TIDM0QUI
RNS Number : 3368R
Lucara Diamond Corp
04 November 2021
November 3, 2021
NEWS RELEASE
LUCARA ANNOUNCES Q3 RESULTS WITH A 57% INCREASE IN REVENUE TO
$72.7 MILLION FOLLOWING A STRONG PRODUCTION QUARTER
VANCOUVER, November 3, 2021 /CNW/ (LUC - TSX, LUC - BSE, LUC -
Nasdaq Stockholm)
Lucara Diamond Corp. ("Lucara" or the "Company") today reports
its results for the third quarter of 2021 ending September 30,
2021, with strong financial and operational performance.
Q3 2021 HIGHLIGHTS:
-- Revenue of $72.7 million during Q3 2021, a 57% increase over the previous quarter, resulted in an average price
per carat sold of $619.
-- Board sanction of the $534 million Karowe underground expansion project extending the mine life out to 2040,
following the arrangement of full project funding through a combination of debt and equity financings.
-- The Karowe underground expansion project continued to ramp up in Q3 with the commencement of pre-sinking
activities on both the ventilation and production shafts under a total spend of $64 million to date in 2021.
-- Strong production in the third quarter with recovery of Specials (+10.8 carats) at 7.9% weight percent:
o 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.
o Recovery of a 393.5 carat top white Type IIa gem quality
diamond from direct milling of ore sourced from the M/PK(S) unit of
the South Lobe. This is the third gem quality +300 carat produced
from the M/PK(S) unit in 2021, following the recovery of two top
white gems (341 carats and 378 carats) in January 2021. In
addition, a 257.7 carat top white Type IIa gem quality diamond was
recovered during the August production month.
-- Clara platform transaction values totaled $6.6 million in Q3 2021, a 136% increase from the $2.8 million
transacted in Q3 2020. Clara observed strong price increases continuing through the quarter and the number of
buyers on the platform increased from 84 to 87 as of September 30, 2021.
-- Sales under the HB supply agreement of $50.5 million in Q3 2021, resulting in an average price per carat of
$8,066. The strong performance reflects a high proportion of Specials (+10.8 carat) recovered and sold, higher
market prices for diamonds, and top-up payments received for polished diamond sales.
Eira Thomas, President & CEO commented: "Strong production,
including a high volume of Specials (diamonds >10.8 carats in
size), combined with our innovative and optimized approach to sales
of rough and polished diamonds into a strengthening market for
diamond jewellery, has delivered a 57% increase in revenues quarter
over quarter. The Company also formally sanctioned the underground
expansion project, following the arrangement of full project
financing, which will support operations at Karowe at current
production rates until at least 2040. These developments have
significantly de-risked Lucara's outlook on growth and has
positioned the Company to benefit from a stronger, more stabilized
diamond price environment as global rough diamond supply remains
constrained."
REVIEW FOR THE THREE MONTHSED SEPTEMBER 30, 2021
-- Operational highlights from the Karowe Mine included:
o Ore and waste mined of 1.3 million tonnes and 0.6 million
tonnes, respectively.
o 0.74 million tonnes of ore processed resulting in 97,412
carats recovered, achieving a recovered grade of 13.2 carats per
hundred tonnes.
o 212 Specials (+10.8 carats) were recovered from direct milling
during the third quarter, representing 7.9% weight percentage of
total direct milling recovered carats, a strong production quarter
in terms of Specials recovered (Q3 2020: 6.5%).
o A Total Recordable Injury Frequency ("TRIF") of 0 was achieved
for the third consecutive quarter.
-- Financial highlights for the three months ended September 30, 2021 included:
o Total revenue of $72.7 million was recognized in Q3 2021 (Q3
2020: $41.3 million) or $619 per carat (Q3 2020: $365 per carat)
from the sale of 117,459 carats (Q3 2020: 112,943 carats).
o The Company recorded net income of $12.8 million during Q3
2021 (earnings per share of $0.03), as compared to a net loss of
$5.4 million for Q3 2020 (loss per share of $0.01).
o Adjusted EBITDA(1) for Q3 2021 of $36.8 million was the result
of a high proportion of Specials (+10.8 carat) recovered and sold,
as well as overall higher market prices for diamonds, supported by
incremental top-up payments received under the HB supply agreement
for polished diamond sales. This compares to $9.9 million for the
same period in 2020.
o As at September 30, 2021, the Company had cash and cash
equivalents of $26.6 million, an increase of $21.7 million from
December 31, 2020.
o Following the achievement of Financial Close of the Facilities
on September 2, 2021, first drawdown of $25 million occurred. The
outstanding balance on the working capital facility was reduced
from $50.0 to $30.0 million.
