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.
A squeaky and glittering metaphoric smile was the look reflected from the Pula against the greenback this week and money market researchers lean this on optimism following Monday’s announcement of another Covid-19 vaccine which is said to have boosted emerging market economies.
With other emerging market currencies, the Pula too reacted to optimism and fanfare on the new Covid-19 vaccine against the weakening US dollar which has been losing its shine since the uncertainty laden US elections.
After bouncing back into the Johannesburg Stock Exchange (JSE) last week Friday, following a year of being in the freezer, the Choppies stock started this week with much fluidity.
Choppies was suspended in both the Botswana Stock Exchange and its secondary listing at the JSE for failure to publish financial results. Choppies suspension on Botswana Stock Exchange was lifted on 27 July 2020. On Friday last week, when suspension was being lifted, Choppies explained that this came into fruition “following extensive engagement with the JSE.”
Choppies stock, prior to suspension, hit a mammoth decline in value of more than 60 percent, especially in September 2018. Waking from a 24 month freezer, last week the Choppies share price was at R0.64 and the stock did not make any movement.
However, Monday was the day when Choppies stock moved vibrantly, albeit volatile. Choppies’ value was on a high volatile mood on Monday, reaching highs of 200 percent. At noon, the same Monday, the Choppies share had reached R1.05. Before taking an uphill movement, Choppies stock slightly slipped by 2 cents. But the Choppies share rode up high and by lunch time the stock had reached the day’s summit of R2.00 and that was at 13:30 when investors were buying the stock for lunch.
The same eventful Monday saw gloom on the faces of Choppies rivals, when Choppies gained by 220.31 percent around lunch time its rivals in the JSE Food & Drug Retailers sector were licking wounds. Spar lost 2.94 percent, Pick Pay fell by 2.43 percent, Shoprite 7.52 percent and Dis-Chem 1.98 percent. The only gainer was Clicks by a paltry 0.51 percent.
In an interview with BusinessPost, Choppies sponsors at the JSE PSG Capital Managing Director Johan Holtzhausen explained that the retailer’s stock was in high demand after a long suspension. He said when a company list or a suspension is lifted the market needs to find itself on the pricing of the share.
“Initially when the suspension was lifted there were more buyers than sellers. As far as we could see this created a shortage of shares so to speak and resulted in the price at which the shares traded going to R1.20 and eventually R2.05 before finding its level around R0.80 sent from a JSE perspective.
This is marked dynamics and reflect that there are investors that are positive about the stock in the long run. This is a snapshot over a short period and one requires a longer period to draw further conclusions,” said Holtzhausen in an interview talking about the Choppies stock.
On Monday this week where the Choppies value grew by 200 percent, the stock took a turn looking down, closing the day at R0.87 from a high of R2.00. According to local stockbroker Motswedi Securities on Monday while there was no movement by Choppies in the local stock exchange as the retailer appeared on the board as 141,000 shares traded at P0.60 each.
However in Choppies’ secondary listing the stock price rallied to over 200 percent during intraday trading on Monday before losing steam and declining to around R0.87 share.
Before press yesterday Choppies opened the market with the stock starting the day at R0.80 then went flat for few hours before taking a slide downward, dropping 5 cents in 30 minutes. Choppies then went flat at R0.75 for 50 minutes yesterday before going up at 10:20 am where it nearly recovered the open day price of 80 cents, but was shy of 1 cent. From 79 cents the price went flat until noon.
Competition and Consumer Authority (CCA) has revealed that in its assessment of the Jet take over by Foschini, there were considerations on possible market rivalry and a clash in targeted classes.
According to a merger decision notice seen by this publication this week, high considerations were made to ensure that Foschini’s takeover of Jet is not anyhow an elimination of rivalry or competition or if the two entities; the targeted and the acquiring enterprise serves the same class of customers or offer the same products, to elude the anti-trust issues or a stretch of monopoly.
The two entities are South African retailers whose services stretched to Botswana shores. Last month local anti-trust body, CCA, received an acquisition proposal from South African clothing retailer, Foschini, stating their intentions to take-over Jet.
