Lucara rakes in over P1 billion in 2019 H1
Canadian conceived Lucara Diamond Corporation has gathered $91.2 million, equivalent to just over P1 billion in revenue during the first half of 2019. This solely from their wholly owned Karowe Mine located in the Boteti sub district of Botswana.
The Botswana Stock Exchange listed high value, top carat diamond producer shared this in their June end Quarter 2 results issued from Vencuvour in the wee hours of Friday morning CAT. These revenue figures mirrors a $463 per carat for Karowe sales in the first half of 2019, yielding an operating margin of $292 per carat. In 2019, the Company held blended tenders in which diamonds recovered in the period December 2018 to April 2019 were sold in the same period, with the exception of the particularly rare stone recovered, Sewelô.
Lucara says it has completed an initial analysis of Sewelô and is considering how best to maximize value from this unique and rare diamond. During the six months under review a total of 196,989 carats were sold compared to 138,646 carats sold in the 2019 half year ,achieving a year to date average price of $463 per carat against 2018 H1 figure of $648 per carat.
The number of carats sold was 42% higher than in the comparative period, driven by better recoveries in the smaller, lower value sizes. “While still profitable, the smaller goods impact the average price per carat sold when compared to the prior year” commented Lucara Executives.Karowe Mine top brass says the significant increase in carats is also due to the continued strong performance in the plant which had record consecutive quarters of production, processing 1.48 million tonnes during H1 2019 against 1.3 million tonnes processed in 2018 H1.
“An improved mine call factor also contributed to higher recoveries of diamonds in the smaller size classes” highlighted Lucara management in the results analysis commentary. During the 2019 first 2 quarters under review, operating expenses increased from $31.2 million in H1 2018 to $33.7 million in H1 2019, a hike Lucara says was due to a combination of an increase in the average cost per tonne mined and lower volumes of total tonnes mined. Waste tonnes mined decreased as compared to the same period in 2018 as the significant waste stripping campaign undertaken between 2017 and 2018 was substantially complete by the end of 2018.
In addition, ore mining was stronger than expected in H1 2019 due to resource gains in the North Lobe offsetting planned waste mining. Due to the higher volume of ore mined in H1 2019, no waste stripping costs were capitalized and the strip ratio was reduced to below the life of mine average of 2.46. Lucara says no capitalized stripping is expected during the remaining half of 2019, this is against a strip ratio of 2.84 in 2019 Guidance. On the other hand the increase in volumes processed led to a decrease in the operating expense per carat sold from $225/carat in H1 2018 to $171/carat in H1 2019.
Further commentary from Lucara Headquarters in Canada’s commercial capital, Vencuvour says Karowe’s Q2 2019 performance was underpinned by a continued, strong, stable operating environment at the 7 years old mine. On the back of record production achieved during the first quarter of the year, operations continued to deliver strong performance, with 0.8 and 1.8 million tonnes of ore and waste mined respectively, and 0.71 million tonnes of ore processed.
“As a result, production yielded higher carat recoveries against plan and contributed to a sale of 101,931 carats during Q2 2019 which achieved an average price of $417/carat compared to the sale of 75,329 carats at an average price of $856/carat during Q2 2018,” said Eira Thomas, President and Chief Executive Officer of the triple listed top carats producer. Beside BSE Lucara is also trading on the Toronto Stock Exchange (TSX) and the Stockholm Stock Exchange known as Nasdaq Stockholm
Thomas explained that the difference in average price is due to the exceptional stone tender held in Q2 2018 for which there was no comparable sale in 2019, together with higher recoveries of small diamonds owing to plant processing improvements. The market for both rough and polished diamonds remains challenging due to an excess supply of polished diamonds and reduced credit available in the mid-stream of the supply chain. However Thomas says Lucara’s rough diamond sales during the first six months of 2019 have been consistent with expectations and in line with 2019 revenue guidance of $170 million to $200 million.
Lucara President says the largest diamond to be unearthed in Botswana’s 50+ year history and the second +1,000 carat diamond to be recovered at Karowe in just four years, Sewelô, the 1,758 carat near gem that was recovered undamaged in April, is a testament to Karowe’s remarkable geological endowment and the strong operating environment that prevails at the mine.
“During the second quarter, we continued to deliver safe, reliable, record diamond production. Having focused on operational improvements to drive performance, carat recoveries have significantly increased and costs have gone down” she said. Eira Thomas further added that impressively interest in Clara, Lucara’s online sales platform for rough diamonds, continues to increase as manufacturers look to purchase only the rough diamonds that they can use in their business, while at the same time assuring provenance of the rough diamonds purchased.
“Overall average prices achieved for our diamonds during the first half of the year have settled at $463 per carat and reflect a higher contribution of fine (smaller) diamonds, with continued strong recoveries of single diamonds larger than 10.8 carats that contribute to more than 70% of our revenues” she said. Thomas boasts that her company continues to achieve high margins for its diamonds and is actively pursuing organic growth opportunities, including Clara, its proprietary, cloud based, digital, rough diamond marketplace that continues to ramp up and has now completed a total of 7 sales since December 2018.
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.