Lucara’s Final 2019 Tender Earns $53M, Beating Estimates

Rough Market
19/12/2019 12:24

Lucara Diamond Corp. has reported that its final diamond tender of 2019, held on December 12, generated sales proceeds of US$52.9 million. Sales of goods from the Karowe Diamond Mine in Botswana were 16% higher than expected, and achieved an average price of US$548 per carat.  They noted improvments to market pricing in all size classes. The December tender bring Lucara's 2019 revenue at $192.5 million, exceeding the 2019 revenue guidance of $170 - $180 million and outpacing their 2018 sales of $176.2 million. The difference might be attributable to earnings from their online sales platform Clara, which held 16 sales this year and is included in their annual sales figures.

"Though it is too early to call a trend, prices achieved in our final sale of the year reflect a stronger, more stabilized market environment and continued strong demand for Karowe diamonds," said Lucara President and CEO Eira Thomas. "As a result, we have exceeded our revenue guidance for 2019." For the year, Lucara has reported earning an average price of $468 per carat, which is a 7% decline from the $502 per carat average earned in 2018. At this point it is unclear how the inclusion of Clara sales has impacted their average prices. The miner says they sold 30 diamonds for more that $1 million each. 

Regarding Clara, the company notes its has continued to make "excellent progress" in 2019, completing 16 sales and growing its customer base well beyond expectations from 4 to 27 clients. They say that demand in recent sales has outstripped available supply and the platform is ready to receive a larger quantity of third-party goods to support its next phase of growth. Trials with at least two other providers are anticipated beginning in early 2020.  Lucara adds that Clara is "achieving strong prices for Karowe diamonds and generating attractive margins for its customers", which they view as confirmation that significant value can be unlocked by selling rough diamonds in a more efficient way, using technology and based on specific demand for individual polished products. She adds that 2019 marked the first of a two-year ramp-up period for their digital sales platform.

Following the positive results of the Karowe Underground Feasibility Study announced on November 4, 2019. A budget of up to $53 million has been approved for early works related to the proposed underground mine at Karowe. An investment decision, subject to receipt of all required authorizations and the arrangement of financing, is expected in H2 2020. The approved budget is based on the Company's ability to fund these initial capital expenditures from operating cash flow in 2020. Thomas adds Lucara remains "well positioned and highly levered towards further strengthening in diamond prices over the next 12-24 months as supply constraints from large, maturing, mines begin to manifest. This bodes well, not only for our current open pit operations, but also supports our plans for underground expansion to extend Karowe's mine-life to at least 2040, with the potential to generate an additional US$4 billion in revenue."

Image: Lucara Diamond Corp., from the June 2018 Karowe Diamond Exceptional Stone Tender