For the first quarter of 2021, Lucara Diamond (TSX: LUC) reported revenues of US$53.1 million on US$579 per carat sold – up 56% from last year’s first quarter average of US$396 per carat.
After a difficult 2020, in which global travel and diamonds sale volumes were drastically reduced, the diamond miner reported a first-quarter market that was the healthiest it’s been in five years, with diamond prices rising in almost all sizes and qualities.
The company reported net income of US$3.4 million, compared with a net loss of US$3.2 million in the same quarter of last year. Operating costs rose slightly at the open-pit operation to US$215 per carat from US$201 per carat. At the same time, the higher sales prices boosted operating margins to US$364 per carat from US$195 per carat.
The sale of 91,760 carats (up from 86,178 carats last year) was completed through a combination of regular tenders, the company’s Clara online platform, and an agreement made with HB Antwerp covering the company’s production of “specials” – diamonds weighing 10.8 carats or more.
All production came from Lucara’s sole producing asset, the Karowe diamond mine in Botswana.
“Lucara has bounced back in the first quarter of the year, demonstrating its resiliency at a time of continued uncertainty in respect of the ongoing COVID-19 pandemic. Our solid performance in the first quarter reflects a stronger business environment, Lucara’s continued focus on operational discipline and our innovative approach to sales,” said Eira Thomas, president and CEO, in a release. “Our outlook for the diamond market remains strong, and with close to 20 years of future mining now ahead of us at Karowe, Lucara is highly levered to an improving diamond price environment, particularly in respect of large, high value gem diamonds, the hallmark of Karowe’s production profile.”
For the quarter, 670,000 tonnes of ore were processed at Karowe for 80,014 carats at a recovered grade of 11.9 carats per hundred tonnes. From that production, Lucara recovered 188 specials, two of which weighed over 300 carats.
Beginning in the second quarter of 2020, all specials mined from Karowe have been sold to HB Antwerp. Under the agreement between the two companies, HB buys production at a price based on the polished outcome of each diamond, with any difference (less a fee and the cost of manufacturing) paid to Lucara after the polished stone is actually sold. The agreement, which was initially in force until the end of 2020, has been extended to the end of 2022.
While some of last year’s pressures have eased as major diamond miners cut output to balance the market, Lucara noted that the resurgence of Covid-19 infections in India – a key manufacturing centre – is a major concern heading into the second quarter.
Lucara expects to make a decision on an underground expansion of Karowe later this year. The company recently made progress towards the completion of a US$220-million debt financing package for Karowe, with credit approved commitments received from five international lenders.
The remainder of the US$514-million expansion, which is expected to take five years to complete, will be funded through cash flows.
Lucara secured a 25-year extension to its Karowe mine licence late last year to 2046.
The mine’s open pit life extends to 2026 and the current underground mine life extends to 2040.