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Extreme losses for Lucara in Q1

Publishing Date : 14 May, 2018

Author : TSHEPISO GABOTLHOMOLWE

After a mixed bag of events during the first quarter of 2018, including change in management, and the successful discovery of a 472 and 327 carat diamonds from the south ore lobe respectively, Lucara Diamond’s first quarter results declined when compared to the first quarter of the just ended year.


The Vancouver-based miner, which operates the Karowe mine in Botswana has reported achieved earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.4-million which when compared to the same period prior year has a made a 3.5 million loss.
Although the company has made a substantial loss in comparison, they have noted that Revenue, EBITDA and earnings per share performance were as expected. They have highlighted that they reflect the overall timing of the Company’s sales tenders, with a single tender held during the first quarter.
 

Net loss for the three months ended 31st March 2018 has been reported at $7.0 million reflecting a loss of $0.02 per share as compared to a loss of $1.5 million ($0.00 per share) in the comparative quarter and is attributable to lower revenues, higher depletion and amortization costs, higher administrative and other expenses as compared to the same period in 2017.


The Company’s cash balance as at March 31 2018 is reported to have been $ 43.6 million, a decrease of $ 17.5 million from the December 31, 2017 cash balance of $ 61.1 million. The company has associated the decrease mainly due to the Company’s reduction in non-cash working capital by $ 5.8 million, capital expenditures of $4.0 million primarily for the sub-middles XRT project audit facility. This is reported to have had an effect on capitalized production stripping costs which amounted to $6.8 million with the $50 million credit facility undrawn.


In the reported period, Lucara’s Karowe mine has noted that Ore and waste mined during the three months ended March 31, 2018 amounted to 0.6 million tonnes and 4.0 million tonnes respectively. Tonnage processed was within forecast at 0.6 million tonnes, with a total of 75,698 carats recovered. Ore processed was predominantly from the South lobe. During Q1, a total of 218 specials (single diamonds larger than 10.8 carats) were recovered including four diamonds greater than 100 carats in weight. Recovered specials equated to 6.8% weight percentage of total recovered carats during the first quarter.


The Chief Executive Officer (CEO) Eira Thomas noted that Karowe delivered solid performance in the first quarter; she said this was underpinned by production from the South Lobe which yielded 218 specials diamonds greater than 10.8 carats in size. She noted that this was the third best quarterly tally ever, and included eight diamonds greater than 100 carats in size. The CEO further highlighted that large stone recoveries continued into April and included a 472 carat top light brown and a 327 carat white gem. Eira cited that the strong sales result achieved from their first Regular Stone Tender of the year is consistent with the improving sentiment of the broader diamond market, and positions Lucara well for its June sale, which will include both a Regular Stone Tender and an Exceptional Stone Tender.”


Lucara Diamonds, which has sold diamonds through both regular stone, tenders (RST’s) and exceptional stone tenders (EST’s) notes that they will continue using the method. The Diamonds that qualify for EST’s are rare, selected on a range of criteria including weight, quality, color, and, often achieve sales prices in excess of USD$ 1 million per diamond. On average, Lucara has held between 4 and 5 RST’s and 1 to 2 EST’s per annum. As they continue to Lucara continues to adjust its sales strategy to maximize client participation and achieve best possible revenue.


As a result, Lucara has decided to conduct an Exceptional Stone Tender (EST) during the regular tender scheduled for June 2018 and thereafter, will move to a blended tender process, whereby a greater number of exceptional stones will be sold as part of RST’s. This they note will decrease the inventory time for large, high value diamonds and will generate a smoother, more predictable revenue profile that better supports price guidance on a per sale basis. As part of this new approach, Lucara will retain the optionality of tendering truly unique and high value diamonds through special tenders, outside of the scheduled RST’s.

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