VANCOUVER, BC, Nov. 10, 2020 /CNW/ - (TSX: LUC) (BSE: LUC)
(Nasdaq Stockholm: LUC)
Lucara Diamond Corp. ("Lucara" or the "Company") today reports
its results for the quarter ended September
30, 2020. View PDF version
HIGHLIGHTS:
- Recognized $41.3 million in
revenue during Q3 2020 or $365 per
carat. This includes diamonds sold through a combination of
regular tenders and Clara as well as 5,633 carats sold through HB
Antwerp ("HB") under the supply agreement announced in July 2020.
- Operating cash cost(1) of $26.92 per tonne of ore processed, due to a
combination of cost optimization efforts and depreciation of the
Botswana Pula against the U.S. dollar.
- EBITDA(1) of $9.9
million earned in Q3 2020
marks a return to a strong operating margin of
47%.
- Lucara continues to have a strong availability of working
capital, including $10.1 million in
cash at the end of Q3 and $30.0
million available from a revolving term credit
facility.
- Clara's customer base doubled during Q3 2020, from 35 to 71
customers. The platform began selling stones on behalf of
third party sellers, meeting a significant objective for 2020.
- An agreement was announced on November
4, 2020 between Lucara, Louis
Vuitton and HB to collaborate on the planning, cutting and
polishing of the exceptional, 549 carat white gem diamond referred
to as "Sethunya" meaning "Flower" in Setswana recovered from the
Karowe Mine in February 2020 (Press
Release November 4, 2020).
(1)
|
See Non-IFRS
measures
|
Eira Thomas, President & CEO commented: "Moving into Q3,
Lucara was pleased to see a stabilization of the rough diamond
market and an improvement in consumer demand for polished diamonds
in both Asia and the U.S.
markets. Karowe continued to perform well, delivering safe,
reliable production in line with plan. In Q3 we began recognizing
revenue from our new sales agreement with HB Antwerp, and though it
is still in its infancy, Lucara is now receiving regular,
predictable revenue for its +10.8 carat diamonds using a superior
pricing mechanism based on estimated polished outcomes less a
commission and the cost of polishing. For diamonds -10.8
carats in size, Clara continues to deliver strong results, growing
its customer base to more than 70 clients during this period and
completing its first sales of third party goods through the
platform. Clara continues to resonate strongly with
manufacturers that are restricted from traveling to purchase
diamonds in traditional venues and we are expecting to expand
trials with third party goods in Q4 and into 2021.
Finally, we are delighted to have entered into a second,
strategic collaboration with Louis
Vuitton, the world's leading luxury brand, and HB Antwerp
for the planning and polishing of the exceptional, 549 carat
white gem diamond referred to as "Sethunya" meaning "Flower" in
Setswana and recovered from the Karowe Mine in February 2020.
Sethunya is one of the highest quality exceptional diamonds ever
recovered at Karowe and we believe this partnership is a unique
opportunity to showcase it to the world and ultimately transform it
into an extraordinary, bespoke, polished diamond collection,
catering exclusively to Louis
Vuitton's global customer base."
REVIEW FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2020
- The Karowe Mine continued to deliver strong, safe, reliable
production results in the third quarter with the process plant
continuing to operate at full capacity.
- Operational highlights from Q3 2020 were as follows:
-
- Ore and waste mined of 0.7 million tonnes and 0.4 million
tonnes, respectively
- 0.65 million tonnes of ore processed resulting in 88,909 carats
recovered, achieving a recovered grade of 13.8 carats per hundred
tonnes
- 193 Specials (+10.8 carats) recovered from direct milling
during the third quarter, representing 6.5% weight percentage of
total direct milling recovered carats, in line with mine plan
expectations
- 8 diamonds were recovered greater than 100 carats in weight,
including 3 stones > 200 carats in weight
- No lost time injuries, resulting in a rolling twelve-month Long
Term Injury Frequency Rate of zero.
- The Company recorded a net loss of $5.4
million for Q3 2020 (Q3 2019 - $4.0
million net loss) resulting in a $0.01 loss per share (Q3 2019 – loss of
$0.01) for the quarter.
- Lucara recognized revenue of $82.9
million for the nine months ended September 30, 2020 from the sale of 268,101
carats or $309 per carat. This
represents a decrease from revenue of $136.5
million recognized for the nine months ended September 30, 2019 (313,189 carats sold at an
average price of $436 per carat). The
reduction in revenue results from a combination of a 15% decrease
in the number of carats sold and a deliberate decision not to sell
any diamonds +10.8 carats in favour of entering into a committed
supply agreement for these diamonds for the remainder of the year.
