Lucara lift revenue forecasts
Staff Writer | Tuesday August 19, 2014 16:57
In a statement, the company says that it has maintained its overall cost outlook for the mine of between $31-$33 per tonne ore processed with Karowe operating performance exceeding targets during the first six months of 2014.
“The company recovered a record number of 252 special stones (above 10 carats) during the period with an average size of 27.84 carats.
“Revenue is forecast between $240-$250 million based on the sale of between 400,000 to 420,000 carats.
“Karowe is still forecast to process between 2.2 - 2.4 million tonnes,” said the statement. The company is forecasting that a plant optimisation project currently on going at Karowe will cost up to $55 million, an increase from the $45-$50 million in previous guidance.
The additional cost includes the purchase of an additional diamond-sorting machine, which will be installed early, in the capacity of a large diamond recovery unit.
The company has also included costs to mitigate the impact of industrial action in the steel industry in South Africa, which commenced on July 1 and ended July 28.
“The company is forecasting a second quarter 2015 completion date for the plant optimization project and this timeline is not expected to affect 2015 production,” said the company.
Lucara Diamond reported that revenue grew 50 percent year on year to $71 million during the second quarter that ended on June 30, adding that a sharp increase in the average price of rough diamonds was observed.
The average price of diamonds sold from the Karowe mine in Botswana, the company’s sole producing asset, rose 59 percent to $836 per carat during the quarter. The increase was due to the improved frequency and size of large diamond recovered at the mine following the installation of a second crusher circuit as well as strong demand in the rough diamond market.
Despite the steep increase in revenue, Lucara’s net profit fell 31 percent to $15.6 million and earnings per share declined by one-third to four cents during the quarter. The drop in profitability resulted from higher operating costs as the Karowe mine processed lower-grade ore and increased capital expenditures as the company pursued its plant optimisation plan. Operating costs rose 22 percent, averaging $124 per carat, while capital expenditures jumped to $11.5 million from $1.7 million a year earlier.
“Lucara had a strong first half of the year and this has continued into the third quarter with our second exceptional stone tender in July, resulting in total year to date proceeds of $169 million, achieving $764 per carat.
“Following these results and our current diamond inventory we have increased our full year revenue guidance while maintaining our original carat production and operating cost guidance due to strong operational delivery at Karowe,” said William Lamb, President and Chief Executive Officer.