Ahead of Sale of 1,100-Ct Diamond, Lucara Eyes Expansion On Back of Solid Cash Position

Mining and Exploration
20/06/2016 09:27

Lucara Diamond Corp, which operates the Karowe mine in Botswana and which is selling the 1,100-carat Lesedi La Rona diamond at Sotheby's in London next week, has a strong cash position and plans to invest the money in a merger or acquisition or to further develop a mine through exploration activities, Chief Operational Officer Paul Day said in an extensive interview with Rough & Polished. The miner, which had net cash of $144.3 million at the end of the first quarter of 2016, will also put $15 million to $18 million into project capital expenditure this year. That will allow the plant at Karowe to increase the top size of diamonds recoverable to 80 mm from 60 mm and then on to 100 mm that will give the mine an opportunity to recover undamaged stones.

In addition to the Lesedi La Rona, Karowe last year produced the Constellation, an 813-carat stone sold in May for $63 million, and a 374-carat stone, which is yet to be sold. Day also spoke about the huge interest in Lesedi by traditional and non-traditional diamond buyers. "Some of the diamond brokers said ‘with a 1,000 carat stone the best thing you can do is to hit it with a hammer and crush it into smaller stones because they will be easy to sell. A 1,000 carat stone will be difficult to sell’, but we really do not believe that. We had expressions of interest from various individuals and bodies, interested in purchasing the stone for a high value, so we see an opportunity for that stone not just for the [diamond dealers] but individual collectors of high net worth artifacts, be they individuals or institutions, and hence that was the reason to take it to an open auction rather than having a closed tender, which typically attracts [diamond buyers]."

Day said the firm has not yet decided on a reserve price, commenting: "I think the easiest reference for a reserve is the sale value achieved for the 813 carat stone which was $63 million, or $77,000 per carat, so logically that becomes a floor and although we haven’t settled on an actual reserve ... one should think about that value. I think our CEO William Lamb was quoted as saying we had an offer from an institution in America of $40 million very early on, but currently we believe we will get much more than that on a public platform." Day goes on to talk about what has helped Lucara to recover large stones, and planned diamond production this year and sales figures.