(1) See Non-IFRS measures
DIAMOND SALES
Diamond sales in Q3 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 which are to
be manufactured and sold as polished. Clivage-low and rejection
stones greater than 10.8 carats were sold in the quarterly tender
held in September. The Company recognized revenue of $72.7 million
or $619 per carat from the sale of 117,459 carats. Stronger
performance was driven by a high proportion of Specials (+10.8
carats) recovered and sold over the quarter, higher diamond prices
and a contribution from top-up payments for polished diamonds sold
under the HB supply agreement. 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 decided 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 recovered that exceed +10.8 carats from the
Company's 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, less a fee and
the cost of manufacturing. Changes to the payment profile were also
amended in the extended agreement to better reflect the timing of
mine production and the manufacturing process. This unique pricing
mechanism delivers regular cash flow for this important segment of
our production profile. The Company recorded revenue of $50.5
million over the third quarter, compared to $25.9 million in Q3
2020. Polished sales frequency and prices achieved have continued
to increase through 2021, resulting in higher revenue.
CLARA SALES PLATFORM
Clara, Lucara's 100% owned proprietary, secure, web-based
digital sales platform, continues to gain scale and interest. In
the third quarter, 4 sales took place with a total sales volume
transacted of $6.6 million, a 136% increase from the $2.8 million
transacted in Q3 2020. Clara also observed a steady upward price
trend at each subsequent sale throughout the period. The number of
buyers on the platform increased to 87 in Q3, from 84 in Q2, with
the Company maintaining a waiting list to manage supply and demand.
Platform trials and discussions continued through the quarter and
are ongoing with third parties to build supply. Interest in Clara
has grown considerably since 2020, sparked by global restrictions
on travel, combined with a new openness to purchasing rough
diamonds in an innovative way.
KAROWE UNDERGROUND EXPANSION UPDATE
The Karowe UGP will extend the mine life to at least 2040, with
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. Following Financial
Close of the Facilities on September 2, 2021, the Company's Board
of Directors formally approved the UGP, which has a $534 million
capital cost and a five-year construction period. Mine ramp up is
expected in Q1 2026 with full production from the UGP expected in
Q4 2026.
Highlights of the activities undertaken this year, include:
-- $64.6 million has been spent to September 30, 2021, primarily in relation to engineering and procurement of long
lead items and the commencement of construction activities; the total planned spend for 2021 is up to $120.0
million.
-- During Q3 2021, the Company spent $32.0 million on project execution activities including full mobilization of
the pre-sink shaft sinking contractor, commencing pre-sinking of the ventilation and production shafts,
ventilation shaft scotch derrick erection and installation, continued surface infrastructure construction for
shaft development and the second phase of a 200-person camp, and the commencement of bush clearing on the route
for the 29 km 132kV transmission line bulk power upgrade.
Upcoming Activities for the UGP
Activities on the UGP in Q4 2021 are expected to include the
following: Commissioning of scotch derrick cranes, completion of
ventilation and production shaft pre-sinking, continuation of shaft
civil works, mobilize headframe material and contractor to start
headframe pre-assembly, continuation of detailed design and
engineering of the underground mine infrastructure and layout,
commissioning of temporary generators, commencement of bulk power
supply infrastructure and foundation works for the transmission
line towers, transmission line engineering, and completion of other
site related infrastructure. JDS Energy & Mining Inc. ("JDS")
is the Engineering Procurement Construction Manager for the
execution of the Karowe UGP. JDS is currently building up the
onsite project team in conjunction with the Lucara owners' team,
while working closely with the Karowe Diamond Mine operations
team.
DIAMOND MARKET
Following a challenging 2020, the diamond market in 2021
continues to be in a healthy balance due to robust demand and lower
rough supply. The market remained stable in Q3 despite concerns
there may be a softening in the Chinese market. Midstream demand
remains strong with capacity in particularly India remaining high
leading up to an expected strong holiday season over the coming
months.
UPDATE ON COVID-19 RESPONSE
Measures and guidelines implemented by the Government of
Botswana in late March 2020 have allowed the Karowe Mine to remain
fully operational throughout the pandemic. These measures
designated mining as an essential service in Botswana and included
increased travel restrictions, reduced overall staffing levels and
appropriate social distancing, among other restrictions. The
Government of Botswana extended the state of emergency several
times before it was lifted on September 30, 2021. The Company has
been able to continue mining and processing activities during the
state of emergency as most of the workforce (+98%) are Botswana
nationals.
