Lucaraís glory days back with 28 % jump in revenue
Lucara Diamond Corporation, the Canadian top gem producer, mining some of the world’s best diamonds in Karowe, has raked in $68.2 million (Over P700 million) for the first quarter of 2022, a 28 percent increase from $53.1 million in the first quarter of 2021.
The company, listed both in Canada and Botswana has credited the stellar performance to strong rough and polished diamond market fundamentals during the first 3 months of 2022.
The combination of a strong diamond market, combined with the sale of several higher value rough diamonds in Q1 2022 generated an average price per carat (excluding top-up payments) of $690 for Karowe diamonds sold during the quarter, a significant increase from the Q1 2021 figure of $480 per carat.
Lucara said in the financial results published on Friday that the strong rebound in diamond jewelry demand, combined with growing global natural rough diamond supply†constraints, contributed to a healthy recovery in diamond prices in 2021.
This price strength continued into the first quarter of 2022 where increases were observed across most sizes, qualities and colors of diamonds. Current pricing trends have been impacted by uncertainty triggered by geopolitical events, including the conflict in Ukraine and the COVID-19 pandemic.
Lucara however noted that it continues to experience a healthy market fundamentals in overall, highlighting a positive longer-term outlook for diamond prices. On the impact of Russian diamond sanctions, Lucara said though Russia†accounts for a significant portion of global reserves, the impact cannot be predicted at this time.
During the first 3 months of 2022 Lucara continued to conduct diamond sales†through a combination of regular tenders, and the Clara platform, for diamonds less than 10.8 carats, and through HB under the sales agreement for those gem and near-gem diamonds greater than 10.8 carats which are to be manufactured and sold as polished.
All other diamonds are sold in quarterly tenders. The $68.2 million( P700 million) revenue in the first quarter of 2022 from the sale of 80,295 carats from Karowe included top-up payments of† $11.7 million as well as $1.0 million from the sale of third-party goods on the Clara platform.
In comparison, the Company achieved revenues of $53.1 million from sales of 91,760 carats in the first quarter of 2021 which included top-up payments of $9.1 million as well as $0.1 million in revenue from third-party goods sold through the Clara platforms.
The exceptionally strong performance throughout 2021 was driven by higher diamond prices which were reflective†of the impact of strong demand for both rough and polished diamonds, combined with supply constraints in certain†size classes. This strength continued into Q1 2022.
Beginning in Q2 2020, all +10.8 carat diamonds mined from Karowe were delivered to HB pursuant to the terms of the diamond sales agreement described below. A total of 186 Specials (single diamonds in excess of 10.8 carats) were recovered, representing 6.9% weight Specials (Q1 2021: 6.8%).
For the three months ended March 31, 2022, Lucara recorded revenue of $45.2 million from the HB agreement (inclusive of top-up payments of $11.7 million), as compared to revenue of $38.0 million in Q1 2021(inclusive of top-up payments of $9.1 million).
In Q1 2021, all +10.8 carat stones were sold through HB. Beginning in April 2021 when the HB agreement was extended, any +10.8 carat stones not earmarked for manufacturing by HB were sold through the Companyís quarterly tender process.
The increase in revenue in Q1 2022 is attributed to higher prices achieved, despite lower sale volumes. As a result of the sales agreement with HB, the Company also participated in polished diamond price increases during Q1 2022 as rough diamonds sold to HB in previous quarters were polished and sold.
In Q1 2022, top-up payments of $11.7 million (Q1 2021: $9.1 million) were included in revenue for the quarter. At March 31, 2022 a number of higher value and more technically complex stones that take longer to manufacture had not fully completed the†manufacturing and sales process.
These stones were delivered to HB in 2021 and Q1 2022. As these stones finish the manufacturing process and are sold, the Companyís may record additional revenue in the form of ďtop-upĒ
In terms of Clara, Lucaraís 100% owned proprietary, secure, web-based digital sales platform, business continued†to gain scale and interest during the first quarter of 2022 as the benefits of purchasing rough diamonds in an innovative way†becomes more evident.
In Q1 2022, three sales (Q1 2021: six sales) took place with a total sales volume transacted of $7.0 million, a 17% increase from the $6.0 million transacted in Q1 2021, reflecting a strong upward price trend observed on Clara during Q1 2022.
The number of buyers on the platform increased to 92 at March 31, 2022 with the Company maintaining a waiting list to manage supply and demand. During the first 3 months of 2022† Lucara spent† $31.1 million (over P350 million ) on the Karowe Underground Project ,† focused on shaft pre-sinking activities and construction of a new 29km 132kV transmission line.
The Karowe Underground Project is expected to extend the mine life to at least 2040, with underground carat production predominantly from the highest value EM/PK(S) unit and is forecast to contribute approximately $4 billion in additional revenues, using conservative diamond prices.
The project has an estimated $534 million capital cost and a five-year construction period. Mine ramp up is expected in Q1 2026 with full production from the UGP expected in H2 2026.The Company is financing the project through a combination of cash flow from operations and project debt.
Commenting on the performance Eira Thomas, Lucara President & Chief Executive Officer said the company begins the year on a positive trajectory, having fully financed and significantly de-risked† growth plans for the underground expansion in 2021 and delivered another strong quarter of operating and financial results in Q1, reflecting solid performance at the mine combined with continued buoyancy in diamond prices.
“Preparation for main shaft sinking is well underway and anticipated to begin in Q2. Our multi-channel approach to sales through tenders, Clara and HB continues to mature, creating alignment along the value chain, delivering efficiencies and higher margins. Despite current geo-political challenges, Lucara remains optimistic about diamond prices as natural rough diamond supply constraints continue to manifest globally,Ē she said.
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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.
‚ÄúIn 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,‚ÄĚ 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.
‚ÄúCommunity 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,‚ÄĚ 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.
‚ÄúAs 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‚Äôs 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,‚ÄĚ said the Minister of Minerals and Energy.
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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Moody‚Äôs Reaffirms African Trade Insurance‚Äôs A3 Rating & Revises Outlook to Positive
Moody‚Äôs Investors Service (‚ÄúMoody‚Äôs‚ÄĚ) 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‚Äôs noted that the change in outlook to positive reflects the strong growth in ATI‚Äôs 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‚Äôs A/Stable rating by Standard & Poor‚Äôs and Moody‚Äôs 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 ‚Äúpositive‚ÄĚ, 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: ‚ÄúThis 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 ‚ÄúAA‚ÄĚ/Stable rating by both Moody‚Äôs 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.‚ÄĚ
ATI‚Äôs 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 ‚ÄėA/Stable‚Äô rating for Financial Strength and Counterparty Credit by Standard & Poor‚Äôs, and in 2019, ATI obtained an A3/Stable rating from Moody‚Äôs, which has now been revised to A3/Positive.