Lucara Diamond Corp hopes to sell their most prized gem early next year. The Canadian company says this time around they will not go for an auction, opting instead for single bid offer.
Lesedi La Rona, the second largest diamond ever recovered failed to find a buyer after bidders at the Sotheby’s auction in London failed to beat the minimum price. The bid for the magnificent 1109 carat diamond started at $50 million and ended up at $61 million, which was below the reserved price. Lesedi La Rona was expected to fetch at least $70 million while some analysts had even touted a much higher value over $100 million.
The stone was expected to set yet another record as the most expensive rough diamond ever sold following Lucara’s sale of an 813-carat rough diamond (named the Constellation), the world’s sixth largest, for $63 million in May. The Constellation was extracted alongside another 374 carat gem, a day after the discovery of Lesedi La Rona.
In an interview with Rapaport, the leading print publication for the diamond industry, William Lamb, Lucara's president and CEO stressed that the Lesedi La Rona will not be placed on auction again. The stone is currently undergoing analysis to determine the most valuable way it can be polished. Lucara expects the analysis will be completed midway through the first quarter before it initiates another sales process.
“We have not yet determined the best mechanism for the sales event. It will not be an auction,” Lamb said before adding that the most likely format will be a single bid offer, which may or may not be sealed. Still on the interview, Rapaport reports that Lamb said there was strong interest in the stone and they hope to have disposed of it within six months.
“We have had a significant number of people continue to show interest in the stone,” Lamb reported. Only those diamantaires who have directly requested it will be given the data ahead of an “exclusive sales event.” â€¨â€¨“We do not have a time for when this will occur but the hope is that we will be able to finalize its sale within the first half of 2017,” Lamb said.
Lucara Diamond Cop laid claim to the world second largest diamond to be ever mined in November last year when it unearthed a 1,111carat gem quality, Type IIa diamond. The white Type IIa diamond is considered the purest form of diamond. The magnificent stone, which originated from the south lobe of Lucara’s Karowe Mine, is the world’s second largest gem quality diamond ever recovered and the largest ever to be recovered through a modern processing facility. The stone was recovered by the newly installed Large Diamond Recovery (“LDR”) XRT machines. The stone measures 65mm x 56mm x 40mmin size and is the largest ever to be recovered in Botswana.
The unearthing of this exceptional gem diamond came more than a century later since the discovery of the world largest diamond; the 3,106-carat Cullinan, found near Pretoria in South Africa in 1905. It was cut to form the Great Star of Africa and the Lesser Star of Africa, which are set in the Crown Jewels of Britain.
Karowe mine has been a rare source of exceptional diamonds with its consistent recovery of large high value diamonds. Although it produces less than 1% of world’s diamonds, the mine is recovering more than 50% of the world’s diamonds larger than 100 carats. In January 2013, it sold a 9.46 carat blue diamond recovered from Karowe mine for $4.515 million. This was later followed by the mining of a 239 carat diamond, which at the time was the largest diamond ever to have been recovered from the highly prolific Orapa kimberlite in over 40 years of production.
This set in motion more discoveries of valuable diamonds, a 257 carat gem stone was unearthed in September 2013 and in May 2014, Lucara had mined 13 diamonds greater than 100 carats, two of which were greater than 200 carats. In the first half of 2015, Lucara’s prized jewel was the 342 gem quality diamond mined from the central and south lobe of Karowe. The diamond was auctioned for $20.55 million.
As the year comes to an end, the Canadian mining company has released operating guidance for 2017 accompanied by strong projections for the last quarter of the year. Lucara Diamond Corp’s revenue for fourth quarter 2016, including the second exceptional stone tender held in November this year, is $6.6 million at an average of $743 per carat. Total revenue for the year end, including the constellation diamond sale, is estimated to be $295 million at an average of $823 per carat. Revenue excluding the sale of the constellation diamond is estimated at $232 million at an average of $649 per carat.
Lucara Diamond Corp sold 14 exceptional stones at over $2 million per stone, including four stones at over $10 million per stone. In addition, Lucara Diamond Corp sold 20 exceptional stones between $1 to $2 million per stone. The company’s Karowe mine, to date, has yielded 1.8 million carats generating revenue of $1.02 billion at an average price of $566 per carat. The mine also surpassed the 5 million Lost Time Injury Free mark in November.
Lamb commented: "Achieving sales of $1 billion is a significant milestone for Lucara Diamond Corp and is arecognition of our strong client base and the quality of diamonds recovered from the Karowe mine. “Such a milestone could only have been achieved with the dedication of our employees, who have demonstrated a great commitment to working safely on site as exemplified by the Karowe mine surpassing 5,000,000 Lost Time Injury Free hours. We are pleased that our final sale of the year has shown strong demand for our larger higher quality diamonds and also a sustainable demand for the smaller size diamonds.
“We look forward to continued success in 2017 with the advancement of our exploration and deep drilling programs and the completion of our capital programs to enhance diamond recovery from the high value south lobe."
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”