All +10.8 carat diamonds produced since the second quarter sales
cut off in March 2020 are now being
sold to HB at regular intervals, approximately twice a month. As a
result, revenue for stones ordinarily part of the Q2 and Q3 tenders
will continue to be recognized in Q4 2020.
- Capital allocated for the underground expansion program has
been reduced to $22 million (from the
original $53 million budget) and the
2020 program objectives have been re-scoped to focus on long lead
time critical-path items, detailed engineering and design, and
limited site activity focused on earth works and geotechnical
studies. During the nine months ended September 30, 2020, $10.4
million was spent on these project execution
activities.
(1)
|
See Non-IFRS
measures
|
SUPPLY AGREEMENT FOR +10.8 CARAT DIAMOND PRODUCTION FROM
KAROWE
Karowe's large, high value diamonds have historically accounted
for approximately 60% to 70% of Lucara's annual revenues.
Though the mine has remained fully operational throughout the
COVID-19 pandemic, Lucara made a deliberate decision not to tender
any of its +10.8 carat production after early March 2020 amidst the uncertainty caused by the
global crisis and the significant weakness observed in the rough
diamond market. The polished diamond market performed much better
through this period and subsequently, in July 2020, Lucara announced a ground breaking
partnership agreement with HB, entering into a definitive supply
agreement for the remainder of 2020, for all of the diamonds
produced in excess of +10.8 carats from our 100% owned Karowe
Diamond mine in Botswana.
Under the supply agreement with HB, Lucara's +10.8 carat
production is being 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 amount payable to
Lucara on actual achieved polished sales in excess of the initial
estimated polished price, less a fee and the cost of manufacturing.
The +10.8ct diamonds of poorer quality (clivage low, rejection
goods) are sold as rough parcels and do not enter the polishing
pipeline at HB This unique pricing mechanism is expected to deliver
regular cash flow at superior prices for this important segment of
our production profile. The decision to enter into the supply
agreement with HB for the remainder of 2020 followed a trial period
during Q2 2020 where approximately 3,100 carats of +10.8 carat
rough diamonds were placed into manufacturing ("Shipment 1").
Lucara will receive payment for the polished diamonds from Shipment
1 once those diamonds are sold by HB to an end customer, less a fee
and the cost of manufacturing.
Beginning in Q3 2020, the Company recognized revenue of
$25.9 million from these sales
agreements. The $13.5 million
deposit received in June as partial payment for +10.8 carat goods
delivered under the HB sales agreement has been fully allocated and
reduced to $nil as of September 30,
2020. Revenue for +10.8 carat stones ordinarily part of the
Q2 and Q3 tenders, as well as sales from Shipment 1, will continue
to be recognized in Q4 2020.
CLARA
With global restrictions impeding travel for many diamantaires,
the interest from buyers in Clara doubled during the third quarter,
increasing from 35 to 71 buyers. During Q3 2020, Clara began
selling stones on behalf of third party sellers, which was a
significant objective for 2020. Seven sales occurred on Clara
during the third quarter of 2020, with total transaction volumes of
$3.2 million. As Clara becomes the
online marketplace of choice for rough buyers, discussions are
underway with several producers to begin trials for the sale of
their diamonds on Clara.
FINANCIAL HIGHLIGHTS
|
Three months
ended
September
30
|
Nine months
ended
September
30
|
In millions of
U.S. dollars, except carats or
otherwise noted
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
Revenues
|
$
|
41.3
|
$
|
45.3
|
$
|
82.9
|
$
|
136.5
|
Net income (loss) for
the period
|
(5.4)
|
(4.0)
|
(22.4)
|
4.1
|
Earnings (loss) per
share (basic and diluted)
|
(0.01)
|
(0.01)
|
(0.06)
|
0.01
|
Operating cash flow
per share*
|
0.03
|
0.02
|
0.03
|
0.10
|
Cash on
hand
|
10.1
|
4.8
|
10.1
|
4.8
|
Amounts drawn on the
working capital facility
|
20.0
|
-
|
20.0
|
-
|
|
|
|
|
|
Average price per
carat sold ($/carat)*
|
365
|
390
|
309
|
436
|
Operating expenses
per carat sold ($/carat)*
|
192
|
201
|
190
|
182
|
Operating margin per
carat sold ($/carat)*
|
173
|
189
|
119
|
254
|
Carats
sold
|
112,943
|
116,200
|
268,101
|
313,189
|
|
(*) Operating cash
flow per share, average price per carat sold, operating expenses
per carat sold and operating margin per carat sold are Non-IFRS
measures.
