VANCOUVER, BC, May 6, 2021 /PRNewswire/ -- (TSX: LUC)
(BSE: LUC) (Nasdaq Stockholm: LUC)
Lucara Diamond Corp. ("Lucara" or the "Company") today reports
its results for the first quarter of 2021 ending March 31, 2021, with strong financial and
operational performance. View PDF version.
HIGHLIGHTS:
- Revenue of $53.1 million or
$579 per carat sold in Q1 2021, 56%
higher than Q1 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.
- Q1 2021 total operating cash costs of $29.24 per tonne processed(1), 7%
lower than Q1 2020.
- Adjusted EBITDA(1) in Q1 2021 of $22.2 million, marking a return to higher levels
of operating margin.
- 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.
- Specials recovered (+10.8 carats) equated to 6.8% weight
percentage of total recovered carats.
- 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.
- In April 2021, Lucara announced
the 24-month extension of its novel supply agreement with HB, in
respect of all diamonds produced in excess of 10.8 carats in size,
from the Karowe mine, to be sold as polished.
- In May 2021, Lucara received
credit approved commitments from a syndicate of five international
lenders for a senior secured project financing debt package of up
to $220 million to fund an
underground expansion at the Karowe Mine in Botswana.
(1) See
Non-IFRS measures
|
Eira Thomas, President & CEO commented: "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. We
also made significant progress towards the completion of a
supplemental debt financing package with credit approved
commitments received from five international lenders, in support of
our plans for underground expansion. 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."
REVIEW FOR THE THREE MONTHS ENDED MARCH 31, 2021
- Operational highlights from the Karowe Mine included:
-
- Ore and waste mined of 1.1 million tonnes and 0.8 million
tonnes, respectively.
- 0.67 million tonnes of ore processed resulting in 80,014 carats
recovered, achieving a recovered grade of 11.9 carats per hundred
tonnes.
- 188 Specials (+10.8 carats) were recovered from direct milling
during the first quarter, representing 6.8% weight percentage of
total direct milling recovered carats, in line with resource
expectations.
- 2 diamonds were recovered greater than 300 carats in weight and
2 diamonds were recovered greater than 200 carats in weight.
- Financial highlights for the three months ended March 31, 2021 included:
-
- The Company recorded net income of $3.4
million during Q1 2021 (earnings per share of $0.01), as compared to a net loss of $3.2 million for Q1 2020 (loss per share of
$0.01).
- Adjusted EBITDA(1) was $22.2
million as compared to adjusted EBITDA of $8.1 million for the same period in 2020.
- The value of the rough diamonds transacted through the Clara
platform in Q1 2021 was $6.0 million
over six sales, double the $3.0
million transacted on the platform in Q1 2020. Strong price
increases have been observed in each of the sales conducted since
the beginning of the year.
- As at March 31, 2021, the Company
had cash and cash equivalents of $27.9
million, an increase of $23.0
million from December 31, 2020
and net debt of $22.2 million.
Following the quarter-end, on May 5,
2021 the Company's $50 million
working capital facility was extended with Rand Merchant Bank, a division of FirstRand Bank
Limited, London Branch.
(1) See
Non-IFRS measures
|
DIAMOND SALES
Diamond sales in Q1 2021 were held through a combination of
regular tenders, and the Clara platform, 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 $53.1 million or $579 per carat from the sale of 91,760 carats.
Price recovery was observed in most size and quality classes.
Included in this amount is variable consideration of $9.1 million which relates to "top-up" payments
which arise from polished diamond sales in excess of the initial
planned value paid to Lucara. Beginning in Q2 2020, all +10.8 carat
diamonds mined from Karowe were sold to HB pursuant to the terms of
the diamond supply agreement described below.
HB 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 groundbreaking
partnership agreement with HB, entering into a definitive supply
agreement for the remainder of 2020, for all diamonds produced in
excess of +10.8 carats from our 100% owned Karowe Diamond mine in
Botswana. This agreement was
subsequently extended for a 24 month period, from January 1, 2021 to December 31, 2022.
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 delivers regular cash flow for this
important segment of our production profile.
