Lucara Q3 report card
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.
Business
LLR transforms from Company to Group reporting
Botswana Stock Exchange listed diversified real estate company, Letlole La Rona Limited (“LLR” or “the Company” or “the Group”), posted its first set of group financial statements which comprise the Company and Group consolidated accounts, which show strong financial performance for the six months ended 31 December 2023, with improvements across all key metrics.
The Company commenced the financial year with the appointment of a Deputy Chairperson, Mr Mooketsi Maphane, in order to bolster its governance and enhance leadership continuity through the development of a Board and Executive Management Succession Plan.
At operational level, LLR increased its shareholding in Railpark Mall from 32.79% to 57.79% and proudly took over the management of this prime asset.
The CEO of LLR, Ms Kamogelo Mowaneng commented “During the period under review, our portfolio continued to perform strongly, with improvements across all key metrics as a result of our ongoing focus on portfolio growth and optimisation.
“We are pleased to report a successful first half of the 2024 financial year, where we managed to not only grow the portfolio through strategic acquisitions and value accretive refurbishments but also recycled capital through the disposal of Moedi House as well as the ongoing sale of section titles at Red Square Apartments. The acquisition of an additional 25% stake in JTTM Properties significantly uplifted the value of our investment portfolio to P2.0 billion at a Group level. Our investment portfolio was further differentiated by the quality of our tenant base, as demonstrated by above market occupancy levels of 99.15% and strong collections of above 100% for the period”.
The growth in contractual revenue of 9% from the prior year’s P48.0 million to the current year P52.2 million, increased income from Railpark Mall, coupled with high collection rates, has enabled the company to declare a distribution of 9.11 thebe per linked unit, which is in line with the prior year.
In line with its strategic pillars of ‘Streamlined and Expanded Botswana Portfolio’ as well as ‘Quality African Assets’, the Group continuously monitors the performance of its investments to ensure that they meet the targeted returns.
“The Group continues to explore yield accretive opportunities for balance sheet growth and funding options that can be deployed to finance that growth” further commented the CEO of LLR Ms Kamogelo Mowaneng.
Ms Mowaneng further thanked the Group’s stakeholders for their continued support and stated that they look forward to unlocking further value in the Group.
Business
Botswana’s Electricity Generation Dips 26.4%
The Botswana Power Corporation (BPC) has reported a significant decrease in electricity generation for the fourth quarter of 2023, with output plummeting by 26.4%. This decline is primarily attributed to operational difficulties at the Morupule B power plant, as per the latest Botswana Index of Electricity Generation (IEG) released recently.
Local electricity production saw a drastic reduction, falling from 889,535 MWH in the third quarter of 2023 to 654,312 MWH in the period under review. This substantial decrease is largely due to the operational challenges at the Morupule B power plant. Consequently, the need for imported electricity surged by 35.6% (136,243 MWH) from 382,426 MWH in the third quarter to 518,669 MWH in the fourth quarter. This increase was necessitated by the need to compensate for the shortfall in locally generated electricity.
Zambia Electricity Supply Corporation Limited (ZESCO) was the principal supplier of imported electricity, accounting for 43.1% of total electricity imports during the fourth quarter of 2023. Eskom followed with 21.8%, while the remaining 12.1, 10.3, 8.6, and 4.2% were sourced from Electricidade de Mozambique (EDM), Southern African Power Pool (SAPP), Nampower, and Cross-border electricity markets, respectively. Cross-border electricity markets involve the supply of electricity to towns and villages along the border from neighboring countries such as Namibia and Zambia.
Distributed electricity exhibited a decrease of 7.8% (98,980 MWH), dropping from 1,271,961 MWH in the third quarter of 2023 to 1,172,981 MWH in the review quarter.
Electricity generated locally contributed 55.8% to the electricity distributed during the fourth quarter of 2023, a decrease from the 74.5% contribution in the same quarter of the previous year. This signifies a decrease of 18.7 percentage points. The quarter-on-quarter comparison shows that the contribution of locally generated electricity to the distributed electricity fell by 14.2 percentage points, from 69.9% in the third quarter of 2023 to 55.8% in the fourth quarter. The Morupule A and B power stations accounted for 90.4% of the electricity generated during the fourth quarter of 2023, while Matshelagabedi and Orapa emergency power plants contributed the remaining 5.9 and 3.7% respectively.
