Lucara Diamond Corp. has seen its revenue reach $72.7 million during Q3 2021, a 57% increase over the previous quarter.
The miner enjoyed strong production in the third quarter with recovery of Specials (+10.8 carats) at 7.9% weight per cent. There was recovery of four pink diamonds from direct milling from the EM/PK(S) unit of the South Lobe, including a 62.7 carat high quality, fancy pink Type IIa gem diamond and a 22.21 carat pink gem of similar quality along with two additional pink gems of similar colour and purity weighing 11.17, and 5.05 carats.
Recovery of a 393.5 carat top white Type IIa gem quality diamond from direct milling of ore sourced from the M/PK(S) unit of the South Lobe being the third gem quality +300 carat produced from the M/PK(S) unit in 2021, following the recovery of two top white gems (341 carats and 378 carats) in January 2021. In addition, a 257.7 carat top white Type IIa gem quality diamond was recovered during the August production month.
Clara platform transaction values totalled $6.6 million in Q3 2021, a 136% increase from the $2.8 million transacted in Q3 2020. Clara observed strong price increases continuing through the quarter and the number of buyers on the platform increased from 84 to 87 as of September 30, 2021.
Sales under the HB supply agreement of $50.5 million in Q3 2021, resulting in an average price per carat of $8,066. The strong performance reflects a high proportion of Specials (+10.8 carat) recovered and sold, higher market prices for diamonds, and top-up payments received for polished diamond sales.
Eira Thomas, President & CEO commented: “Strong production, including a high volume of Specials (diamonds >10.8 carats in size), combined with our innovative and optimized approach to sales of rough and polished diamonds into a strengthening market for diamond jewellery, has delivered a 57% increase in revenues quarter over quarter. The Company also formally sanctioned the underground expansion project, following the arrangement of full project financing, which will support operations at Karowe at current production rates until at least 2040. These developments have significantly de-risked Lucara’s outlook on growth and has positioned the Company to benefit from a stronger, more stabilized diamond price environment as global rough diamond supply remains constrained.”
Diamond sales in Q3 2021 continued to be held through a combination of regular tenders, and the Clara platform, for diamonds less than 10.8 carats, and through HB under the supply agreement for those diamonds greater than 10.8 carats which are to be manufactured and sold as polished. The Company recognized revenue of $72.7 million or $619 per carat from the sale of 117,459 carats. Stronger performance was driven by a high proportion of Specials (+10.8 carats) recovered and sold over the quarter, higher diamond prices and a contribution from top-up payments for polished diamonds sold under the HB supply agreement. Beginning in Q2 2020, all +10.8 carat diamonds mined from Karowe were delivered to HB pursuant to the terms of the diamond supply agreement described below.
Karowe’s large, high value diamonds have historically accounted for approximately 60% to 70% of Lucara’s annual revenues. Though the mine remained fully operational following the declaration of COVID-19 as a global pandemic, Lucara decided not to tender any of its +10.8 carat production after early March 2020 amidst the uncertainty caused by the global crisis and the significant weakness observed in the rough diamond market. The polished diamond market performed better through this period and subsequently, in July 2020, Lucara announced a partnership agreement with HB, entering into a definitive supply agreement for the remainder of 2020, for all diamonds recovered that exceed +10.8 carats from the Company’s 100% owned Karowe Diamond mine in Botswana. In April 2021, this agreement was subsequently extended for a 24-month period, effective from January 1, 2021 to December 31, 2022. Under the amended supply agreement with HB, +10.8 carat production from the Karowe Mine is being sold at prices based on the estimated polished outcome of each diamond, determined through state-of-the-art 3 scanning and planning technology, with an adjusted amount payable on actual achieved polished sales, less a fee and the cost of manufacturing. Changes to the payment profile were also amended in the extended agreement to better reflect the timing of mine production and the manufacturing process. This unique pricing mechanism delivers regular cash flow for this important segment of our production profile. The Company recorded revenue of $50.5 million over the third quarter, compared to $25.9 million in Q3 2020. Polished sales frequency and prices achieved have continued to increase through 2021, resulting in higher revenue.
Clara Sales Platform
Clara, Lucara’s 100% owned proprietary, secure, web-based digital sales platform, continues to gain scale and interest. In the third quarter, 4 sales took place with a total sales volume transacted of $6.6 million, a 136% increase from the $2.8 million transacted in Q3 2020. Clara also observed a steady upward price trend at each subsequent sale throughout the period. The number of buyers on the platform increased to 87 in Q3, from 84 in Q2, with the Company maintaining a waiting list to manage supply and demand. Platform trials and discussions continued through the quarter and are ongoing with third parties to build supply. Interest in Clara has grown considerably since 2020, sparked by global restrictions on travel, combined with a new openness to purchasing rough diamonds in an innovative way.
Diamond Market
Following a challenging 2020, the diamond market in 2021 continues to be in a healthy balance due to robust demand and lower rough supply. The market remained stable in Q3 despite concerns there may be a softening in the Chinese market. Midstream demand remains strong with capacity in particularly India remaining high leading up to an expected strong holiday season over the coming months. [bse.co.bw]