Tsodilo Resources Making Moves in Lucara Diamond's Backyard

Lucara Diamond (TSX:LUC) threw Botswana into focus for diamond investors last week when it announced the results of its first Exceptional Stone Tender of 2015. 
The company, whose assets include the Karowe diamond mine in Botswana and the Mothae diamond project in Lesotho, completed the tender on July 16, garnering gross revenues of US$68.71 million for 14 stones. At 1,674 carats, that equates to US$41,028 per carat.
William Lamb, the company’s president and CEO, was positive on the sale, commenting, “[t]his is another amazing result, demonstrating not just the sustainable quality of the diamonds being produced but also the robustness of the exceptional stone market. The sales values achieved for the two large stones demonstrates the quality of diamonds which the south lobe is producing.”
He’s not the only one who was happy with the results. Lucara was one of the five top gainers on the TSX last week, with its share price rising 5.39 percent to close at $2.15. It rose as high as $2.17 directly after the results of the tender were released.
Dundee Capital Markets was also likely pleased — the firm predicted last week that Lucara would generate US$50 million from the tender, and, as mentioned, the sale ended up bringing in nearly US$20 million more than that. Furthermore, according to Dundee, Lucara’s previous average selling price per carat was US$29,292; the average for last week’s tender was over US$10 million higher.
All of those numbers make it clear that Lucara has plenty to be glad about.
However, they’re also likely giving hope to Tsodilo Resources (TSXV:TSD), whose BK16 kimberlite pipe is located 28 kilometers east-northeast from Karowe. The exploration-stage company just updated and refined its internal geological model for BK-16, and it believes that its proximity to Karowe may be beneficial.
Tsodilo said in a release last week that the new geological model will be an “integral tool” in evaluating BK-16. The previous model was “created from geophysical magnetic and gravity surveys as well as historical data,” and the new one adds data from 20 holes covering 3,662 meters.
Significantly, the new model highlights that BK-16 measures 5.9 hectares at surface, a “substantial increase” from the previous 3.5-hectare estimate. Tsodilo notes in its release that when exploration was being undertaken at Karowe, “[a] similar increase in surface size was found.”
Of course, Tsodilo still has a lot of work left to do at BK-16. As yet, no diamond valuation has been complete for the kimberlite, and that’s likely a fair ways off. The company’s next step at BK-16 will be to complete a 24-inch, large-diameter drill program in order to define diamond grades at the different kimberlite phases. In all, Tsodilo expects to extract about 2,000 tonnes from the holes; it will then treat the material at its Mobile DMS plant in Letlhakane.
All that said, it’s worth noting that John Kaiser of Kaiser Research is already a fan of Tsodilo. Though he likes the company in large part because of its Xaudum copper project, also in Botswana, he believes BK-16 offers potential upside.
“…you have a plodding feasibility demonstration story in the background to which the market is assigning the main value,” he told the Investing News Network earlier this year, adding that if BK-16 ultimately turns out to be as promising as Tsodilo hopes, investors will “get the upside on [the] discovery for free.”
Though the story at BK-16 is still uncertain, it certainly seems that Tsodilo will be an interesting stock to watch moving forward. At close of day Tuesday, the company’s share price was sitting at $0.80. Year-to-date it’s down 23.81 percent.
 
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 
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