Sunday, July 3, 2022

Lucara Diamond expects healthy sales in 2014

Lucara Diamond Corp, a Canadian company which operates an open-pit Karowe diamond mine in northern Botswana, is confident that 2014 will be a good year.

“Production costs in 2014 are forecast to be USD 179 per carat and are significantly below the current average sales price of USD 412/ct achieved in 2013. The forecasts of costs and sales are robust, and support the Mineral Reserve estimates and the cash flow analysis in this report,” says the company in its latest technical report.

The report says that the occurrence of large high-value stones adds to the robust economic viability of the Karowe mine, since high value stones tend to be less negatively affected by downturns in the diamond market relative to smaller ones.

Karowe is 100 percent owned by Lucara through its 100 percent-owned subsidiary, Boteti Mining (Pty) Ltd.

The report says that carat production in 2013 totalled 438 717 ct. Gross revenues in 2014 are budgeted to be approximately USD 164 million, down USD16.5 million from what they were in 2013. In 2012, the year, that mining operations at Karowe started, gross revenues were USD 54.6 million. A royalty of 10 percent on actual sales of diamonds is levied by the Botswana government.

Karowe is based on the AK6 kimberlite pipe, which is part of the Orapa Kimberlite Field which includes at least 83 kimberlite bodies. The AK6 kimberlite was continuously held by De Beers or Debswana under a succession of prospecting licences from the time of its discovery in 1969, until the project was acquired by Lucara in 2008. As at December last year, the AK6 pipe was approximately 480 metres long in the north-south direction, and the pit was approximately 800 metres in the same direction.

The technical report says that more than 600,000 carats of diamond produced from AK6 have been sold up to November 2013.

“These sales have realised USD 230 million dollars of income at an average price of USD 365 per ct. A significant population of very high value diamonds is present in the AK6 diamond population, and these stones have been extracted from regular sales parcels for separate sales in ‘Large Stone Tenders’,” says the report, adding that large high-value diamonds (up to a maximum of USD 28,000 per ct, excluding rare blue stones with values of up to USD 470,000 per ct) were previously recovered and sold.

However, the latter were not present in sufficient quantities to justify extraction for separate sales, and did not impact materially on the average sales prices for the earlier parcels. Karowe gets its water from 16 wells that are situated around the periphery of the mine but as with every other business in Botswana and at a time that the mine plans to expand its plant, it may face serious power supply challenges. Electricity is supplied to the mine by the national grid serviced by the Botswana Power Corporation from a substation at Orapa.

“The power line has a maximum capacity of 10kVA. The currently maximum power draw of the mine is approximately 6.0 to 6.5 kVA of this capacity. Power requirements from the plant expansion will increase the maximum power draw by approximately 2.1 kVA, or approximately 80 percent of capacity,” the report says.

On the other hand, BPC has not been able to produce enough power due to its chronically malfunctioning Morupule Power B plant.

The update has been prepared to report revised Mineral Resource and Mineral Reserve estimates for the mine which is a requirement under Canadian law.


Read this week's paper