Dominion Diamond Stock Sparkles While Flying Under the Radar

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Dominion Diamond Corp. (NYSE:DDC) focuses on the mining and marketing of rough diamonds worldwide. The company operates through Diavik Diamond Mine, Ekati Diamond Mine, and Corporate segments. It holds 80 percent ownership interest in the Ekati group of mineral claims and a 40 percent ownership interest in the Diavik group of mineral claims, both located at Lac de Gras in Canada’s Northwest Territories.

The stock has been somewhat stuck for the last 18 months, down a few percentage points. This is interesting, because the stock is really cheap — it trades at only 2.5 times earnings. This is uncommon outside of stocks that are real estate investment trusts. Given that the average volume is only 250,000 shares traded per day, this one is flying under the radar. To decide if the stock is a buy, though, an analysis of the company’s recent milestones and performance is warranted.

It should be noted that the first quarter of fiscal 2015 marked the anniversary of the divestiture of the company’s luxury business and the acquisition of the Ekati Diamond Mine. The company is now focused on delivering enhanced value from its world-class diamond mines: an 80 percent interest in the Ekati Diamond Mine and a 40 percent interest in the Diavik Diamond Mine. The company is well funded and has a strong balance sheet.

During the first quarter, both the Ekati Diamond Mine and the Diavik Diamond Mine performed well. Production at both mines was substantially ahead of expectations. An improved plan has been developed for mining the Jay kimberlite, the largest diamondiferous resource in North America. A total of $163 million of capital expenditure remains to be spent on the Misery pushback before bringing the Misery Main Pipe, which at 4 carats per ton is one of the richest ore bodies in the world, into full production at the beginning of calendar 2016.