Lucara Diamond Corp says it is optimistic that its subsidiary the Karowe diamond mine revenues might exceed the top end of its June 30th revenue guidance of $240 -$250 million.
This follows an outstanding performance in terms of ore and waste and the carats discovered for the nine month period to 30 September 2014.
“This forecast is based on current earnings of $241.4 million but also in consideration of its first entirely Gaborone based tender in November and a softening diamond market,” the company stated.
Lucara expects to sell between 400,000 to 420,000 carats in 2014 from the Karowe mine. The mine recently celebrated milestone achievement of 1million carats.
The Company held its third and final large stone tender for the year in October achieving proceeds of $46.4 million from the sale of 14 diamonds with a combined weight of 1,539 carats. The Company plans on holding a further two diamond tenders during the fourth quarter of the year.
The Non-IRFS measures are expected to remain between $31 $33 per ton ore treated Karowe is still forecast to process between 2.2-2.4 million tones. Forecast for ore mined remains at between 3.0-3.5 million tons and waste mined between 10.0-11.0 million tons.
The Company maintains its forecast total cost for the plant optimization project at $55 million and has revised its stay in business capital expenditures to $5.0million for the year. Additional capital is being spent on the Karowe slimes dam following a revised design plan during the year to increase overall capacity and decrease long-term costs.
The Company has also forecast an exploration capital expenditure of $3.5million, of which $1.4million is forecast to be spent in 2014 for the purchase of a bulk sample plant for work on its two Botswana prospecting licenses.
For now, Lucara Diamond says it is looking beyond Karowe mine as there is a possibility of a prolonged lifespan as the operations goes underground. Chief Operating Officer of the company, Paul Day said that Karowe has every chance of running far in excess of its original design life.
“There is a good chance that one day Karowe will develop an underground operation to take the life of this mine beyond that originally planned into 20135 or beyond,” Day said.
“We are already looking for Karowe2. Recently, the Ministry of Mines and Energy were awarded 2 X exploration packages and we will start an accelerated exploration program in these two areas in the very near future,” he added.
Day said the plant upgrade is the gateway to the future for Karowe. The Company has spent approximately $21.2 million of the forecasted $55 million. Industrial action by the National Union of Metalworkers of South African ended during the third quarter resulting in a 6-week project delay. The plant optimization project is forecast to be complete during the second quarter of 2015.
The Karowe mine which continues to be celebrated because of its outstanding performance performed well during the third quarter with tons of ore mined exceeding the mine plant during the period. Waste mined for the push back to open up access to the south lobe continues as planned. Ore mined for the period was ahead of forecast with higher than expected grades processed compared to the previous quarter.
Mill throughput and carats recovered were in line with forecast. A total of 126 special stones (+10.8carats) were recovered during the quarter at an average size of 30.71 carats.
Lucara Diamond Corp. says quarterly proceeds of $50.9 million at an average sales price of $625 per carat and operating expenses of $110 per carat. The company added that its strong cash flow generation has resulted in the company fully repaying its $50 million debenture during the fourth quarter.
William Lamb, President and Chief Executive Officer said Lucara has continued to see strong demand for its diamonds with revenues boosted by our Exceptional and Large Diamonds, which have now contributed $136 million this year following our large stone tender in October.
“These revenues, as well as our focus on cost control, have resulted in strong operating cash flows. We are re-investing in the business to secure future revenues through our plant optimization and large diamond recovery project and the commencement of exploration programs on two precious stone prospecting licenses in the Orapa region in Botswana,” said Lamb.
The Company has also declared a total dividend of CA$0.08 per share for 2014.
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”