Tuesday, June 2, 2020

Lucara stumbles before Covid-19

Lucara Diamond Corp had a sluggish start in the first three months of the year, recording a quarterly loss as the diamond market continues to be under pressure, characterised by lower prices amid waning demand, with fears that the slump will continue as covid-19 uncertainty prevails.  

The Canadian diamond miner, listed on the Toronto Stock Exchange and Botswana Stock Exchange, wholly owns the prolific Karowe mine known for churning out large quality gems. In the first quarter of the year, Karowe was stripped of 0.9 million tonnes of ore, with 0.64 million tonnes of that ore processed, resulting in 91,536 carats recovered.

Karowe, which last year delivered the historic 1,758 carats Sewelô diamond, did not disappoint in the first quarter of the year, birthing an unbroken 549 carat white diamond of exceptional purity, recovered from the ore sourced from the South Lobe of the mine in February. The gemstone is part of the eight diamonds recovered which were greater than 100 carats in weight during the quarter under review.

The financials for 2020’s first quarter shows that Lucara registered a $3.2 million loss, a massive drop from last year’s corresponding quarter that delivered $7.4 million profit. The loss has been attributed to less carats sold amid decline in diamond prices as the miner’s average price per carat fell by nearly 23 percent. 

The diamond mining company recognized revenue of $34.1 million from the sale of 86,178 carats in the first quarter of 2020, a 10 percent decrease from 2019’s first quarter. The average price per carat sold was $396, down from last year’s $512 per carat. 

“The decrease in the average price per carat sold and in total revenue achieved in Q1 2020 was due to a combination of variability in quality of the stones available for sale in the Q1 2020 tender along with lower achieved prices similar to those realized in mid-2019,” the company said in the quarterly report. 

While Lucara sells most of its diamonds through sales tenders, it disposes diamonds sized between 1 and 10 carats and of better quality through Clara, which is the company’s web based digital sales platform that allows customers to purchase rough diamonds individually, based on specific demand. Six sales were completed on the platform during the first quarter of 2020 with $3.0 million in value transacted. 

The global diamond industry is experiencing the widespread impacts of COVID-19 throughout the value chain, manifested as fewer sales, weaker pricing, logistical challenges in the movement of goods and people and, production curtailments at several mines. While full production levels are currently being sustained at the Karowe, Lucara says it cannot predict if future changes or regulations implemented by the Botswana government will affect its operations in the near term. 

The miner’s second quarter tender, originally scheduled for mid-May 2020, has been postponed and will be rescheduled to a more appropriate date in the near-term, as market conditions are evaluated, the company said. Though the Clara digital sales platform will continue to hold sales, travel restrictions in Botswana, South Africa, India and Europe have caused disruptions during April, preventing some deliveries from taking place.

Furthermore, Lucara has revealed that the Botswana government has granted temporary permission to the company to conduct sales in Antwerp, Belgium, which means the second quarter tender that was supposed to be conducted in Botswana will now  be held in Belgium.

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