Lucara Diamond Company Botswana’s full impact of the COVID-19 pandemic on the company’s operations and production outlook for 2020 remains uncertain.
The market for diamonds and luxury products has suffered in line with many other businesses as a result of COVID-19. Demand for polished continues to be weak, and rough diamond transactions have slowed or even stopped for many producers.
Although Karowe continues to operate safely and at full production, the company has suspended its 2020 guidance until further notice.
In an interview with Sunday Standard, Lucara Botswana Managing Director (MD)Naseem Lahri , said as a result of international travel restrictions relating to COVID-19, Lucara’s second quarter tender, scheduled in Botswana, was postponed, adding that the government of Botswana has temporarily granted Lucara permission to hold diamond sales in Antwerp, Belgium, as required.
After being declared an essential service by the government of Botswana, Lucara implemented a crisis management strategy to protect the health and well-being of its employees and to protect the financial well-being of the business.
“Lucara is focused on cost management and capital discipline through this period of uncertainty. The company’s capital spending program for 2020 is now being re-scoped to focus on critical path elements, largely in support of our ongoing, underground expansion program,” said Lahri.
She further revealed that as the government of Botswana has granted Lucara the option of selling diamonds outside of Botswana to facilitate easier access for their customers, they have taken a good portion of their goods to Antwerp in anticipation of that market being one of the first to open.
Lahri stated that throughout this pandemic, the company has continued to sell diamonds through Clara, their secure digital sales platform. She said Clara presents a unique opportunity to purchase rough diamonds without the requirement to travel or view the goods, significantly reducing the time it takes for a rough diamond to get to market. She added that it also allows producers to generate cash flow on a more regular basis, and manufacturers to limit the amount of working capital tied up in inventory.
“In the short term, we predict a challenging price environment, longer-term, we are very optimistic. When we entered this crisis, diamonds had begun a strong recovery from the previous two-year period,” she said.
Lahri is of the view by declaring mining an essential service and enforcing strict safety guidelines, the government of Botswana has enabled Lucara to continue to operate safely and at full production during this pandemic. Furthermore, she believes that by granting the company permission to sell their diamonds in Antwerp, the government has provided Lucara the opportunity to generate revenue through the quickest avenue possible.
“Given the uncertainty in global markets resulting from COVID-19, the originally planned capital budget will be reduced until more certainty exists around our cash flow projections,” Lahri stated.
She also observed that most, if not all, retailers in China have now opened their doors, and consumer demand is picking up, however, the reopening of the U.S. retail market is essential. She said once fully opened after COVID-19, the US will undeniably continue to be the foundation of global end-consumer diamond jewelry demand, representing almost 50 percent of the global market.