|
QUARTERLY RESULTS OF OPERATIONS – KAROWE MINE, BOTSWANA
|
UNIT
|
Q3-20
|
Q2-20
|
Q1-20
|
Q4-19
|
Q3-19
|
Sales
|
|
|
|
|
|
|
Revenues generated
from the
sale of Karowe diamonds in the
quarter
|
US$M
|
41.2
|
7.3
|
33.8
|
56.0
|
45.3
|
Carats recovered from
Karowe
sold for revenues recognized
during the quarter
|
Carats
|
112,741
|
68,861
|
86,010
|
98,394
|
116,200
|
Average price per
carat for
proceeds received during the
quarter
|
US$
|
366
|
107
|
393
|
568
|
390
|
Production
|
|
|
|
|
|
|
Tonnes mined
(ore)
|
Tonnes
|
678,110
|
683,282
|
878,087
|
694,591
|
823,875
|
Tonnes mined
(waste)
|
Tonnes
|
436,781
|
591,804
|
1,199,660
|
740,593
|
1,489,668
|
Tonnes
processed
|
Tonnes
|
646,447
|
705,421
|
639,430
|
647,502
|
680,665
|
Average grade
processed
|
cpht (*)
|
13.8
|
14.3
|
14.3
|
13.31
|
13.92
|
Carats
recovered
|
Carats
|
88,909
|
101,203
|
91,536
|
86,4221
|
104,9902
|
Costs
|
|
|
|
|
|
|
Operating costs per
carats sold
(see Non-IFRS measures)
|
US$
|
192
|
174
|
201
|
209
|
201
|
Sustaining capital
expenditures
|
US$M
|
4.7
|
3.7
|
2.4
|
13.0
|
0.7
|
Underground expansion
project
|
US$M
|
4.8
|
3.9
|
1.7
|
-
|
-
|
|
(*) carats per
hundred tonnes
|
(1)
|
Carats recovered
during the period included 273 carats recovered from re-processing
historic recovery tailings from previous milling and are excluded
from the average grade processed.
|
(2)
|
Carats recovered
during the period included 10,646 carats recovered from
re-processing historic recovery tailings from previous milling and
are excluded from the average grade processed.
|
CONFERENCE CALL
The Company will host a conference call and webcast to discuss
the results on Wednesday, November 11,
2020 at 7:00 a.m. Pacific,
10:00 a.m. Eastern, 3:00 p.m. UK, 4:00 p.m.
CET.
CONFERENCE CALL:
Please call in 10 minutes before the
conference call starts and stay on the line (an operator will be
available to assist you).
Conference ID:
54473288 / Lucara Diamond
Dial-In Numbers:
Toll-Free Participant
Dial-In North America
|
(+1) 888 390
0546
|
All International
Participant Dial-In
|
(+1) 778 383
7413
|
Webcast:
To view the live webcast presentation, please
log on using this direct link:
https://produceredition.webcasts.com/starthere.jsp?ei=1389639&tp_key=fd95686472
The presentation slideshow will also be available in PDF format
for download from the Lucara website
www.lucaradiamond.com shortly before the conference call.
Conference Replay:
A replay of the telephone
conference will be available two hours after the completion of the
call until November 18, 2020.
Replay number (Toll
Free North America)
|
(+1) 888 390
0541
|
Replay number
(International)
|
(+1) 416 764
8677
|
The pass code for the replay is: 473288#
On behalf of the Board,
Eira Thomas
President and Chief Executive Officer
Follow Lucara Diamond on Facebook, Twitter, Instagram, and
LinkedIn
ABOUT LUCARA
Lucara is a leading independent producer of large exceptional
quality Type IIa diamonds from its 100% owned Karowe Mine in
Botswana and owns a 100% interest
in Clara Diamond Solutions, a secure, digital sales platform
positioned to modernize the existing diamond supply chain and
ensure diamond provenance from mine to finger. The Company
has an experienced board and management team with extensive diamond
development and operations expertise. The Company operates
transparently and in accordance with international best practices
in the areas of sustainability, health and safety, environment, and
community relations.
