Lucara posts impressive earnings in Q1
Business
LESEDI LA RONA: The 813 carat stone held in inventory at March 31, 2016
In the latest string of good news from Lucara Diamond Corporation, the miner has announced that it has had a terrific first quarter following improved diamond sales, marking a departure from 2015 which was fraught with low diamond prices and subdued sales. In the latest announcement, Lucara reported strong demand and pricing for its first quarter diamond sale and will commence the sales process for the Lesedi La Rona diamond, the world’s second largest gem quality diamond ever recovered and the largest ever to be recovered over a century since the discovery of the world largest diamond; the 3,106-carat Cullinan.
In the first quarter of the year, Lucara’s revenue shot up by 70% to deliver $50.6 million following marked improvement in diamond prices which increased from an average of $278 to $649 per carat, representing 133% increase. Earnings Before Interest Tax Depreciation and Amortization (EBITDA) for the period was $30.7 million, a 158% surge from previous corresponding period, with an EBITDA margin of 61%. The company also improved on its Net cash position of $144.3million (Q12015: $87.5 million, FY 2015: $134.8 million).
The company’s impressive performance was in part due to costs containment. Year to date costs at $25 per tonne ore processed continue to be well controlled and below forecast. First quarter 2016 earnings per share were $0.05 per share (Q1 2015: $0.02 per share). The company recently got a boost following the end of quarter one, as the first exceptional stone tender achieved $51.3 million, resulting in year to date revenue exceeding $100 million.
In another strategic move to cut costs and extract efficiencies, the trailblazing miner completed the transfer of its shares of Mothae Diamonds Pty Ltd and the site bulk sample plant to the Government of Lesotho. In consideration, the company was released from any rehabilitation liability for the Mothae Project, which had been accrued in the accounts for approximately $2 million. The completion of the sale now leaves Lucara to focus on its lucrative Karowe mine which has proved to be an excellent investment for the company. 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
William Lamb, President and Chief Executive Officer, Commented “Lucara’s high quality stones and production assortment has resulted in strong customer demand for our product generating revenues of over $100 million this year. With management’s focus on cost control we continue to achieve high operating margins and returns. Lucara’s exploration program continues to advance and with the deep 2 drilling of the Karowe resource due to commence in the second quarter we are excited by the prospects for the remainder of 2016 and the potential organic growth opportunities. The sale of the Lesedi La Rona diamond, the 1,109 carat stone discovered in November has commenced and is resulting in a great deal of interest and excitement for this magnificent, historic stone, culminating in an auction during the month of June”.
The buoyant Lucara has upped its stakes with forecast revenue between $200 million and $220 million for the year ending December 31, 2016. This excludes the anticipated sale of the two high value diamonds, the Lesedi La Rona and the 813 carat stone held in inventory at March 31, 2016. While it appears that the company will most likely exceed its forecast following the improved sentiments in the first quarter of the year, the recent reports from diamond industry insiders still point to a shaky and fragile industry that has not yet fully recovered from last year’s slump.
“The first quarter of 2016 was relatively positive for the diamond trade. However, trading was largely driven by dealers looking to replenish select inventory to fill existing orders.
Jewellers and diamond dealers are carefully managing their inventory, while consumer demand is uncertain,” this was according to Rapaport Group, an international network of companies providing added-value services that support the development of fair, transparent, efficient, and competitive diamond and jewellery markets.
In its latest press release this week, Rapaport has noted that polished diamond trading slowed in April due to sluggish demand at the start of a seasonally-quiet period.
Sentiment weakened as the positive momentum from the first quarter failed to gain traction. Supplies significantly increased due to high rough sales and polished production in the first quarter. Furthermore, the Rapaport Monthly Report highlighted concern among diamond traders that consumer demand is weak. While a steady U.S. market supported the diamond industry, sentiment in the Far East and European markets remained cautious.
“Rough demand is expected to slow from May as manufacturing levels have stabilized. Polished trading is also expected to remain slower this month. Amid declining global demand, dealers have shifted focus to the U.S. ahead of the Las Vegas shows that begin May 31.”
Business
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.
Business
Food import bill slightly declines
The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.
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Business
Moody’s Reaffirms African Trade Insurance’s A3 Rating & Revises Outlook to Positive
Moody’s Investors Service (“Moody’s”) has affirmed the A3 insurance financial strength rating (IFSR) of the African Trade Insurance Agency (ATI) for the fifth consecutive year and changed the outlook from stable to positive.
Moody’s noted that the change in outlook to positive reflects the strong growth in ATI’s membership base – that has resulted in improved portfolio diversification, strengthened capital adequacy, and the good profitability despite the challenging operating environment. In addition, ATI benefits from its preferred creditor status (PCS) amongst sovereign member states which protects it from the risk of default by member sovereigns through securing recoveries against claims paid on guarantees.
The strong membership and equity growth are some of the key considerations for the consistent reinstatement of ATI’s A/Stable rating by Standard & Poor’s and Moody’s rating, over the years. Also supporting the rating affirmation are; consistent improvement in financial performance, commitment of its shareholders who continue to uphold the preferred creditor status, its high quality and conservative investment portfolio as well as strong relationships with a number of global reinsurers that provide significant risk-bearing capacity.
With the change in outlook to “positive”, ATI is now better placed to provide enhanced support to its member countries, attract additional shareholding and grow its portfolio. The positive outlook is an indication that if ATI continues to demonstrate its strong underwriting performance and ability to recover claims under the preferred creditor arrangements, among other factors, an upward pressure towards an upgrade may be generated. The Moody’s press release can be accessed from here
Commenting on the rating, Africa Trade Insurance Chief Executive Officer Manuel Moses said: “This positive revision is in line with our 2023 – 2027 strategic objectives in which we set to improve our rating outlook to positive in the first year, and achieve an upgrade of at least “AA”/Stable rating by both Moody’s and S&P within this Strategic Plan period. We aim to achieve this by doubling our exposures and increasing our capital to more than USD1 billion.”
ATI’s mandate is to provide trade-credit and political risk insurance, as well as other risk mitigation products to its member countries and related public and private sector actors. These insurance products not only directly encourage and facilitate foreign direct investment as well as local private sector investment in our member countries, but also contribute to intra- and extra-African trade.
About The African Trade Insurance Agency
ATI was founded in 2001 by African States to cover trade and investment risks of companies doing business in Africa. ATI predominantly provides Political Risk, Credit Insurance and, Surety Insurance. Since inception, ATI has supported US$78 billion worth of investments and trade into Africa. For over a decade, ATI has maintained an ‘A/Stable’ rating for Financial Strength and Counterparty Credit by Standard & Poor’s, and in 2019, ATI obtained an A3/Stable rating from Moody’s, which has now been revised to A3/Positive.