Lucara extends diamond sales deal to 2032

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Lucara Diamond Corp. [LUC-TSX, LUCRF-OTC] said it has entered into an extended diamond sales agreement with Lucara Botswana Ppy. Ltd. and HB Trading BV, for the purpose of selling 10.8-plus-carat rough diamonds produced from Lucara’s 100%-owned Karowe diamond mine in Botswana until the end of 2032.

Lucara first partnered with HB in 2020 to sell Karowe’s large, high-value diamonds, which have historically accounted for approximately 60%-70% of Lucara’s annual revenues. The agreement extends the arrangement for 10 years.

Under the agreement, Lucara’s 10.8-plus-carat production is sold at prices based on the estimated polished outcome of each diamond, determined through state-of-the art scanning and planning technology, with a true up paid on actual achieved polished sales thereafter, less a fee and the cost of manufacturing.

The agreement is consistent with the terms of the previous arrangement with HB, with refinements to more accurately reflect how parties have been working together.

Lucara said the pricing mechanism of the agreement with HB results in complete transparency within the value chain, creating important alignment between all participants in the value chain and delivering regular cash flow at superior prices for this important segment of the company’s production profile.

“As one of the world’s most important sources of large, high-value type 11a diamonds, our approach provides customers with complete confidence in the origin of their diamonds and full insight on how our business is governed, delivering on our commitments to industry-leading, best practise in responsible mining in Botswana,’’ said Lucara CEO Eira Thomas.

The Lucara mine has been in production since 2012 and is the focus of the company’s operations and development activities.

For the nine months ended September 30, 2022, a total of 245,764 carats were sold from Karowe at an average price of $528 per carat, generating revenue of $129.9 million before top-up payments of $33.8 million. Revenue for that period came in at $170.5 million the company said.

In the highlights from its recent third quarter results, Lucara said rough and polished diamond prices continue to exceed prices from 2021, despite growing global economic uncertainties.

The current mine plan is based on probable reserves form surface to a depth of 324 metres below surface of 19.84 million tonnes containing 2.6 million carats. Total mineral reserves (including stockpiles) stand at 25.40 million tonnes containing 2.96 million carats.

On January 4, 2021, the company said its mining license has been renewed and is effective for 25 years, securing the company’s mining rights to 2046.

On November 16, 2017, Lucara shares closed at 53 cents and currently trade in a 52-week range of 74 cents and 48.5 cents.

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