TIDM0QUI
RNS Number : 9644P
Lucara Diamond Corp
22 February 2021
February 22, 2021
NEWS RELEASE
LUCARA ANNOUNCES STRONG Q4 2020 SALES AND OPERATIONAL
RESULTS
VANCOUVER, February 22, 2021 /CNW/ (LUC - TSX, LUC - BSE, LUC -
Nasdaq Stockholm)
Lucara Diamond Corp. ("Lucara" or the "Company") today reports
its results for the year and quarter ended December 31, 2020.
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 YEARED 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:
o Continuous operations with implementation of new health and
safety protocols to protect the health and well being of employees,
contractors and local communities.
o Ore and waste mined of 3.0 million tonnes and 2.7 million
tonnes, respectively.
o 2.7 million tonnes of ore processed resulting in 381,706
carats recovered, achieving a recovered grade of 14.3 carats per
hundred tonnes.
o 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):
o a 549 carat top-white gem diamond "Sethunya" (February
2020)
o a 998 carat, high white clivage diamond (November 2020)
o 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:
o 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.
o 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.
o 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 Twelve months ended
December 31 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
cpht
Average grade processed (*) 14.6 13.8 14.3 14.3 13.3(2)
Carats recovered Carats 100,059 88,909 101,203 91,536 86,422(2)
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 $28.00 to $32.00
processed (including (a) to (b) below):
------------------------------------------ -----------------------------
(a) Cash cost per tonne mined (ore and $5.00 to $5.50
waste)
------------------------------------------ -----------------------------
(b) Cash cost per tonne processed $11.15 to $12.15
------------------------------------------ -----------------------------
Botswana G&A expenses, including sales $3.00 to $4.00
and marketing, per tonne processed
------------------------------------------ -----------------------------
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
Follow Lucara Diamond on Facebook , Twitter , Instagram , and
LinkedIn
For further information, please contact:
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 Emily Moss / Jos Simson, Tavistock
+44 778 855 4035 | lucara@tavistock.co.uk
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.
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END
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