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. All contractors
and visitors are required to have negative COVID-19 tests and
adhere to all COVID-19 protocols while conducting work at company
operations in Botswana. A government-sponsored vaccination program
commenced in Botswana mid-year. At the end of September, 67% had
received a first dose, and 8% of the Company's workforce was fully
vaccinated. As the vaccination programs ramp up, the Company is
working toward fully vaccinating the workforce by the end of Q4
2021.
QUARTERLY FINANCIAL HIGHLIGHTS
Three months ended September 30, Nine months ended September 30,
In millions of U.S. dollars except 2021 2020 2021 2020
carats or otherwise noted
--------------------------------------- ----------------- ---------------- ---------------- ----------------
Revenues $ 72.7 $ 41.3 $ 172.1 $ 82.9
Net income (loss) for the period 12.8 (5.4) 22.2 (22.4)
Earnings (loss) per share (basic) 0.03 (0.01) 0.05 (0.06)
Operating cash flow per share(1) 0.08 0.03 0.19 0.03
Cash on hand 26.6 10.1 26.6 10.1
Amounts drawn on working capital
facility/ revolving credit facility 30.0 20.0 30.0 20.0
Amounts drawn on project financing
facility 25.0 - 25.0 -
Average price per carat sold
($/carat)(1) 619 365 619 309
Operating expenses per carat sold
($/carat)(1) 198 192 208 190
Operating margin per carat sold
($/carat)(1) 421 173 410 119
Carats sold 117,459 112,943 278,180 268,101
--------------------------------------- ----------------- ---------------- ---------------- ----------------
(1) Operating cash flow per share before working capital
adjustments, average price per carat sold, operating expenses per
carat sold and operating margin per carat sold are Non-IFRS
measures.
QUARTERLY RESULTS OF OPERATIONS - KAROWE MINE, BOTSWANA
UNIT Q3-21 Q2-21 Q1-21 Q4-20 Q3-20
Sales
Revenues generated from the sale of Karowe
diamonds in the quarter US$M 72.5 45.9 53.1 42.3 41.2
Carats recovered from Karowe sold for revenues
recognized during the period Carats 117,162 68,806 91,734 105,329 112,741
Average price per carat for proceeds received
during the period US$ 619 667 579 401 366
Production
Tonnes mined (ore) Tonnes 1,323,218 1,020,267 1,100,622 748,296 678,110
Tonnes mined (waste) Tonnes 608,124 707,722 756,494 434,082 436,781
Tonnes processed Tonnes 738,986 726,379 673,646 684,768 646,447
Average grade processed cpht (*) 13.2 13.9 11.9 14.6 13.8
Carats recovered Carats 97,412 101,330 80,014 100,059 88,909
Costs
Operating expenses per carats sold(1) US$ 198 219 215 205 192
Sustaining capital expenditures US$M 3.4 2.4 0.4 4.4 4.7
Underground expansion project US$M 32.0 22.6 9.9 8.3 4.8
(*) carats per hundred tonnes
2021 OUTLOOK
This section of the press release 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. Based on expectations
for revenue in Q4 2021, the lower end of diamond revenue guidance
has been increased to $195.0 million from $180.0 million. In Q2
2021, a change was made to the allocation between ore and waste
mining 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.
Karowe Mine (all amounts in US Dollars) Full Year 2021
------------------------------------------ -----------------------------
Diamond revenue (revised Q3) $195 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 Q2) 3.8 million to 4.2 million
------------------------------------------ -----------------------------
Tonnes mined - Waste (revised Q2) 2.2 million to 2.6 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
------------------------------------------ -----------------------------
Sustaining capital and project expenditures are expected to be
up to $21.0 million in 2021, excluding capital on the underground
expansion.
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 Thursday, November 4, 2021 at 7:00 a.m. Pacific,
10:00 a.m. Eastern, 2:00 p.m. UK, 3:00 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:
40783748 / 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=1505604&tp_key=96c93c6466
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 November 11, 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: 783748 #.
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 Charles Vivian / 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 November 3, 2021 at 2:30pm 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 third 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 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,
changes in inflation, the supply and demand for, deliveries of and
the level and volatility of prices of rough diamonds, costs of
power and diesel, impacts of potential disruptions to supply
chains, 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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