After a strong update in early November, it’s clear that BlueRock Diamonds (LON: BRD) is once again in a powerful position.

While the diamond miner has faced obstacles during its journey including a recent short period of closure, it is now achieving record production thanks to a majorly expanded plant.

It’s an opportunity that seems to have escaped the notice of the wider market, likely due to the Covid-caused supply chain issues that initially slowed plant expansion and suppressed the firm’s share price.

But with strong demand for diamonds, and BlueRock on track to hit its production target, the future is sparkling for the business.

Here, we speak with executive chair Mike Houston about the latest news and the diamond market’s rapid recovery.

Diamond market quickly returns to pre-Covid levels in 2021

The pandemic caused upheaval in the diamond market, but prices have made a rapid recovery in 2021.

As Houston says:

“I think it’s a combination of a variety of things that seems to be keeping the market fairly buoyant at this stage. And because there’s a little bit of tightness on the supply side, prices are holding up.

“We are seeing an average of about $400, $420 per carat for the year, and that’s pretty similar to what we did in 2019 pre-Covid. It seems the market in balance and, for certain diamond sizes, very strong at this stage.”

This recovery could mean great things for BlueRock, which has seen a rapid increase in production thanks to expanding the plant at its Kareevlei Diamond Mine, located in South Africa’s Kimberley region.

Houston explains that the original plant was built on a temporary, small-scale basis. The company recognised the need to expand and benefit from economies of scale – starting to put plans together in late 2019. Initially, the plan was to expand the then 350,000 tonnes per annum plant to 750,000 but this was upped to 1 million tonnes in mid-2020.

The company is now completing the final stages of the plant expansion, having added and recently started feeding ore to the second line of the new plant enabling it to ramp up to full production by the end of the month.

Plant expansion delays spell opportunity for investors

Unfortunately, as with seemingly every company under the sun, the pandemic threw a spanner in the works, delaying BlueRock’s plans for Kareevlei.

“With the issues that have gone on in 2020, rolling through into early 2021, the project is has run much later than we’d hoped in terms of completion. And obviously with delays come costs,” says Houston.

But that delay presents an opportunity for investors to get in at an affordable price.

After all, amidst a worldwide pandemic, “the plant’s been completely built and the front end of it’s been running for five or six months”.

Not only that, but the company has already commissioned and begun running one of the two planned processing lines.

Despite all the challenges the firm has faced, the plant expansion is already delivering results, with BlueRock reporting record third-quarter production.

No wonder, then, that the company is on track to meet its annual guidance target for between 22,000 and 26,000 carats – with 19,362 carats under its belt already in early November.

Plus, Houston points out, “the market, not only through the year but through this last quarter, has remained very buoyant”.

Meanwhile, amid all the commotion surrounding the new plant, the firm has been unearthing some truly impressive high-carat diamonds.

In August, BlueRock unveiled the sale of a 58.6-carat diamond for $585,000, selling three large diamonds for a combined $1.1 million.

As Houston explains:

“The 58.6 carat stone was more than double the size of any other diamond that we've recovered to date. It set a different benchmark, proving that there are stones that size in the resource. It demonstrates that there’s significant value potential going forward, if you can get stones of this size and quality coming up.”

Covid-19 delays have kept the cost of shares low, meanwhile the company’s actual production is climbing higher than ever. At this very moment, and the firm is sitting on a soon-to-be million tonne plant and high-value precious stones. With all this in place, the chance to invest at this price point could prove very short indeed.

Author: Anna Farley

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