VANCOUVER, BC, Feb. 22, 2021 /CNW/ - (TSX: LUC)
(BSE: LUC) (Nasdaq Stockholm: LUC)
Lucara Diamond Corp. ("Lucara" or the "Company") today reports
its results for the year and quarter ended December 31, 2020. View PDF version.
HIGHLIGHTS:
- Revenue of $42.4 million or
$402 per carat sold in Q4 2020. This
includes diamonds sold through a combination of regular tenders,
Clara, and through HB Antwerp ("HB") under the supply agreement
announced in July 2020.
- FY2020 total operating cash costs of $27.80 per tonne processed(1), 13%
lower than the prior year.
- Adjusted EBITDA(1) in Q4 2020 of $10.2 million marks a continued strong operating
margin of 49%.
- Lucara continues to have a strong availability of working
capital, including $4.9 million in
cash at the end of Q4 and $19.5
million available from a revolving term credit facility. No
long-term debt.
- Specials recovered (+10.8 carats) equated to 6.7% weight
percentage of total recovered carats, the fourth year to achieve
greater than 6%.
- Extension of the Karowe mining license for a period of 25 years
to 2046, marking a critical step in the advancement of the Karowe
underground expansion project.
- In January 2021, the Company
announced the recoveries of two, top white gem quality diamonds
(341 carats and 378 carats) from ore sourced from the M/PK(s) unit
within the South Lobe. Both stones were recovered unbroken.
(1) See
Non-IFRS measures
|
Eira Thomas, President & CEO commented: "The measures that
Lucara took early in the pandemic, including the decision not to
sell rough diamonds in excess of +10.8 carats after Q1, helped
protect and support prices for large, high value diamonds that
account for more than 70% of our revenues. These efforts in
conjunction with our transformational supply agreement with HB
Antwerp executed in July, resulted in strong price recoveries by
Q4, a trend which has continued into 2021. The recent recovery of
two, high value +300 carat stones continue to highlight the
extraordinary nature of the Karowe resource and underpin the
rationale for underground expansion, extending our mine life out to
at least 2040. In late 2020, the Government of Botswana also granted Lucara a mining license
extension for 25 years, a critical milestone for the underground
project, paving the way for the completion of a supplementary debt
financing in support of full project sanction, anticipated in the
second half of 2021."
REVIEW FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2020
- Mining and processing operations continued without interruption
at the Karowe Mine, where more than 98% of the workforce are
Botswana Nationals.
- Operational highlights for the year ended December 31, 2020 were as follows:
-
- Continuous operations with implementation of new health and
safety protocols to protect the health and well-being of employees,
contractors and local communities.
- Ore and waste mined of 3.0 million tonnes and 2.7 million
tonnes, respectively.
- 2.7 million tonnes of ore processed resulting in 381,706 carats
recovered, achieving a recovered grade of 14.3 carats per hundred
tonnes.
- Successful completion of planned XRT upgrades, a key component
of the diamond recovery circuit.
- A record setting year for the recovery of Specials (single
diamonds in excess of 10.8 carats):
-
- a 549 carat top-white gem diamond "Sethunya" (February 2020)
- a 998 carat, high white clivage diamond (November 2020)
- throughout the year, a total of 34 stones in excess of 100
carats, of which 10 stones exceeded 200 carats.
- Two unique collaboration agreements entered into with
Louis Vuitton and HB Antwerp to
create a high jewellery collection from the historic 1,758 carat
"Sewelô", the largest diamond ever mined in Botswana, and the 549 carat "Sethunya".
- Clara's customer base increased from 25 to 75 customers (+178%
in 2020), with continuous bi-weekly sales on Clara throughout 2020
providing regular cash flow and visibility into price trends.
- An investment of $18.7 million on
the Karowe underground expansion project under a re-scoped budget
focused on de-risking the project schedule (procurement of long
lead equipment, detailed design and engineering).
- Financial highlights for the year ended December 31, 2020 included:
-
- Total revenues of $125.3 million
(2019: $192.5 million) or
$335 per carat (2019: $468 per carat). Revenue, from this agreement,
will continue to be recognised in 2021 as rough diamonds delivered
in 2020 are sold as polished, and "top-up" payments are realised.
