VANCOUVER, BC, Aug. 11, 2021 /PRNewswire/ -- (TSX: LUC) (BSE:
LUC) (Nasdaq Stockholm: LUC)
Lucara Diamond Corp. ("Lucara" or the "Company") today reports
its results for the second quarter of 2021 ending June 30, 2021, with strong financial and
operational performance. View PDF version
RECENT HIGHLIGHTS:
- Full project funding for the Karowe underground expansion
project following successful completion of debt and equity
financings in July:
-
- On July 12, 2021, loan
documentation was signed in relation to the previously announced
senior secured project financing debt package of $220 million (the "Facilities") between Lucara
Botswana as the Borrower and a syndicate of five mandated lead
arrangers. The Facilities include two tranches: a project finance
facility of $170 million to fund the
development of the underground project, and a $50 million working capital facility to
re-finance the Company's existing debt and to support on-going
operations.
- On July 15, 2021, the Company
closed two previously announced financings, generating gross
proceeds of C$41.4 million from the
sale of 55,157,733 common shares at a price of C$0.75 per share. Net proceeds from these
financings will be used for working capital to support the
development and ongoing operation of the Karowe Mine, including the
underground expansion.
- Recovery of four pink diamonds from direct milling from the
EM/PK(S) unit of the South Lobe, including a 62.7 carat high
quality, fancy pink Type IIa gem diamond and a 22.21 carat pink gem
of similar quality along with two additional pink gems of similar
colour and purity weighing 11.17, and 5.05 carats.
- Diamond market recovery in 2021 evidenced in Lucara's strong
operational and financial results for Q2 2021, with revenue of
$46.3 million resulting in an average
price per carat sold of $671.
- Sales through Clara increased 38% from Q1 2021, with
transaction values of $8.3 million
over six sales. Strong price increases continued through Q2 2021
and the number of buyers on the platform increased to 84 as of
June 30, 2021.
- A record production quarter for the recovery of specials, +10.8
carats, in Q2 2021 resulting in 10.2% weight percentage of total
direct milling recovered carats.
- The recovery of the third +1,000 carat diamond recovered from
the Karowe Mine since 2015, at 1,174.76 carat stone. During the
first half of 2021, 21 diamonds greater than 100 carats, and 5
diamonds over 300 carats have been recovered from Karowe.
Eira Thomas, President & CEO commented: "We end the second
quarter with a stronger, more positive outlook on the diamond
market, our business, and our plans for growth. With a fully
financed underground project now confirmed, we are excited to be
ramping up on our expansion plans at Karowe in the second half of
the year. Sales through Clara also continued strong in Q2,
demonstrating a great need for this transformational technology as
modernization of the diamond supply chain continues. In respect of
mining, Karowe delivered another record quarter in respect of
diamonds >10.8 carats in size, including 21 diamonds >100
carats, 3 diamonds > 300 carats and our 3rd diamond
over 1,000 carats. This remarkable resource continues to
improve the deeper we mine, consistent with the resource model and
underpins our rationale for the Karowe underground expansion,
extending mine-life out to at least 2040."
REVIEW FOR THE THREE MONTHS ENDED JUNE
30, 2021
- Operational highlights from the Karowe Mine included:
-
- Ore and waste mined of 1.0 million tonnes and 0.7 million
tonnes, respectively
- 0.73 million tonnes of ore processed resulting in 101,330
carats recovered, achieving a recovered grade of 13.9 carats per
hundred tonnes
- 261 Specials (+10.8 carats) were recovered from direct milling
during the second quarter, representing 10.2% weight percentage of
total direct milling recovered carats, a record production quarter
in terms of specials (Q2 2020: 6.4%).
- In addition to the 1,174 carat stone recovered, 16 diamonds
greater than 100 carats were recovered during the quarter,
including two diamonds > 400 carats, two diamonds > 200
carats, with a further 12 stones between 100 and 200 carats in
weight.
- Financial highlights for the three months ended June 30, 2021 included:
-
- Total revenue of $46.3 million
was recognized in Q2 2021 (Q2 2020: $7.5
million) or $671 per carat (Q2
2020: $109 per carat) from the sale
of 68,961 carats (Q2 2020: 68,979 carats).
- Operating cash cost(1) per tonne of ore processed
for the six months ended June 30,
2021 was $28.79 per tonne (Q2
2020: $27.14 per tonne), in line with
2021 guidance of between $28 and
$32 per tonne.
- The Company recorded net income of $6.0
million during Q2 2021 (earnings per share of $0.02), as compared to a net loss of $13.9 million for Q2 2020 (loss per share of
$0.04).
- Adjusted EBITDA(1) was $22.2
million as compared to adjusted EBITDA of negative
$10.0 million for the same period in
2020.
