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Lucara's 2Q Revenue +50%, Profit -31%

Aug 14, 2014 6:21 AM   By Ronen Shnidman
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RAPAPORT... Lucara Diamond Corp. reported that revenue grew 50 percent year on year to $71 million during the second quarter that ended on June 30, adding that  a sharp increase in the average price of rough diamonds was observed. The average price of diamonds sold from the Karowe mine in Botswana, the company’s sole producing asset, rose 59 percent to $836 per carat during the quarter. The increase was due to the improved frequency and size of large diamond recovered at the mine following the installation of a second crusher circuit as well as strong demand in the rough diamond market.

Despite the steep increase in revenue, Lucara’s net profit fell 31 percent to $15.6 million and earnings per share declined by one-third to 4 cents during the quarter. The drop in profitability resulted from higher operating costs as the Karowe mine processed lower-grade ore and increased capital expenditures as the company pursued its plant optimization plan. Operating costs rose 22 percent, averaging $124 per carat,  while capital expenditures jumped to $11.5 million from $1.7 million a year earlier.

For the first half of 2014, Lucara’s revenue increased 30 percent to $103.8 million. However, Lucara’s net profit fell 28 percent to $20.7 million due to higher capital expenditures and operating costs. Earnings per share declined 38 percent to 5 cents during the period. Lucara sold 219,370 carats  for an average price of $586 per carat. The company also said that it earned $40.1 million from its July tender, which was after the end of the reporting period.

At Karowe, the company recovered 252 diamonds above 10.8 carats in size during the second quarter, with an average size of 27.84 carats among these diamonds. By June 30, the company had sold 30 diamonds for more than $1 million, 11 diamonds larger than 100 carats and 54 diamonds larger than 50 carats.

Management raised its guidance for 2014 revenue to between $240 million and $250 million, from an original guidance of $150 million to $160 million, due to the strong revenue performance, the company's current inventory and steady rough diamond market conditions. 
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Tags: Botswana, exceptional diamonds, Karowe, lucara, Ronen Shnidman, tender
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