Price improvement was observed in all size categories in sales
concluded in December 2020.
- Adjusted EBITDA(1) of $18.4
million as compared to adjusted EBITDA for the same period
in 2019 of $73.1 million, a decrease
driven by lower revenues.
- Net loss for the year of $26.3
million ($0.07 loss per share)
as compared to net income of $12.7
million ($0.03 per share) in
2019.
(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 remained fully operational following the declaration of
COVID-19 as a global pandemic, Lucara made a 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 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.
This unique pricing mechanism has delivered regular cash flow 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 ("Shipment 1"). Lucara is
receiving payment for the polished diamonds from Shipment 1 as
those diamonds are sold by HB to end customers, less a fee and the
cost of manufacturing.
For the year ended December 31,
2020, the Company recognized revenue totalling $55.2 million from the two agreements with HB,
including an accrual for variable consideration of $7.2 million related to "top-up" payments arising
from polished diamond sales in excess of the initial purchase price
paid to Lucara. A slower than expected ramp-up in both
manufacturing and polished sales resulted in certain amounts, that
would otherwise have been recorded as revenue in 2020, now expected
to be realized in 2021.
SALES
Diamond sales for the fourth quarter of 2020 were held through a
combination of regular tenders, Clara, for diamonds less than 10.8
carats, and through HB under the supply agreement for those
diamonds greater than 10.8 carats. The Company recognized
revenue of $42.4 million or
$402 per carat from the sale of
105,648 carats. Price recovery was observed in most size and
quality classes. Of note, prices achieved for goods sold on Clara
(under 10.8 carats in size) in January
2021 have now recovered to the level of pricing achieved
early in 2020.
Total revenue for the year ending December 31, 2020 of $125.3 million was impacted by challenging market
conditions, a longer ramp-up for production and polished sales in
the latter half of 2020 under the HB supply agreement. As a
result, revenue from certain polished diamonds from Lucara's
highest value stones, that would otherwise have been recorded as
revenue in 2020, is now expected to be realized in 2021. During the
year ended December 31, 2020, Lucara
sold 373,748 carats at an average price of $335 carat.
CLARA
With global restrictions impeding travel for many diamantaires,
interest in Clara grew significantly in 2020 and the number of
buyers on the platform increased from 27 to 75. During 2020, Clara
began selling stones on behalf of third party sellers, which was a
significant objective for the year. 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.
KAROWE UNDERGROUND UPDATE
During the year ended December 31,
2020, $18.7 million was spent
on project execution activities including the following: Site
earthworks (consisting of laydown preparation and clearing of shaft
and surface infrastructure locations), geotechnical test pitting
and drilling, and completion of two pilot holes at the shaft
locations, a 746 metre hole for the ventilation shaft and a 768
metre hole for the production shaft. The Company was able to
complete on-site earth works and geotechnical studies by using
local contractors while a State of Emergency remained in effect in
Botswana. Long lead time item
orders were also placed for shaft muckers, and hoist and winder
refurbishment was initiated. In addition, power line
engineering and detailed shaft design and engineering (consistent
with original targets for 2020) progressed. In Q4 2020, the
Government of Botswana approved
the proposed powerline route and granted a 25-year extension to the
Karowe Mine License to 2046, sufficient to cover the remaining
open-pit life (to 2026) and the expected life of the proposed
underground expansion, currently planned to 2040.
The Company is actively exploring opportunities to arrange debt
financing for the underground expansion for those amounts which are
expected to exceed the Company's cash flow from operations during
the construction period. The underground expansion program has
an estimated capital cost of $514
million and a five year period of development.
DIAMOND MARKET
The diamond industry begins 2021 with a healthier supply-demand
balance than it has had at any stage in the past five years. This
follows an incredibly challenging year in 2020, characterized by
global travel restrictions, low sales volumes, pricing pressure and
overall, difficult economic conditions for miners, manufacturers,
retailers and consumers.
Since the end of last year, the market has seen healthy price
improvements in the rough market, supported by a strong holiday
sales period. Looking ahead, supply curtailments and a pick up
in consumer demand are expected to support a continuation of a
stable, positive price trend in both the rough and polished
markets. Longer-term fundamentals are expected to remain
strong, with the lack of new projects in the pipeline and the
expected increase in demand from growth markets, particularly in
China, due to rising wealth levels
and consumerism.
