gaining in morning trade, up 2%. We take a look at the ASX diamond share’s latest resource announcement.

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The Lucapa Diamond Co Ltd (ASX: LOM) share price is on the rise this morning. In early morning trade, shares were exchanging hands for 66 cents, up 1.5%. At the time of writings, shares have retreated slightly, trading at 65 cents, down 1.5%.

The ASX diamond producer has interests in the Lulo diamond mine in Angola and the Mothae diamond mine in Lesotho. This morning, Lucapa announced a resource upgrade for its Lulo mine.

What did Lucapa Diamond report on its Lulo diamond resources?

Lucapa’s share price is moving higher in morning trade. This comes after the company reported an increase in the JORC Classified Inferred Alluvial Diamond Resource at its Lulo mine.

Lucapa’s partners in Sociedade Mineira Do Lulo (SML) are Empresa Nacional de Diamantes E.P. and Rosas & Petalas.

A new estimate has been conducted by external consultants Z Star Mineral Resource Consultants (Pty) Ltd. According to the estimate, there is a 35% increase in the Lulo diamond resource carats. Additionally, in-situ alluvial resource carats increased to approximately 136,000, up from just over the 100,000-carat resource estimate on 31 December 2019.

The company reported a modelled average diamond value of US$1,440 (AU$1,870) per carat.

The increased resource estimate comes following the exploration program. This program included some 4,800 auger drill holes and a 770-hole pitting program. The increase comes after accounting for mining depletion of approximately 23,600 carats during 2020. The new resource estimate works out to at least 5 years throughput at the current mining rates.

Management commentary

Commenting on the resource upgrade, Lucapa’s managing director Stephen Wetherall said:

The increases in the Lulo Diamond Resource over the last few years is a direct result of disciplined investment in the alluvial exploration and delineation programs by SML. The 35% increase in carats to ~136,000 carats is a new record for carats in the Lulo Diamond Resource notwithstanding six years of mining depletion. This year’s update too highlights the valuable contribution of the newly delineated leziria areas which have provided a stream of top-quality recoveries.

Lucapa said that, to date, “112,000 carats of diamonds have been recovered and sold at Lulo for a total US$200 million at an average price of US$1,790/ carat”. In addition, the company also reported that following a decline during the COVID-19 outbreak, diamond prices have returned to pre-pandemic levels.

Share price snapshot

It’s been a bumpy 12 months for Lucapa Diamond shares, currently down 16% since this time last year. By comparison, the All Ordinaries Index (ASX: XAO) is up 54% in that same time period.

Year-to-date the Lucapa Diamond share price is up 12%.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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