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Lucara Revenue Slides in Challenging 2020 Market

Feb 23, 2021 8:08 AM   By Rapaport News
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Lucara Diamond Corp.’s sales fell in 2020 as the miner held back special-sized rough from its Karowe mine in Botswana in the first half amid weak market prices.

“The measures that Lucara took early in the pandemic, including the decision not to sell rough diamonds in excess of 10.8 carats…, helped protect and support prices for large, high-value diamonds that account for more than 70% of our revenues,” Lucara CEO Eira Thomas said Monday.

Proceeds for the year dropped 35% to $125.3 million. Sales volume slipped 9% to 373,748 carats, while the average price slid 28% to $335 per carat.

The miner sold rough at tenders, on its Clara sales platform, and through a partnership it signed in July with Belgium-based manufacturer HB Antwerp for rough over 10.8 carats. Due to a slower-than-expected ramp-up in manufacturing and polished sales under the supply agreement with HB, the company now expects certain amounts that would otherwise have been recorded as revenue in 2020 to be realized in 2021, it noted. 

Lucara had a record year for big stones, finding 34 diamonds weighing more than 100 carats. Two were over 500 carats, including the 549-carat Sethunya, which the company sold into a partnership with Louis Vuitton and HB, and a 998-carat, high-quality white diamond. Production for the year decreased 7% to 381,706 carats.

The miner reported a net loss of $26.3 million, compared to a profit of $12.7 million in 2019, as rough demand and prices fell.

As global travel restrictions disrupted live tenders, customers showed greater interest in Lucara’s Clara sales platform, which matches buyers with available rough based on their polished needs. The number of buyers on the platform increased from 25 to 75 in 2020, and the company began to sell stones on behalf of third-party suppliers. The company is now in discussions with several producers to begin trials for selling their diamonds on Clara as well, Lucara said.

During the year, the miner spent $18.7 million on work to expand Karowe to underground mining, which will extend the mine’s life until 2040.

Revenue for the fourth quarter plunged 24% to $42.4 million. A 29% drop in the average price to $402 per carat outweighed a 7% rise in sales volume to 105,648 carats. Lucara reported a loss of $3.9 million for the three months ending December 31, compared to a profit of $8.7 million the previous year.

The miner expects to produce between 340,000 and 370,000 carats in 2021, and to sell 350,000 to 390,000 carats. Revenue is expected to grow to between $180 million and $210 million as Lucara recovers a higher proportion of stones from its higher-value M/PK(S) and EM/PK(S) areas of Karowe’s south lobe.

Image: The 549-carat Sethunya diamond. (Lucara Diamond Corp.)
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Tags: Botswana, Clara, Eira Thomas, HB, HB Group, Karowe mine, Louis Vuitton, lucara, Lucara Diamond Corp., Rapaport News, Sethunya
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