FINANCIAL HIGHLIGHTS
|
Three months
ended
December
31
|
Twelve months
ended
December
31
|
In millions of
U.S. dollars, except carats or otherwise noted
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
Revenues
|
$
42.4
|
$
56.0
|
$ 125.3
|
$
192.5
|
Net income (loss) for
the period
|
(3.9)
|
8.7
|
(26.3)
|
12.7
|
Earnings (loss) per
share (basic and diluted)
|
(0.01)
|
0.02
|
(0.07)
|
0.03
|
Operating cash flow
per share*
|
0.02
|
0.05
|
0.04
|
0.15
|
Cash on
hand
|
4.9
|
11.2
|
4.9
|
11.2
|
Amounts drawn on the
working capital facility
|
30.5
|
-
|
30.5
|
-
|
|
|
|
|
|
Average price per
carat sold ($/carat)*
|
402
|
568
|
335
|
468
|
Operating expenses
per carat sold ($/carat)*
|
205
|
209
|
194
|
189
|
Operating margin per
carat sold ($/carat)*
|
196
|
359
|
141
|
279
|
Carats
sold
|
105,648
|
98,547
|
373,748
|
411,732
|
(*) Operating cash
flow per share before working capital adjustments, average price
per carat sold, operating expenses per carat sold and operating
margin per carat sold are Non-IFRS measures.
|
QUARTERLY RESULTS OF OPERATIONS – KAROWE MINE, BOTSWANA
|
UNIT
|
Q4-20
|
Q3-20
|
Q2-20(1)
|
Q1-20
|
Q4-19
|
Sales
|
|
|
|
|
|
|
Revenues generated
from the sale of Karowe diamonds in the quarter
|
US$M
|
42.3
|
41.2
|
7.3
|
33.8
|
56.0
|
Carats recovered from
Karowe sold for revenues recognized during the quarter
|
Carats
|
105,329
|
112,741
|
68,861
|
86,010
|
98,394
|
Average price per
carat for proceeds received during the quarter
|
US$
|
401
|
366
|
107
|
393
|
568
|
Production
|
|
|
|
|
|
|
Tonnes mined
(ore)
|
Tonnes
|
748,296
|
678,110
|
683,282
|
878,087
|
694,591
|
Tonnes mined
(waste)
|
Tonnes
|
434,082
|
436,781
|
591,804
|
1,199,660
|
740,593
|
Tonnes
processed
|
Tonnes
|
684,768
|
646,447
|
705,421
|
639,430
|
647,502
|
Average grade
processed
|
cpht (*)
|
14.6
|
13.8
|
14.3
|
14.3
|
13.32
|
Carats
recovered
|
Carats
|
100,059
|
88,909
|
101,203
|
91,536
|
86,4222
|
Costs
|
|
|
|
|
|
|
Operating costs per
carats sold (see Non-IFRS measures)
|
US$
|
205
|
192
|
174
|
201
|
209
|
Sustaining capital
expenditures
|
US$M
|
4.4
|
4.7
|
3.7
|
2.4
|
13.0
|
Underground expansion
project
|
US$M
|
8.3
|
4.8
|
3.9
|
1.7
|
-
|
(*) carats per
hundred tonnes
|
(1)
|
During the three
months ended June 30, 2020 the Company made a decision to withhold
from sale all +10.8 carat stones due to market uncertainty arising
from the global pandemic. As a result, the quarterly revenue
recognized during Q2 2020 and the average price per carat sold are
not directly comparable to the other quarterly results presented in
the table above.
|
(2)
|
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.
|
2021 OUTLOOK
This section provides management's production and cost estimates
for 2021. These are "forward-looking statements" and subject to the
cautionary note regarding the risks associated with forward-looking
statements.
