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Lucara Q3 report card

Publishing Date : 11 November, 2019

Author : AUBREY LUTE

Lucara Diamond Corporation, a multiple listed mining company which operates the world‘s premier top gem producer Karowe Mine, has registered revenue of $136.5 million or $436 per carat for its sales in the first nine months of 2019, yielding an operating margin of $254 per carat.


This is contained in the company‘s 2019 Q3 performance results released on Monday. Starting in September 2018, Lucara moved to a blended sales tender, combining the sale of exceptional stones with the balance of run of mine production into one tender, held quarterly. According to the Vencouvor headquartered gem diamonds outfit change was made to decrease the inventory time for large, high value diamonds and to generate a smoother revenue profile that better supports price guidance on a per sale basis.


During 2019, diamonds recovered between November 2018 and July 2019 was sold either in blended sales tender or through the Clara digital sales platform. “The one exception to this new practice was the retention of the 1,758 carat diamond named Sewelô.  Lucara says due to the unique and complex nature of the Sewelô, additional analysis of the diamond is being undertaken while the Company considers how best to maximize value from this unique and rare diamond.


 In the first nine months of 2019, a total of 313,189 carats were sold compared to 240,245 carats sold in the previous year achieving a year-to date average sales price of $436/carat against 2018 figure of $564/carat. The number of carats sold was 30% higher than in the comparative period driven by better recoveries in the smaller, lower value sizes.


Lucara says the significant increase in carats is due to the continued strong performance of the plant which processed 2.16 million tonnes during the nine months ended September 30, 2019 compared to 2.03 million tonnes milled last year. “An improved mine call factor also contributed to higher recoveries of diamonds” Explains Karowe mine management.


While most of Karowe’s diamond production is sold through blended sales tender, beginning in late 2018 certain stones from Karowe’s production sized between 1 and 4 carats and of better quality were offered for sale on Clara, Lucara’s revolutionary, web based, digital sales platform that allows customers to purchase rough diamonds individually, based on specific demand.


The first sale through Clara took place in December 2018. Five sales were completed on the platform during the first six months of 2019 and a further five sales through Clara were completed in Q3 2019, with $2.4 million in value transacted in Q3 2019 and a total of $6.0 million transacted since sales began.


Lucara President and Chief Executive Officer, Eira Thomas observed that the continued growth of Clara is expected in the fourth quarter based on increasing demand from a growing customer base, which expanded from twenty to twenty-seven participants in Q3 2019. “The Company’s objective is to begin adding third-party production to the platform before the end of the year in order to meet anticipated demand,” she said.


On financial performance Lucara posted operating expenses increase from $50.0 million in the nine months ended September 30, 2018 to $57.1 million in the nine months ended September 30, 2019 mainly due to a combination of an increase in the average cost per tonne mined which is related to the new mining contractor and lower volumes of total tonnes mined as well as higher volumes of total tonnes processed.

An increase in carats processed and sold resulted in a decrease in the operating expense per carat sold from $208/carat in the nine months ended September 30, 2018 compared to $182/carat in the nine months ended September 30, 2019. Depletion and amortization, a non-cash expense, increased from $20.1 million in YTD 2018 to $38.1 million in year to date 2019 due to a combination of factors including a 30% higher volume of carats sold with 313,189 carats YTD 2019 vs. 240,245 carats YTD 2018.


The increase in this expense has been driven by several things amongst others a larger number of fine diamonds recovered following improvements to the processing circuit implemented in late 2017, a higher mineral property balance from the waste stripping campaign between 2017 and 2018, and a corresponding increase in the rate of unit of production depletion from a change to the reserve base in Q3 2018.


With depletion and amortization expense almost double what it was in the same period last year Lucara posted that net income decreased to $4.1 million for the nine months ended September 30, 2019 as compared to net income of $17.9 million in the same period in 2018. Earnings per share decreased to $0.01 as compared to earnings per share of $0.05 for YTD 2018.


Lucara President & CEO said her company continues to deliver solid results and strong margins on the back of strong operational performance at Karowe in Q3. “With operating margins at Karowe approaching 60%, and no long-term debt, Lucara is well positioned to continue to weather the difficult diamond pricing environment that has prevailed since the beginning of the year,” she said.

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