ABOUT CLARA
Clara Diamond Solutions Limited Partnership (Clara), wholly
owned by Lucara Diamond Corp, is a secure, digital sales platform
that uses proprietary analytics together with cloud and blockchain
technologies to modernize the existing diamond supply chain,
driving efficiencies, unlocking value and ensuring diamond
provenance from mine to finger.
The information in this release is accurate at the time of
distribution but may be superseded or qualified by subsequent news
releases.
The information is information that Lucara is obliged to make
public pursuant to the EU Market Abuse Regulation and the Swedish
Securities Markets Act. This information was submitted for
publication, through the agency of the contact person set out
above, on November 10, 2020 at
2:15pm Pacific Time.
NON-IFRS MEASURES
This news release refers to certain financial measures, such as
operating cash flow per share, adjusted EBITDA, average price per
carat sold, operating cost per carat sold, operating margin per
carat sold and operating cost per tonne of ore processed which are
not measures recognized under IFRS and do not have a standardized
meaning prescribed by IFRS. These measures may differ from
those made by other corporations and accordingly may not be
comparable to such measures as reported by other
corporations. These measures have been derived from the
Company's financial statements, and applied on a consistent basis,
because the Company believes they are of assistance in the
understanding of the results of operations and financial
position. Please refer to the Company's MD&A for the
third quarter, 2020 for an explanation of non-IFRS measures
used.
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain of the statements made and contained herein and
elsewhere constitute forward-looking statements as defined in
applicable securities laws. Generally, these forward-looking
statements can be identified by the use of forward-looking
terminology such as "expects", "anticipates", "believes",
"intends", "estimates", "potential", "possible" and similar
expressions, or statements that events, conditions or results
"will", "may", "could" or "should" occur or be achieved.
Forward-looking statements are based on the opinions and
estimates of management as of the date such statements are made,
and they are subject to a number of known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially
different from any future results, performance or achievement
expressed or implied by such forward-looking statements. The
Company believes that expectations reflected in this
forward-looking information are reasonable, but no assurance can be
given that these expectations will prove to be accurate and such
forward-looking information included herein should not be unduly
relied upon.
In particular, this release may contain forward looking
information pertaining to the following: the impact of COVID-19 on
the Company's cash flows and operations and its plans with respect
to the Karowe underground expansion project; the estimates of the
Company's mineral reserves and resources; estimates of the
Company's production and sales volumes for the Karowe Diamond Mine;
estimated costs for capital expenditures related to the Karowe
Diamond Mine; production costs; exploration and development
expenditures and reclamation costs; expectation of diamond prices
and the potential for the supply agreement with HB to achieve both
higher prices from the sale of polished diamonds and to provide
more regular cash flow than in previous periods; changes to foreign
currency exchange rates; assumptions and expectations related to
the possible development of an underground mining operation at
Karowe including associated capital costs, financing strategies and
timing; expectations in respect of the development and
functionality of the technology related to the Clara platform, the
intended benefits and performance of the Clara platform, including
ability to complete sales without viewing diamonds, the growth of
the Clara platform, the timing and frequency of sales on the Clara
Platform, and the quantum and timing of participation of third
parties on the Clara platform; expectations regarding the need to
raise capital and its availability; possible impacts of disputes or
litigation and other forward looking information.
There can be no assurance that such forward looking statements
will prove to be accurate, as the Company's results and future
events could differ materially from those anticipated in this
forward-looking information as a result of those factors discussed
in or referred to under the heading "COVID-19 Global Pandemic" in
the Company's most recent MD&A and under the heading "Risks and
Uncertainties"' in the Company's most recent Annual Information
Form, both available at http://www.sedar.com, as well as changes in
general business and economic conditions, the ability to continue
as a going concern, changes in interest and foreign currency rates,
the supply and demand for, deliveries of and the level and
volatility of prices of rough diamonds, costs of power and diesel,
acts of foreign governments and the outcome of legal proceedings,
inaccurate geological and recoverability assumptions (including
with respect to the size, grade and recoverability of mineral
reserves and resources), and unanticipated operational difficulties
(including failure of plant, equipment or processes to operate in
accordance with specifications or expectations, cost escalations,
unavailability of materials and equipment, government action or
delays in the receipt of government approvals, industrial
disturbances or other job actions, adverse weather conditions, and
unanticipated events relating to health safety and environmental
matters).
Accordingly, readers are cautioned not to place undue reliance
on these forward-looking statements which speak only as of the date
the statements were made, and the Company does not assume any
obligations to update or revise them to reflect new events or
circumstances, except as required by law.
SOURCE Lucara Diamond Corp.