Lucara's goose to lay more golden eggs
Pauline Dikuelo | Friday February 26, 2021 15:37
This will be a bump from the $125.3 million (P1.4 billion) in revenues recorded for 2020.
In a recent presentation of financials to investors, the Canadian firm said it expects diamond sales of up to 390,000 carats. In the year ended December 31, 2020, Lucara sold 373,748 carats at an average price of $335 per carat.
Eira Thomas, Lucara president and CEO, said this year the company’s revenue forecast incorporates an increase in the proportion of carats recovered from the higher value units within the South Lobe per the mine plan.
“The assumptions for carats recovered and sold are consistent with achieved performance in recent years,” she said.
The CEO added the company’s revenue was impacted by challenging market conditions, a longer ramp-up for production and polished sales in the latter half of 2020 under the transformational HB Antwerp supply agreement.
Lucara’s Karowe Mine has become world-famous for discovering the 1,109-carat Lesedi la Rona and the 813-carat Constellation in 2015, before unearthing the 1,758-carat Sewelo in April 2019. Lesedi la Rona was sold for $53 million (P566 million at current rates) in 2017, while Constellation became the highest ever-selling single rough diamond going for $63.1 million (P673 million) in 2016.
Last month, Karowe announced the discovery of unbroken 341-carat and 378-carat top white gem quality diamonds, within 12 days of each other. Meanwhile, the Ministry of Mineral Resources, Green Technology and Energy Security is still studying recommendations on whether to take up shares in Lucara Diamond Corp.
Minerals Development Company Botswana (MDCB), the government agency that holds all State interests in minerals, has already conducted and completed due diligence into the Lucara stake. Officials there said they had forwarded their recommendations to the minerals ministry.
By law, the government can acquire up to 15% equity in mining ventures, although it does not always exercise the right.
The issue of equity in Lucara has become highly topical, as Karowe keeps unearthing historic diamonds and creating value for its shareholders. Analysts say government snapping up equity now would be timely as Lucara’s shares on the Botswana Stock Exchange have been trending downwards since 2016, losing 24% in the last 12 months alone.
Had the government attempted to buy into Lucara at its peak, it would have paid P34.78 per share at open market rates in 2016. Today, however, Lucara trades at P5.10.
On the other hand, the acquisition of shares now could also open the government up to funding commitments for Karowe’s P6 billion underground expansion. Lucara executives have said the company is exploring debt financing options 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 is expected to be completed by 2026 and represents Karowe’s future.