- As at June 30, 2021, the Company
had cash and cash equivalents of $13.7
million, an increase of $8.8
million from December 31, 2020
and net debt(1) of $36.6
million.
|
(1) See Non-IFRS
measures
|
- On April 6, 2021, a 24-month
extension was executed to the definitive supply agreement with HB
Antwerp ("HB") in respect of all diamonds produced in excess of
10.8 carats in size from the Karowe Mine. The extension will be
effective for the period from January 1,
2021 to December 31,
2022.
- On June 7, 2021, Lucara announced
the recovery of a 470 carat top light brown clivage diamond from
the Karowe Mine, measuring 49x42x26mm.
- On June 22, 2021, Lucara
announced the recovery of the third +1,000 carat diamond recovered
from the Karowe Mine since 2015. This recovery, a 1,174.76 carat
diamond measuring 77x55x33mm is described as a clivage gem of
variable quality with significant domains of high-quality white gem
material.
DIAMOND SALES
Diamond sales in Q2 2021 continued to be 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 $46.3
million or $671 per carat from
the sale of 68,961 carats with price recovery observed in most size
and quality classes. Included in revenue for the six months ended
June 30, 2021 is a variable
consideration of $5.1 million which
relates to "top-up" payments expected from polished diamond sales
in excess of the initial planned value paid to Lucara under the
initial HB sales agreements for rough diamonds delivered in
2020. Beginning in Q2 2020, all +10.8 carat diamonds mined
from Karowe were delivered 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
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. In April 2021, this
agreement was subsequently extended for a 24 month period,
effective from January 1, 2021 to
December 31, 2022.
Under the amended supply agreement with HB, +10.8 carat
production from the Karowe Mine 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 an adjusted
amount payable on actual achieved polished sales compared to 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.
CLARA SALES PLATFORM
Interest in Clara, Lucara's 100% owned proprietary, secure,
web-based digital sales platform, grew significantly in 2020 due to
continued global restrictions impeding travel for many diamond
manufacturers, combined with a new openness to purchasing rough
diamonds in an innovative way. That positive momentum
continued through H1 2021 with six sales in the second quarter and
total sales volume transacted of $8.3
million, a 38% increase from the $6.0
million transacted in Q1 2021. Encouragingly, Clara also
observed consistent price increases at each subsequent sale
throughout the period. The number of buyers on the platform
increased to 84 in Q2, from 80 in Q1. The Company is maintaining a
waiting list to manage supply and demand. A third party supplier
trialed the platform in Q2 and discussions continue with third
party sellers to build supply.
KAROWE UNDERGROUND EXPANSION UPDATE
The Karowe Underground Expansion Project ("UGP") will extend the
mine life to at least 2040 mining predominately from the highest
value EM/PK(S) unit, and is forecast to contribute approximately
$4 billion in additional revenues,
using conservative diamond prices.
A revised project cost and schedule has been developed that
captures the detailed engineering and design work through 2020
until May 2021, incorporating all
changes, improvements, and COVID-19 related delays. Overall capital
expenditures, including contingency have increased marginally
(approximately +4%), to $534 million,
driven by the increase to the production shaft diameter and
additional mine development. The Company has spent $51.4 million of the total budget on project
execution activities through 2020 to June
2021 and $22.6 million in Q2
2021. Total expenditures on the underground expansion project
in 2021 are expected to be up to $120
million. The schedule to 75% of full production has
increased by 1.3 years in comparison to the 2019 feasibility study,
driven mainly by COVID-19 related delays to commence the shaft
pre-sinking, and additional planned time for shaft station
break-outs and ground support. The open pit mining schedule has
been adjusted to push the open pit to 2026, with mill throughput
maintained at 2.7 million tonnes per annum. Underground
operation parameters with respect to waste and ore tonnes mined,
processed tonnes, recoverable diamond grade, recovered carats and
diamond pricing assumptions are unchanged from the 2019 feasibility
study.
DIAMOND MARKET
The diamond market continues to be strong and stable in 2021
following a very strong start to the year, where we have seen price
increases in virtually all sizes and quality of diamonds. The key
dominant retail markets for diamonds in the US and China remain buoyant, and the market continues
to be supported from lower supply from producers, and a pick up in
capacity in the midstream in India. 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. The potential challenges created by the
COVID-19 pandemic do however remain a key concern.
UPDATE ON COVID-19 RESPONSE
Measures and guidelines implemented by the Government of
Botswana 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. With increasing cases in
Botswana and surrounding countries
and limited opportunities for vaccination, restrictions on the
movement of people within zones in Botswana and curfews have been implemented and
are subject to change with limited notice. Concern remains over how
governments across the jurisdictions in which Lucara and many of
its customers operate will respond to increasing infection numbers
and variants of COVID-19, even as mass vaccination campaigns are in
progress in many countries.
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 which began in January 2021 and regular health screening,
temperature checks and the use of infrared measurements are also
routine. A government-sponsored vaccination program commenced in
Botswana in July.
