Opinions
Peter Hodson
Lucara Diamond Corp
LUC-T
COMMENT
Jan 18, 2017
$3.010
Stock price when the opinion was issued
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BUY ON WEAKNESS
A diamond miner, and it seems like the pipe they are mining right now continues to produce giant diamonds. Thinks they will continue to execute. Has a steady cash flow from mining normal diamonds, and then, every once in a while, they find a monster diamond, which is going to do great things for their cash flow. You can probably expect special dividends occasionally. A little volatile, so you can trade around it.
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DON'T BUY
Good and bad. The CEO is great whom she knows. Most of their cash flows comes from a handful of large diamonds, but luckily they turn them up regularly. Diamond markets are spotty and there are wider fears of a global slowdown. Also, there are worries of fake diamonds out there. He doesn't understand the dynamics of the diamond market well enough to recommend this.
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The diamond business is really, really tough. It is hard to find a mine, and costs billions to develop it. For the sector, this is probably the best company you could buy. It has a nice dividend and a nice cash position. They paid a special dividend last year. There is the potential to find giant diamonds, which they already have. They’ve changed their production profile so that they can find giant diamonds. It is worth owning for the dividend and the special dividends along the way. Dividend yield of 2.1%.