The year-on-year analysis reveals some improvement in local electricity generation. The year-on-year perspective shows that the amount of distributed electricity increased by 8.2% (88,781 MWH), from 1,084,200 MWH in the fourth quarter of 2022 to 1,172,981 MWH in the current quarter. The trend of the Index of Electricity Generation from the first quarter of 2013 to the fourth quarter of 2023 indicates an improvement in local electricity generation, despite fluctuations.
The year-on-year analysis also reveals a downward trend in the physical volume of imported electricity. The trend in the physical volume of imported electricity from the first quarter of 2013 to the fourth quarter of 2023 shows a downward trend, indicating the country’s continued effort to generate adequate electricity to meet domestic demand, has led to the decreased reliance on electricity imports.
In response to the need to increase local generation and reduce power imports, the government has initiated a new National Energy Policy. This policy is aimed at guiding the management and development of Botswana’s energy sector and encouraging investment in new and renewable energy. In the policy document, Minister of Mineral Resources, Green Technology and Energy Security Lefoko Moagi stated that the policy aims to transform Botswana from being a net energy importer to a self-sufficient nation with surplus energy for export into the region. Moagi expressed confidence that Botswana has the potential to achieve self-sufficiency in electric power supply, given the country’s readily available energy resources such as coal and renewable sources.
Business
MMG acquires Khoemacau in a transaction valued at P23Bn
MMG Limited, the Hong Kong-based mining company specializing in base metals, has successfully concluded the acquisition of Khoemacau Copper Mine, a state-of-the-art, world-class copper asset nestled in the northwest of Botswana.
On Monday, MMG announced that the acquisition of Khoemacau Mine in Botswana was finalized on 22nd March 2024. “This acquisition enriches the company’s portfolio with a top-tier, transformative growth project and signifies a monumental milestone in the Company’s journey,” MMG communicated in an official statement published on the Hong Kong Stock Exchange.
Upon completion of the acquisition, MMG remitted to the Sellers an Aggregate Consideration of approximately US$1,734,657,000 (over P23 billion), a sum subject to potential adjustments post-Completion.
In addition to the Aggregate Consideration, MMG, in accordance with the Agreement, advanced an aggregate amount of approximately US$348,580,000 (over P4.5 billion) as the Aggregate Debt Settlement Amount, to settle certain debt balances of the Target Group (Cuprous Capital/Khoemacau).
On November 21, 2023, Khoemacau announced that the shareholders of its parent company [Cuprous Capital] had agreed to sell 100% of their interests to MMG Limited.
MMG is a global resources company that mines, explores, and develops copper and other base metals projects on four continents. The company is headquartered in Melbourne, Australia, and has a significant shareholder, China Minmetals Corporation, which is China’s largest metals and minerals group owned by the Government of the People’s Republic of China.
On December 22, 2023, Khoemacau Copper Mining (Pty) Ltd received the approval from the Minister of Minerals and Energy of Botswana regarding the transfer of a controlling interest in the Project Licenses and Prospecting Licenses associated with the Khoemacau Copper Mine, a result of the Acquisition.
The Botswana Competition & Consumer Authority (CCA) on January 29, 2024, notified the market that it had given its approval for the takeover of Khoemacau Copper Mining by MMG Limited.
On January 29, 2024, the CCA issued a merger decision to the market, stating that after conducting all necessary assessments, it was ready to proceed.
The Competition Authority affirmed that the structure of the relevant market would not significantly change upon implementation of the proposed merger as the proposed transaction is not likely to result in a substantial lessening of competition, nor endanger the continuity of service in the market of mining of copper and silver ores and the production, and sale or supply of copper concentrate in Botswana.
Furthermore, the CCA stated that the proposed merger would not have any negative impact on public interest matters in Botswana as per the provisions of section 52(2) of the Competition Act 2018.
Earlier this month, Minister of Minerals & Energy, Lefoko Maxwell Moagi, informed parliament that his Ministry was endorsing the Khoemacau acquisition by MMG Limited. He noted that not only was the company acquiring the existing operation but also committing to an expansion program that would cost over $700 million to double production, create more jobs for Batswana, and increase taxes and royalties paid to the Government.