Sunday, July 3, 2022

Lucara reports strong Q1:2022 performance

Lucara Diamond Company has reported strong performance in the first quarter of the year, benefiting from the strong diamond market resurgence and the rise in diamond prices, the company said.

The diamond miner which operates the prolific Karowe mine in Boteti announced that it mined 0.8 million tonnes of ore in the first three months of the year and processed 0.7 million tonnes of ore in the same period, recovering 83,917 carats.

The revenue from the sale of the 80,295 carats brought in $67 million, up by 28  percent from the corresponding period last year. For the bottom line, the adjusted earnings before interest, taxes, depreciation and amortization (EBITA) was reported at $36 million, an increase of  62 percent from $22.2 million for the same period in 2021, attributed primarily to higher revenues. The net income for the quarter increased to $19.0 million from $3.4 million  in the first quarter of 2021.

The company said the exceptionally strong performance throughout 2021 was driven by higher diamond prices which were reflective of the impact of strong demand for both rough and polished diamonds, combined with supply constraints in certain size classes, with the strength continuing into the first quarter of this year.

“Lucara begins the year on a positive trajectory, having fully financed and significantly de-risked our growth plans for the underground expansion in 2021 and delivered another strong quarter of operating and financial results in the first quarter, reflecting solid performance at the mine combined with continued buoyancy in diamond prices,” said Lucara’s president and CEO Eira Thomas.

She added that preparation for main shaft sinking is well underway and anticipated to begin in the second quarter of the year. “Despite current geo-political challenges, Lucara remains optimistic about diamond prices as natural rough diamond supply constraints continue to manifest globally,” she said.

Current pricing trends have been impacted by uncertainty triggered by geopolitical events, including the conflict in Ukraine and the COVID-19 pandemic.

“We continue to observe healthy market fundamentals overall, and our longer-term outlook remains positive for diamond prices. The diamond price impact of sanctions on Russian diamond supply, which accounts for a significant portion of global reserves, cannot be predicted at this time,” said Thomas.

The Karowe underground mining project is expected to extend the mine life to at least 2040, with underground carat production predominantly from the highest value EM/PK(S) unit and is forecast to contribute approximately $4 billion in additional revenues, using conservative diamond prices. The Karowe UGP has an estimated $534 million capital cost and a five-year construction period. Mine ramp up is expected in the first quarter of 2026 with full production from the UGP expected in the second half of 2026. The company is financing the Karowe UGP through a combination of cash flow from operations and project debt.

Karowe mine, commissioned in July 2012, has been responsible for more than 63 diamonds in excess of 200 carats which have been recovered, including 13 diamonds larger than 300 carats in size. The historic recoveries include the 549 carat Sethunya, 998 carat, 1758 carat Sewelô, the 1109 carat Lesedi La Rona, the 342 carat Queen of the Kalahari, and the 1,174-carat diamond discovered in June 2021, considered the world’s third largest diamond behind the Sewelô diamond.

Last year, the company revealed that it has agreed to a $220 million loan facility through a syndicate of five mandated lead arrangers: African Export-Import Bank (Afreximbank), Africa Finance Corp., ING, Natixis, and Societe Generale, London Branch. In addition, Lucara raised funds through share offering to investors, getting approximately $32.6 million.

The Karowe mine has been a profitable acquisition for Lucara after it bought 70 percent of the mine in 2009 from De Beers for just $49 million. It later acquired 100 percent ownership of the mine when it bought African Diamonds for $70.3 million in stock. Since then, Karowe mine has been a rare source of exceptional diamonds with its consistent recovery of large high value diamonds. Although it produces less than 1 percent of world’s diamonds, the mine is recovering more than 50 percent of the world’s diamonds larger than 100 carats.

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