Lucara diamond sales beat forecasts, stock rises

Lucara Diamond recovered this 1,111-carat diamond, the second largest in history, at its Karowe Mine in Botswana. Photo courtesy Lucara Diamnond Corp.

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Lucara Diamond Corp. [LUC-TSX, LUCRF-OTC; Botswana, Sweden] shares moved higher Thursday December 19 after the company said its final diamond tender of 2019 generated sales of US$52.9 million, 16% above the company expectations.

The diamond tender, held on December 12, 2019, achieved an average price of US$548 per carat, bringing Lucara’s 2019 revenue to US$192.5 million and exceeding the 2019 forecast of between US$170 and US$180 million.

Market pricing movements were noted in all size classes, the company said in a press release on Thursday.

Lucara shares advanced on the news, rising 3.8% or $0.03 to 82 cents on volume of 911,741. The shares are currently trading in a 52-week range of 78 cents and $1.87.

Lucara is a diamond producer and explorer focused on developing its portfolio of advanced stage assets in Africa. Its principal asset and current focus is the 100%-owned Karowe Mine in Botswana. It is a single open pit mine, located on the northern fringe of the Kalahari Desert in one of the world’s most prolific diamond producing areas. It came into production in 2012 and produced a total of 366,086 carats in 2018 from 2.6 million tonnes of processed ore. That marked a record throughput for the Karowe plant.

News of better-than-expected diamond sales follows on the heels of feasibility study results for the planned underground portion of the Karowe mine.

Karowe is one of the world’s most prolific producers of large, high-value Type 2A diamonds. It is the only diamond mine in recorded history to have produced two greater than 1,000-carat diamonds.

The underground expansion at Karowe is expected to extend the life of the mine beyond the open pit by about 13-15 years out to 2040, with potential upside at depth.

The study envisages life-of-mine production from underground and open pit operations of 7.8 million carats out to 2040, delivering US$5.25 billion in gross revenue and after-tax undiscounted net cash flow of US$1.2 billion, assuming no real diamond price escalation.

In January, 2019, the company announce its inaugural diamond sale through the 100%-owned Clara digital sales platform. Clara uses proprietary analytics together with cloud and blockchain technologies to modernize the existing diamond supply chain.

Manufacturers participate in sales on Clara by placing electronic orders specifying the polished diamond parameters they require and the price they are willing to pay. Using proprietary analytics, Clara matches individual, scanned rough diamonds to the buyers’ optimal polished requirements, creating a sale.

In an update on Clara, the company said trials with at least two third-party suppliers are expected to begin in early 2020. It said Clara has completed 16 sales in 2019 while growing its customer base from four to 27 clients.

“Demand outstripped available supply in recent sales, so management believes the platform is ready to take on more third-party rough diamond supply,” Lucara said.

In addition, the company noted that Clara is achieving strong prices for Karowe stones while also generating attractive margins for its customers, confirming the concept of the platform which is more efficient than traditional sales channels.

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