Revenue from stones delivered to HB in 2020 will continue to be
recognised in 2021 as polished diamonds are sold, and "top-up"
payments are realised.
CLARA SALES PLATFORM
With global restrictions impeding travel for many diamond
manufacturers, interest in Clara, Lucara's proprietary, secure,
web-based digital sales platform, grew significantly in 2020 and
that positive momentum continued through Q1 2021. Six sales were
held in the first quarter with total sales volume transacted of
$6.0 million, more than double the
volume from the comparable period in 2020. Encouragingly, Clara
also observed consistent price increases at each subsequent sale
throughout the period. The number of buyers on the platform
increased to 80 and the Company is maintaining a waiting list to
manage supply and demand. Discussions continue with third party
sellers to build supply.
KAROWE UNDERGROUND EXPANSION UPDATE
During Q1 2021, the Company spent $9.9
million on project execution activities for the Karowe
underground expansion, including shaft and geotechnical
engineering, surface infrastructure, dewatering and power line
engineering and procurement. Site construction work commenced early
in the quarter and in March the production and ventilation shaft
box cuts were drilled and blasted to bulk excavation elevations. A
significant amount of time and effort was also spent on due
diligence related to technical, environment and social matters as
part of ongoing project financing efforts.
This follows the $18.7 million
spent on project execution activities in 2020 including: site
earthworks, geotechnical test pitting and drilling, power line
engineering, and works on the shaft design and engineering. In Q4
2020, the Government of Botswana
("GRB") 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.
In March 2021, a mandate for a
senior secured project financing package of up to $220 million (the "Mandate") to fund the
underground expansion at Karowe was executed with a syndicate of
five international financial institutions, including ING Bank
N.V., Natixis, Societe Generale, London Branch, Africa Finance Corporation and
Afreximbank (collectively, the "MLAs"). The formal Mandate included
a non-binding indicative term sheet for debt facilities of up to
$220 million (the "Facilities"). In
May 2021, Lucara received credit
approved commitments for a senior secured project financing debt
package of up to $220 million from
the MLAs. Closing of the Facilities is targeted to be mid-2021,
with financing in place for the second half of 2021. The receipt of
credit approved commitments is a key milestone in the project
financing process for the Karowe underground expansion, which has
an estimated capital cost of $514
million and a five-year development period. The balance of
development capital is expected to come from operating cash flow
generated by open pit operations at Karowe during the development
period. Detailed due diligence is expected to be concluded in the
near term. Financial closing of the Facilities is subject to
satisfactory completion of definitive documentation, and
satisfaction of certain terms and conditions, including appropriate
KYC checks.
An investment decision, subject to receipt of all required
authorizations and the arrangement of financing, is expected in H2
2021. Total expenditures on the underground project in 2021 are
expected to be $105 million. Until
financial close of the Facilities is complete 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.
DIAMOND MARKET
The diamond market began 2021 in a healthier position than it
has at any stage over the past five years, resulting in increasing
price performance in virtually all sizes and quality of diamonds in
Q1 2021. This follows a challenging year in 2020 as a result of the
global COVID-19 pandemic, characterized by global travel
restrictions, low sales volumes, pricing pressure and overall,
difficult economic conditions for miners, manufacturers, retailers
and consumers.
During Q1 2021, the diamond market remained buoyant following a
strong holiday sales period, particularly in China and the United
States. Careful rough diamond supply management by the
producers has also helped to re-balance polished diamond
inventories and stabilize the market overall. COVID-19 remains a
key concern, however, even as vaccination programs are being rolled
out in many countries around the world. India, a major manufacturing centre for
diamonds, is of particular concern heading into the second quarter
as infection rates have increased dramatically, resulting in new
lock-down measures.
UPDATE ON COVID-19 RESPONSE
Measures and guidelines implemented by the GRB in late
March 2020, and the current state of
emergency in Botswana, has still
allowed for the Karowe Mine to remain fully operational throughout
the pandemic as mining has been designated an essential service in
Botswana. The current state of
emergency has been extended and currently the published end date is
September 30, 2021.