QUARTERLY FINANCIAL HIGHLIGHTS
|
Three months
ended
June
30,
|
Six months
ended
June
30,
|
In millions of
U.S. dollars except carats or otherwise noted
|
2021
|
2020
|
2021
|
2020
|
|
|
|
|
|
Revenues
|
$
|
46.3
|
$
|
7.5
|
$
|
99.4
|
$
|
41.6
|
Net income (loss) for
the period
|
6.0
|
(13.9)
|
9.4
|
(17.1)
|
Earnings (loss) per
share (basic)
|
0.02
|
(0.04)
|
0.02
|
(0.04)
|
Earnings (loss) per
share (diluted)
|
0.01
|
(0.04)
|
0.02
|
(0.04)
|
Operating cash flow
per share*
|
0.05
|
(0.02)
|
0.11
|
0.00
|
Cash on
hand
|
13.7
|
13.7
|
13.7
|
13.7
|
Amounts drawn on
working capital facility
|
50.0
|
19.0
|
50.0
|
19.0
|
|
|
|
|
|
Average price per
carat sold ($/carat)*
|
671
|
109
|
618
|
268
|
Operating expenses
per carat sold ($/carat)*
|
219
|
174
|
217
|
189
|
Operating margin per
carat sold ($/carat)*
|
452
|
(65)
|
401
|
79
|
Carats
sold
|
68,961
|
68,979
|
160,721
|
155,158
|
(*) Operating cash
flow per share before working capital adjustments, average price
per carat sold, operating expenses per carat sold and operating
margin per carat sold are Non-IFRS measures.
|
QUARTERLY RESULTS OF OPERATIONS – KAROWE MINE, BOTSWANA
|
UNIT
|
Q2-21
|
Q1-21
|
Q4-20
|
Q3-20
|
Q2-20(1)
|
Sales
|
|
|
|
|
|
|
Revenues generated
from the sale of Karowe diamonds in the quarter
|
US$M
|
45.9
|
53.1
|
42.3
|
41.2
|
7.3(1)
|
Carats recovered from
Karowe sold for revenues recognized during the period
|
Carats
|
68,806
|
91,734
|
105,329
|
112,741
|
68,861
|
Average price per
carat for proceeds received during the period
|
US$
|
667
|
579
|
401
|
366
|
107(1)
|
Production
|
|
|
|
|
|
|
Tonnes mined
(ore)
|
Tonnes
|
1,020,267
|
1,100,622
|
748,296
|
678,110
|
683,282
|
Tonnes mined
(waste)
|
Tonnes
|
707,722
|
756,494
|
434,082
|
436,781
|
591,804
|
Tonnes processed
|
Tonnes
|
726,379
|
673,646
|
684,768
|
646,447
|
705,421
|
Average grade
processed
|
cpht
(*)
|
13.9
|
11.9
|
14.6
|
13.8
|
14.3
|
Carats
recovered
|
Carats
|
101,330
|
80,014
|
100,059
|
88,909
|
101,203
|
Costs
|
|
|
|
|
|
|
Operating costs per
carats sold (see Non-IFRS measures)
|
US$
|
219
|
215
|
205
|
192
|
174
|
Sustaining capital
expenditures
|
US$M
|
2.4
|
0.4
|
4.4
|
4.7
|
3.7
|
Underground expansion
project
|
US$M
|
22.6
|
9.9
|
8.3
|
4.8
|
3.9
|
(*) 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. A change to the allocation between ore and waste
mining has been adjusted in the 2021 guidance to reflect ore gains
realized in the first half of the year and adjustments in the mine
plan to support dewatering activities. Ore gains realized are of
lower quality material and will be stockpiled. There are no other
changes from the guidance previously released in February 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
(revised)
|
3.8 million to 4.2
million
|
Tonnes mined – Waste
(revised)
|
2.2 million to 2.6
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,
excluding capital on the underground expansion. This includes
expenditures associated with further upgrades to the XRT 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).
The proposed underground expansion at the Karowe Mine has an
estimated capital cost of $534
million and a five year development period. Total
expenditures on the UGP in 2021 are expected to be up to
$120 million. See "Karowe Underground
Expansion Update" above.
Proceeds from the 549 carat "Sethunya" collaboration agreement
with Louis Vuitton and HB, are
expected to be realized in 2021. The group is collaborating
and planning the creation of the highest value polished diamonds
from the unique rough stone, which will be made available to
Louis Vuitton exclusively. Lucara
will receive a payment based on the estimated polished outcome,
determined by HB's state of the art scanning and planning
technologies, with a true up paid on the actual achieved polished
sales thereafter, less a fee and the cost of manufacturing.
CONFERENCE CALL
The Company will host a conference call and webcast to discuss
the results on Wednesday, August 11,
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:
03343101 / 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=1483811&tp_key=0dc7900db8
The presentation slideshow will also be available in PDF format
for download from the Lucara website (Link to presentation).
Conference Replay:
A replay of the telephone
conference will be available two hours after the completion of the
call until August 18, 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: 343101 #.
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 August 10, 2021 at
5:00pm 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
second 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