Lucara Diamond Corp.'s Q2 results are a mixed parcel of sorts, as production and the recovery of 'specials' (+10.8 carats) increased while the company achieved softer prices, sold fewer exceptional stones and consequently achieved lower revenues than during the same period a year earlier.
Lucara's revenue declined 19% year on year to $64.5 million for the three months ending June 30, despite higher revenue from their 'regular' tender and a 26% increase in sales volume to 75,329 carats. The average selling price declined by 36% year-over-year to $856 per carat from $1,336 per carat, while profit declined by 39% to $19.7 million from $32.2 million a year prior.
The company recovered 253 specials during the quarter, representing the highest number of specials recovered by quarter since initiating production at the Karowe mine in Botswana. From this output, 11 diamonds were recovered greater than 100 carats in weight, including 3 diamonds larger than 300 carats. 12 diamonds sold in excess of $1 million each. The Q2 2017 Exceptional Stone Tender featured a number of stones held in inventory and included the sale of a 374 carat diamond for $17 million. Additionally, revenue from the Q2 2018 'regular' tender was 29% higher than Q2 2017, with increased carat volumes (+28%) and a similar year-over-year average price.
While Lucara recovered a higher quantity of large diamonds and sold some large stones, the revenue drop reflected the absence of top-quality stones of the type the miner sold in the same period last year, they explained. Though 253 exceptional diamonds were recovered during the period, 148 of those diamonds were recovered after the cut-off date for inclusion in the June sale and will be sold in Q3. Only 100 of the 253 specials recovered were sold during the quarter. Overall, the company remarks, a smaller volume and lower average price of exceptional diamonds were sold in Q2 2018, as compared to Q2 2017.
The miner also provided an updated resource estimate for the AK06 kimberlite, increasing their Indicated Mineral Resources for the South Lobe (as at end 2017) by 54% from 4.4 million carats to 6.8 million carats. The updated Mineral Resource includes a recoverable Indicated Mineral Resource of 7.9 million carats hosted in 57.85 million tons at an average grade of 13.7 cpht, with an average modeled diamond value of $673 per carat. The updated Mineral Resource also includes a recoverable Inferred Mineral Resource of approximately 1.17 million carats hosted in 5.84 million tons at an average grade of 20 cpht with an average modeled diamond value of $716 per carat.
Lucara's forecast for 2018 as it now stands sees them expecting to recover (and sell) 270,000 to 290,000 carats this year from 2.5 to 2.8 million tons mined. They expect to achieve revenue of $170 million to $200 million, in line with their earlier forecast. They note that during 2018, efforts to fully gain access to the Cut 2 South lobe ore will require a large volume of waste to be mined which impacts operating cash costs, but these will start declining in the fourth quarter and on into 2019. Additionally, they note that their efforts to commercialize the new Clara sales platform is going according to schedule, with inaugural sales expected to commence in Q3.