Canadian precious stones miner, Lucara Diamond Corporation, a multi-listed company that recently made back-to-back headlines globally with its rare mineral recoveries have started the year 2019 with impressive set of financial figures.
For the three months period ended 31st March 2019 the company raked in over P487 million in revenue from its wholly owned Botswana operation, Karowe mine, posting over 50 percent increase from 2018 quarter one revenue of just over P250 million. Karowe Mine is globally known for producing special stones over 1000 carat in the Boteti region. The mine is Lucara’s sole active rough diamond production, and Botswana’s most prolific mine outside De Beers’s bracket.
Lucara, listed on the Botswana Stock Exchange (BSE) reported these figures on Friday last week. According to a statement dispatched from Vencuvour, Canada’s glamorous multi-trillion dollar business city, Lucara says 2019 Quarter 1 was characterized by a continuation of strong operating performance observed during the latter half of 2018. This conclusion according to Lucara emanates from the fact that the company has met and exceeded guidance with respect to all mining and processing activities.
During the three months period under review, Karowe processed a record 0.76 million tonnes of ore, putting 2019 Q1 up as the best quarter in the history of the 7 years old mine. During this period 1.0 million tonnes of Ore and 2.5 million tonnes of waste were mined at Karowe recovering 132,336 carats, achieving recovered grade of 15.9 per hundred tonnes processed. The carats recovered figure includes 10,899 carats unearthed from reprocessing historic recovery tailings from previous milling.
One of the key highlights during the quarter was recoveries of a 240 carat top white gem and a 223 carat high white gem with a total of 170 Specials recovered representing 4.1 percent weight percentage of total recovered carats. Lucara notes that the recovery figures post a satisfactory output in line with the mine plan expectations. A total of 7 diamonds were recovered greater than 100 carats in weight. In April 2019, the largest diamond to be mined at Karowe to date, an unbroken 1,758 carat near gem quality diamond was recovered.
This recovery is the largest diamond recovered in Botswana and one of the largest diamonds in recorded history, superseding the spot held by the 1,109 carat Lesedi La Rona recovered from Karowe in 2015. Several large, high-value specials , single diamonds larger than 10.8 carats were sold in the Company’s first tender of 2019 which resulted in quarterly sales revenue of $48.7 million an almost double growth when weighed against 2018 Quarter 1 revenue of $25.4 million.
This represents $512 per carat for Lucara sales in the first quarter, yielding an operating margin of $343 per carat. During these three months period the Company held a blended tender in which diamonds recovered in the period December 2018 – February 2019 were sold. The Toronto Securities Exchange (TSE) listed diamond house highlights that the blended tender process decreases the inventory time to market of higher value diamonds.
A total of 95,057 carats were sold mirroring a significant growth compared to 63,317 carats sold in 2018 quarter 1, achieving a strong first quarter average price of $512 and with 50% more carats sold than Q1 2018. Historically, Lucara has sold diamonds through both regular stone tenders (RSTs) and exceptional stone tenders (ESTs). In September 2018, the Company modified its tender sales to a blended tender process, combining the sale of exceptional stones with the balance of run of mine production into one sale.
This change according to Lucara management 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. Beginning in December 2018, certain stones from the Karowe production were offered for sale through the Clara platform. Lucara says as the number of carats increases from better recovery in the smaller, lower value sizes, the average sales price per carat is reduced accordingly.
“The significant increase in carats is due to continued strong performance in the plant which had a record quarter of production of 0.76 million tonnes and an improved mine call factor,” observes Lucara Chief Executive Officer & President Eira Thomas, adding that Karowe plant also achieved record high availability during Q1 2019. The increase in the number of carats available for sale in the Q1 2019 tender follows commissioning of the sub-middles circuit in Q3 2017 and increased efficiency in diamond recovery in the smaller sizes and improved mill throughput.
The number of carats recovered in Q1 2019, being 121,437 carats processed from the mine was 60 percent higher than the 75,698 number of carats recovered in Q1 2018. On the expense front, for the period under review operating expenses increased from $14.6 million in Q1 2018 to $16.1 million in Q1 2019 due to a combination of higher volumes of ore mined and processed as well as an increase in the average cost per tonne mined.
The operating cash cost for the three months ended March 31, 2019 was $30.52 per tonne processed while in 2018 quarter 1 was $39.97 per tonne processed while a full year forecast for 2019 was cash cost of $32-$37 per tonne processed. Lucara management highlights in the statement that operating cash cost per tonne processed was positively impacted by a reduction in waste mined and an increase in tonnes processed during the first quarter
Depletion and amortization expense increased from $5.1 million in Q1 2018 to $11.6 million in Q1 2019 due to the 50 percent higher volume of carats sold during the period. Depletion and amortization expense has increased significantly as compared to prior periods for several reasons: an increasing number of fine diamonds recovered following improvements to the processing circuit implemented in late 2017, a larger 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 an update to the reserve base of the mine plan in Q3 2018.
Net income for the three months ended March 31, 2019 was $7.4 million, a significant pick up compared to a net loss of $7.0 million in the comparative quarter of 2018. Lucara President says the net income and earnings per share performance were as expected and reflect the stronger carat recoveries being achieved due to the investments in the plant as well as the transition to a blended sales tender process in 2019 creating a smoother revenue profile.
On the Clara space, a rough diamond digital sales platform under wholly ownership Lucara has continued to focus on building its customer base through the first quarter after its inaugural sale in Q4 2018. Lucara completed two sales during Q1 2019 with rough diamond sales of $1.4 million transacted through the platform. The company says it expects Clara to continue to grow its supply and demand concurrently through 2019 by adding third-party production to the platform as well as increasing the number of manufacturers who are buying on the platform.
Eira Thomas, President & CEO Lucara Diamond says her company focus on operational excellence has delivered another strong quarter, having met or exceeded guidance with respect to ore mined and processed as well as carats produced. “Costs were significantly down quarter over quarter and the first sale of the year delivered revenues in excess of US$ 47 million, in line with expectations,” she said in the statement.
Thomas further highlights that Lucara’s technologically advanced, XRT diamond recovery circuit delivered one of the largest diamonds in recorded history, the largest diamond recovered in Botswana, and the largest diamond to be mined at Karowe to date. “The unbroken 1,758 carat diamond is a testament to the remarkable nature of the Karowe resource and the strong operating environment prevailing at the mine.”
This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.
“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.
Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.
A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.
Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.
A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.
Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.
In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.
The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.
In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.
Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.
The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”
In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.
Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.
The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.