Paragon Diamonds shines bright on better-than-expected results for Mothae

Paragon Diamonds shines bright on better-than-expected results for Mothae

The Mothae diamond project is located in Lesotho, close to Paragon's Lemphane project and the much larger Letšeng mine, owned by Gem Diamonds. (Image courtesy of Lucara Diamonds)

Shares in Paragon Diamonds (LON:PRG) climbed almost 6% Tuesday after the Africa-focused miner said that two independent studies carried out on the Mothae kimberlite project in Lesotho yield better than expected results.

The stock was up 5.64% at 1:00 pm GMT after the company said the reports carried out on Mothae, which Paragon is in the process of acquiring, show results that "exceed management's initial expectations."

The studies suggest the project, which is only 5km from the world class Letšeng diamond mine in Lesotho, has the potential for average diamond values up to $2,000 per carat. They also indicated an improved strip ratio of less than 1:1, compared to 1.5:1 previously assumed, which would make the mine more profitable.

The reduction in the strip ratio is expected to result in cost savings of $1 to $2 per tonne of ore, compared to original estimates, the company said.

"Further cost reductions could result from using extensive X-ray transmission recovery technology to reduce water and power consumption and waste generation and at the same time more reliable recovery of large diamonds with reduced breakage," it added.

Paragon still requires funding to complete the acquisition of a 75% stake in the Mothae project from Canada’s Lucara Diamond (TSX:LUC), but said it is already in the process of securing funding for the nearby Lemphane project.

The company said it expects to announce financing-related news before the end of the month.