The Company continues to operate under its approved crisis
management plan, designed to protect the health and well-being of
our employees in Botswana and
Canada as well as the financial
well-being of the business. The Company has permission to conduct
COVID-19 testing at our operations in Botswana and active testing of the workforce
began in January 2021. Regular health
screening, temperature checks and the use of infrared measurements
are also a routine part of the operations.
QUARTERLY FINANCIAL HIGHLIGHTS
|
Three months ended
March 31,
|
In millions of
U.S. dollars except carats or otherwise noted
|
2021
|
2020
|
|
|
|
Revenues
|
$
|
53.1
|
$
|
34.1
|
Net income (loss) for
the period
|
3.4
|
(3.2)
|
Earnings (loss) per
share (basic and diluted)
|
0.01
|
(0.01)
|
Operating cash flow
per share*
|
0.06
|
0.02
|
Cash on
hand
|
27.9
|
27.4
|
Amounts drawn on
working capital facility
|
50.0
|
19.0
|
|
|
|
Average price per
carat sold ($/carat)*
|
579
|
396
|
Operating expenses
per carat sold ($/carat)*
|
215
|
201
|
Operating margin per
carat sold ($/carat)*
|
364
|
195
|
Carats
sold
|
91,760
|
86,178
|
(*) Operating cash
flow per share before working capital adjustments, average price
per carat sold, operating expenses per carat sold and operating
margin per carat sold are Non-IFRS measures.
|
QUARTERLY RESULTS OF OPERATIONS – KAROWE MINE, BOTSWANA
|
|
|
|
|
|
|
|
UNIT
|
Q1-21
|
Q4-20
|
Q3-20
|
Q2-20(1)
|
Q1-20
|
Sales
|
|
|
|
|
|
|
Revenues
generated from the sale of
Karowe diamonds in the quarter
|
US$M
|
53.1
|
42.3
|
41.2
|
7.3(1)
|
33.8
|
Carats recovered from
Karowe sold for
revenues recognized during the period
|
Carats
|
91,734
|
105,329
|
112,741
|
68,861
|
86,010
|
Average price per
carat for proceeds
received during the period
|
US$
|
579
|
401
|
366
|
107(1)
|
393
|
Production
|
|
|
|
|
|
|
Tonnes mined
(ore)
|
Tonnes
|
1,100,622
|
748,296
|
678,110
|
683,282
|
878,087
|
Tonnes mined
(waste)
|
Tonnes
|
756,494
|
434,082
|
436,781
|
591,804
|
1,199,660
|
Tonnes processed
|
Tonnes
|
673,646
|
684,768
|
646,447
|
705,421
|
639,430
|
Average grade
processed
|
cpht
(*)
|
11.9
|
14.6
|
13.8
|
14.3
|
14.3
|
Carats
recovered
|
Carats
|
80,014
|
100,059
|
88,909
|
101,203
|
91,536
|
Costs
|
|
|
|
|
|
|
Operating costs per
carats sold (see Non-IFRS
measures)
|
US$
|
215
|
205
|
192
|
174
|
201
|
Sustaining capital
expenditures
|
US$M
|
0.4
|
4.4
|
4.7
|
3.7
|
2.4
|
Underground expansion
project
|
US$M
|
10.0
|
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 deliberate 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.
|
2021 OUTLOOK
This section provides management's production and cost estimates
for 2021. No changes have been made to the Guidance previously
announced. 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
|
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 Friday, May 7, 2021 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:
76196170 / 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=1456126&tp_key=287c91a276
The presentation slideshow will also be available in PDF format
for download from the Lucara website (www.lucaradiamond.com).
Conference Replay:
A replay of the telephone conference will be available two hours
after the completion of the call until May
14, 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: 196170 #.
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 May 6, 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 first quarter, 2021 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
Antwerp 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 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.
Investor Relations & Communications: +1 604 674 0272,
info@lucaradiamond.com; Sweden:
Robert Eriksson, Investor Relations
& Public Relations, +46 701 112615, reriksson@rive6.ch; UK
Public Relations: Charles Vivian / Jos Simson,
Tavistock, +44 778 855 4035, lucara@tavistock.co.uk