South African government’s Business Rescue Practitioners earlier this year after finding out that Jet’s mother company, Edcon, is falling apart, made a decision that Foschini can buy Jet for R480 million. This means that Foschini will add Jet to its portfolio of 30 retail brands that trade in clothing, footwear, jewellery, sportswear, homeware, cell phones, and technology products from value to upper market segments throughout more than 4085 outlets in 32 countries on five continents.
However the main headache for the CCA decision which was released this week, is distinguishing the targeted and the acquiring entity businesses and services.
When doing a ‘Competitive Analysis and Public Interest’ assessment, CCA is said to have discovered that Foschini is classified as a “standard retailer” which targets middle-to-upper income consumers and it competes with stores such as; Truworths and Woolworths. The targeted entity, Jet, is on the lower league when compared to its acquirer, it serves customers of lower classes and is regarded as a discount/value retailer targeting lower income consumers or a mass market. This makes Jet to be in direct competition with Ackermans, Pepkor, Cash Bazaar and Mr Price.
“Therefore, a narrower view of the market is that Foschini through its stores trading in Botswana is not a close competitor to Jet. Additionally, there exist other major rivals who will continue to exercise competitive constraints on the merged enterprise post-merger,” concluded CCA this month.
The anti-trust body continued to explain that in terms of the Acquisition of a Dominant Position, the analysis shows that the acquisition of the target business by Foschini Botswana will result in an insignificant combined market share in the relevant market.
This made CCA reach to a conclusion that there is no case of an acquisition of a dominant position in the market under consideration or any other market on the account of the proposed transaction.
What supports the merger according to CCA is that it is in compliance with regards to ‘Public Interest Considerations’ because the findings of the assessment revealed that the transaction is as a result of the need for a Business Rescue by the target enterprise. This is so because in the event that the proposed transaction fails, it will translate into the loss of the employment positions at the target business.
“On that note the Authority (CCA) found it necessary to ensure that the proposed merger does not result in any retrenchments or redundancies. In light of this, the assessment revealed the critical need to protect the employees of the merged entity from possible merger specific retrenchments/ redundancies,” said CCA.
Before making a determination that the recently proposed transaction is not likely to result in the prevention or substantial lessening of competition or endanger the continuity of the services offered in the relevant market, CCA said it then moved into a concern for public interest which is a protection enshrined in the Competition Act of 2018.
CCA’s concern was mostly loss of livelihood or employment by 126 Batswana workers at Jet stores, stating that possible retrenchments or redundancies may arise as a result of implementation of the proposed merger.
Much to the desire of trade union or labour movements in Botswana and across Southern Africa where the Jet stores are stemmed-who also raised concerns about the retail’s workers job security- CCA subjects Foschini to keep the target entity 126 workers.
“There shall be no merger specific retrenchments or redundancies that may affect the employees of the merged enterprises. For clarity, merger specific retrenchments or redundancies do not include (the list is not exhaustive): i. voluntary retrenchment and/or voluntary separation arrangements; ii. Voluntary early retirement packages; iii. Unreasonable refusals to be redeployed; iv. Resignations or retirements in the ordinary course of business; v. retrenchments lawfully effected for operational requirements unrelated to the Merger; and vi. Terminations in the ordinary course of business, including but not limited to, dismissals as a result of misconduct or poor performance,” said CCA.
CCA also orders that Foschini informs it about all the details of 126 Jet employees within thirty (30) days of the merger approval date. CCA should also know information of when Foschini is implementing the merger, within 30 days of the approval date.
Other conditions include Foschini sharing a copy of the conditions of approval to all employees of the Jet or their respective representatives within ten (10) days of the approval date.
“Should vacancies arise in the target, the merged enterprise shall consider previous employment at one of the non-transferring Jet stores to be a positive factor to be taken into account in the consideration of offering potential employment,” said CCA.
According to CCA, in cases of any job losses, for the Authority to assess whether the retrenchments or redundancies are merger specific, at least three months before (to the extent that this deadline can be practically achieved and in terms of the prevailing and legally required employment practices) any retrenchments or redundancies are to take place, inform the Authority of: i. The intended retrenchments; ii. The reasons for the retrenchments; iii. The number and categories of employees affected; iv. The expected date of the retrenchments.