Lucara Diamond Corp. has completed its highly anticipated inaugural diamond sale through Clara Diamond Solutions, its digital sales platform for selling rough diamonds individually, based on polished characteristics and demand. The sales platform was successfully launched on November 30 featuring a selection of rough diamonds between 1 and 4 carats in size in the better colors and qualities from Lucara's Karowe mine as well as additional aggregated third-party rough, and seven manufacturers searching for rough diamonds to fill their specific demand, five of whom matched and received their orders.
The final matching was completed on December 16, 2018. The diamonds successfully matched to orders generated revenue of US$660,865, achieving +8% over Lucara's market price and +15% over Lucara's reserve price for these goods. Goods of approximately similar value have been set aside for the next sale, scheduled to take place later this month, after which a steady ramp up in sales through Clara is anticipated in 2019. Lucara will be reporting sales through Clara quarterly, along with additional guidance, once the platform has moved into continuous sales.
"This trial sale marks a momentous milestone for Clara," said Eira Thomas, CEO of Lucara, adding the trial showed that the platform is commercially viable. "Though we are delighted with the prices achieved for the rough diamonds sold in this first sale, Clara's longer-term value will be realized through its' scalability, increasing the volume of rough diamonds transacted by adding production from other global diamond producers." The miner said that Diamonds will be added to the platform in the coming weeks gradually, as additional manufacturers are onboarded and in response to increasing variety and size of orders received. In time, as supply and demand is optimized, Lucara will progress into continuous sales of appropriate, qualifying goods through Clara.
Lucara said the first trial sale, conducted in partnership with a select group of large vertically integrated jewelry houses and global diamond manufacturers, was designed to demonstrate that Clara can unlock significant value throughout the diamond pipeline by facilitating rough diamond sales on a stone-by-stone basis, based on specific polished demand. The platform works by creating a digital fingerprint of each rough diamond and uploading it to the system with a corresponding asking price. Simultaneously, diamond buyers upload their specific polished diamond requirements in terms of size, cut, color and quality, including their desired purchase price, creating an 'order' within Clara. Clara then matches individual, scanned rough diamonds to the buyers' optimal polished requirements.
Simultaneously, Lucara announced quarterly sales revenue for Q3 2018 of $45.7 million (Q3 2017: $77.9 million) or $450 per carat (Q3 2017: $1,161 per carat) from the sale of 101,600 carats. This revenue includes proceeds of $3.9 million received in July 2018 related to the Company's June tender. The third quarter of 2018 saw Lucara host its first blended tender process in which both regular and exceptional diamonds, recovered in the period May-August, were sold achieving an average price per carat of $467 from the sale of 89,461 carats (Q3 2017: 64,289 carats), a 39% increase in the number of carats sold as compared to the same quarter last year. Comparisions with third quarter sales from 2017 are skewed because a year ago during this period Lucara sold the Lesedi La Rona ("LLR") for $53 million ($47,777 per carat). Adjusting for the sale of the LLR, the Q3 2017 average sales price was $389 per carat. This brings their revenues for the year thus far to $135.6 million as compared to $183.6 million for the first nine months in 2017. Lucara expects its 2018 revenue to be between $180 million and $190 million (2018 guidance: $170 million to $200 million).
Lucara recovered 127,031 carats in Q3 2018, which was more than double the number of carats recovered in Q3 2017 (62,425 carats). They also began setting aside diamonds in the one to fifteen carat size range in the better colors and qualities for sale on Clara. The removal of these diamonds from traditional tender sales will have an impact on the overall achieved average sales price, however, these differences will be captured and reconciled in the results reported through Clara. During the third quarter, Lucara recovered 197 specials (+ 10.8 carats), representing 4.7% weight percentage of total recovered carats, in line with expectations. They also unearthed 10 diamonds larger than 100 carats.
The miner said it is increasing its 2018 forecast for ore mined from 2.5 – 2.8 million tonnes to 2.9 – 3.1 million tonnes. The 2018 mine plan was amended following the Mineral Reserve update mid-year and additional, lower-grade ore has been mined and stockpiled. It also increasing the 2018 forecast for diamonds recovered and sold, from 270,000 – 290,000 carats to 325,000 – 350,000 carats. This increase is due to better plant performance resulting in a higher recovery of smaller diamonds, which do not contribute materially to the Company's revenue.
The miner's Q3 2018 EBITDA of $18.2 million (Q3 2017: $49.8 million) reflects lower revenues attributable to a smaller volume and lower average price of exceptional stones sold, as compared to Q3 2017 which included the sale of the 1,109 carat LLR. Net income for the three months ended September 30, 2018 was $5.1 million ($0.01 per share) as compared to net income of $32.9 million ($0.09 per share) in the comparative quarter of 2017.