Karowe Mine (all
amounts in US Dollars)
|
Full Year
2021
|
Diamond
revenue
|
$180 million to $210
million
|
Diamond
sales
|
350,000 carats to
390,000 carats
|
Diamonds
recovered
|
340,000 carats to
370,000 carats
|
Tonnes mined –
Ore
|
2.8 million to 3.2
million
|
Tonnes mined –
Waste
|
2.8 million to 3.4
million
|
Tonnes processed –
Ore
|
2.6 million to 2.9
million
|
Total operating cash
costs per tonne processed (including (a) to (b) below):
|
$28.00 to
$32.00
|
(a)
Cash cost per tonne mined (ore and waste)
|
$5.00 to
$5.50
|
(b)
Cash cost per tonne processed
|
$11.15 to
$12.15
|
Botswana G&A
expenses, including sales and marketing, per tonne
processed
|
$3.00 to
$4.00
|
Tax rate
|
0% to 25%
|
Average exchange rate
– USD/Pula
|
11.0
|
In 2021, the Company's revenue forecast incorporates an increase
in the proportion of carats recovered from the higher value M/PK(S)
and EM/PK(S) units within the South Lobe in accordance with the
mine plan. The assumptions for carats recovered and sold are
consistent with achieved performance in recent years. The number of
tonnes processed is also consistent with recent achievements,
noting that actual tonnes processed in 2020 was lower than 2019 due
to several multi-day shut-downs for upgrades within the XRT
recovery circuit. Waste tonnes that were deferred in 2020 as a cost
saving measure are expected to be caught up in 2022 and 2023. The
estimated processing cost per tonne processed is lower than
previous years, reflecting a combination of strong operating
performance in the plant and insourcing of the process plant
contract in 2020.
The proposed underground expansion at the Karowe Mine has an
estimated capital cost of $514
million and a five year development period. An investment
decision, subject to receipt of all required authorizations and the
arrangement of financing, is expected in H2 2021. The year one
capital spend on the expansion program is expected to be
$105 million. Until financing
can be arranged and an investment decision is made, a limited
amount of funding has been approved for H1 2021, based on the
Company's ability to fund the initial capital expenditures from
operating cash flow. Similar to the 2020 program, the 2021 program
will focus on early works, including detailed engineering and
design work, with the objective of mitigating key risks related to
the development schedule.
Lucara Botswana's progressive tax rate computation allows for
the immediate deduction of operating costs, including capital
expenditures, in the year in which they are incurred. Based on 2021
revenue guidance of $180 million to
$210 million and assuming the
underground development expenditures are incurred, the expected tax
rate will be 0% for 2021. Changes to the timing and amount of
capital expenditures may result in a rate of up to 25% for
2021.
Sustaining capital and project expenditures are expected to be
up to $21.0 million in 2021,
including expenditures associated with further upgrades to the XRT
recovery circuit to create redundancy in the Large Diamond Recovery
circuit and implementation of body scanning technology (to enhance
security) which had originally been planned for 2020 but was
delayed whilst regulatory approval was pending (required approvals
were received in Q4 2020).
Proceeds from two unique collaboration agreements with
Louis Vuitton and HB, both entered
into in 2020, are expected to be realized in 2021. The objective of
the collaboration agreements is to create a high jewellery
collection from the historic 1,758 carat "Sewelô", the largest
diamond ever mined in Botswana,
and the 549 carat "Sethunya".
CONFERENCE CALL
The Company will host a conference call and webcast to discuss
the results on Tuesday, February 23,
2021 at 7:00 a.m. Pacific,
10:00 a.m. Eastern, 3:00 p.m. UK, 4:00 p.m.
CET. 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:
55915704 / Lucara Diamond
Dial-In Numbers:
Toll-Free Participant
Dial-In North America
|
(+1) 888 390
0546
|
UK Toll
free
|
0 800 652
2435
|
All Other
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=1429054&tp_key=0487cf5667
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 March 2, 2021.
Replay number (Toll
Free North America)
|
(+1) 888 390
0541
|
Replay number
(International)
|
(+1) 416 764
8677
|
The pass code for the replay is: 915704 #.
On behalf of the Board,
Eira Thomas
President and Chief Executive Officer
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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.
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 February 22, 2021 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 fourth 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
pandemic on the Company's operations and cash flows 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;
estimates of variable consideration receivable pursuant to the HB
Antwerp supply agreement; 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
risks and uncertainties described under the heading "Risks and
Uncertainties" in the Company's most recent Annual Information Form
available at http://www.sedar.com (the "AIF").
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.