Canadian rare diamonds powerhouse Lucara has posted positive revenue figures from its third quarter sales tender, well within the company’s projections. The BSE listed top gem producer this week said figures were thus far looking impressively good for the company when taking into account current global rough diamonds slow market performance.
Lucara through its wholly owned subsidiary, Lucara Botswana runs and owns Karowe Mine, as the sole shareholder. Karowe is located in the outskirts of Letlhakane Village in the Boteti district of Botswana. On August 29th Lucara closed its third diamond tender sale of the year. The company says despite challenging market conditions, the tender was extremely well attended with a total of 123 companies attending and 47 companies winning one or more tender lots.
In the three completed tenders of the year a total of 19 diamonds sold for in excess of $1 million USD, including 7 for more than $ 2 million USD and one for over $ 8 million USD. Lucara Diamond Corporation President and Chief Executive Officer, Eira Thomas said revenue received was in line with expectations and in line with the Company, meeting the yearly guidance of $ 170 to $ 200 million USD in revenue.
Thomas said her company continues trading on positive trajectories with continued strong performance of Karowe mine as well as the consistent recovery of large, high quality diamonds that contribute more than 70% of Lucara’s total revenues. “Attendance at our sales remains high, a testament to our well established client base and Karowe’s production profile, which continues to be well regarded and sought after in the marketplace,” she observed.
CLARA – THE DISTRUPTOR
The Vencuvour , Canada based Executive added that Lucara’s digital diamond trading and sales platform Clara continues to disrupt the gem sales space “Our performance is further evidenced by our growth with the client base for Clara which has grown from 4 to over 20 customers since the beginning of the year. Ramp up continues on plan, with transactions now occurring bi-weekly.” She said.
This week US based global business media house Bloomberg reported that Lucara’s Clara Diamond Solution is set to transform the diamond supply value chain. Bloomberg says modern technology has been making serious inroads into the diamonds traditional industry. “Advances in software, scanning and now block chain are disrupting long-established business practices” noted the US based media outfit.
Clara Diamond Solutions is a secure, web-based, digital sales platform. It uses proprietary analytics, combined with cloud and block chain technologies to completely modernize the diamond supply chain. Eira Thomas says feedback on the Clara Diamond Solutions platform has been overwhelmingly positive. “Customers return after their first experience, having saved considerable time and money,” shared Thomas.
Thomas explained that Clara’s approach transforms current sales practices, driving efficiencies and unlocking value for producers and manufacturers alike. The platform operates under an exclusive collaboration agreement with Sarine Technologies, a well-established service provider of diamond scanning and planning technologies used by the diamond manufacturing companies globally.
She elaborated that for the producers, Clara helps reach a broader customer base and allows for continuous sales, which helps smooth out cash flows. “By sidestepping purchasing in batches, manufacturers don’t have to finance unwanted inventory and resell unwanted diamonds. All of this means more certainty, transparency and profits for producers and manufacturers,” she said. Thomas says Clara will continue to help maximize the value Lucara receives for Karowe diamonds, as demand is increased, and will because it is a completely scalable offering ,be opened up to other producers to try as well.
ANOTHER TOP GEM RECOVERY
On Wednesday Lucara announced yet another high value recovery from Karowe, this time around the underground terrains of the magnificent Karowe open pit birthed a 123 carat gem quality top white Type II diamond. The high value precious stone was recovered from direct milling ore sourced from the EM/PK(S) unit of the South Lobe. The EM/PK(S) has also delivered several other high value diamonds including the 1,109 carat Lesedi La Rona, the 813 carat Constellation and the recently recovered 1,758 carat Sewelô.
The Botswana Stock Exchange listed diamond outfit says the EM/PK is an important economic driver for the underground feasibility study which is currently underway and scheduled for completion in Q4 later this year. A 375 carat gem quality diamond was also recently recovered at Karowe from the processing of historic DMS recovery tailings, generated prior to the incorporation of Lucara’s XRT diamond recovery circuits.
Karowe continues to have strong production performance year to date, with recovery from direct milling ore of 22 individual, +100 carat diamonds, including 6 greater than 200 carats. “Reprocessing of historic DMS recovery tailings (pre-XRT circuit) is ongoing. Processing of these tailings does not displace direct feed ore, but rather supplements overall production.”
Karowe is the only mine in recorded history to have recovered two diamonds larger than 1,000 carats. The Sewelô was an unbroken 1,758 carat near gem-quality diamond recovered in April this year. It was the largest diamond from the Karowe mine so far, and one of the largest diamonds in the world, while being the largest ever from Botswana. Since 2012, Lucara has recovered 14 diamonds above 300 carats, with two surpassing the 1,000-carat threshold. To date, the company has sold 10 diamonds above USD$10 million each.
Year to date, from all processing, the mine has produced 29 diamonds weighing more than 100 carats, including 8 diamonds gauging over 200 carats. Karowe has open pit reserves allowing for a mine life that will reach 2026. However, robust output since mining began in 2012 has management excited about organic growth. Studies are underway to assess the feasibility of extending Karowe’s mine life for at least another ten years to 2036 by expanding the mine underground.
The Company’s $14.9 million program for 2019 consists of ongoing drilling, sampling and geotechnical studies. Included in this effort is an updated resource statement, which indicates higher grades and potentially coarser diamond size-frequency distribution at depth. Moreover, test pumping, modelling and outfitting of new de-watering wells have helped significantly de-risk the underground mining potential. Thomas says the Feasibility Study results for an underground mine are expected in Q4 this year, and a construction decision should be made by H1 next year, “so investors can anticipate continued updates regarding mine potential,” Thomas concluded.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”