TIDM0QUI
RNS Number : 1474F
Lucara Diamond Corp
03 November 2022
November 2, 2022
NEWS RELEASE
2022 GUIDANCE ON-TRACK FOLLOWING STRONG OPERATIONAL PERFORMANCE
IN THIRD QUARTER AS UNDERGROUND SHAFT SINKING CONTINUES
VANCOUVER, November 2, 2022 /CNW/ (LUC - TSX, LUC - BSE, LUC -
Nasdaq Stockholm)
Lucara Diamond Corp. ("Lucara" or the "Company") today reports
its results for the quarter ended September 30, 2022.
Q3 2022 HIGHLIGHTS:
-- Revenue for the three and nine months ended September 30,
2022 totalled $49.9 million and $170.5 million, respectively.
-- For the nine months ended September 30, 2022, a total of
245,764 carats were sold from Karowe at an average price of $528
per carat, generating revenue of $129.9 million before top-up
payments of $33.8 million.
-- A strong U.S. Dollar helped to mitigate increases in input
costs, resulting in an operating cash cost of $29.33 per tonne of
ore processed(1) for the three months ended September 30, 2022.
-- A strong year-to-date operational performance supports the
Company's 2022 revenue guidance of $195 million and $225 million.
Operating cost per tonne on an annualized basis is expected to be
at the low-end of 2022 Guidance ($29.50 to $33.50).
-- Rough and polished diamond prices continued to exceed prices
from 2021, despite growing global economic uncertainties.
-- On Clara, more than 40% of sales came from third-party goods
transacted, reflecting a positive trend towards increased
diversification of supply and less reliance on Karowe production.
Revenue from sales transacted on Clara during the three months
ended September 30, 2022 totalled $8.3 million.
-- Production metrics remained in line with 2022 guidance, with
0.9 million tonnes of ore and 0.5 million tonnes of waste mined,
and 0.7 million tonnes of ore processed during the three months
ended September 30, 2022.
-- The main sink phase for the production shaft commenced at the
end of September; sinking of the ventilation shaft continued.
-- A total project investment of $23.9 million into the Karowe
UGP during the current quarter focused on the transition to main
sink activities for both shafts, procurement of underground mobile
equipment and construction of the upgraded transmission line and
related substations.
Eira Thomas, President & CEO commented: "Lucara remains on
track for another solid year, with sales from our large, high value
diamonds continuing to achieve consistent, healthy polished prices
under our committed supply agreement with HB, despite recent market
softening. Clara also continued to make good progress during the
quarter, adding third party supply from both producer trials and
secondary market sources, to positive results. Importantly, third
party supply now accounts for more than 40% of sales on Clara. It
was also a busy and productive period for the underground project.
Main sinking commenced on the production shaft and mitigations
implemented during the third quarter in response to operational
start-up challenges are beginning to take effect, with progress
made to reduce cycle times for both production and ventilation
shafts."
REVIEW FOR THE QUARTERED SEPTEMBER 30, 2022
-- Operational highlights from the Karowe Mine for the three
months ended September 30, 2022 included:
o Mined 0.9 million tonnes (Q3 2021: 1.2) and 0 .5 million
tonnes (Q3 2021: 0.7) of ore and waste, respectively.
o Processed 0.7 million tonnes of ore (Q3 2021: 0.7) and
recovered 78,879 carats (Q3 2021: 95,907 carats), achieving a
recovered grade of 11.4 carats per hundred tonnes (Q3 2021: 13.0
cpht).
o A total of six diamonds greater than 100 carats including one
stone greater than 200 carats were recovered during the
quarter.
o The year-to-date Total Recordable Injury Frequency Rate
("TRIFR") of 0.32 (Q3 2021: zero) at the end of Q3 2022 reflects
four medical treatment cases reported during the third quarter of
2022.
-- Financial highlights for the three months ended September 30, 2022 included:
o Revenues from the sale of 99,301 carats recovered from the
Karowe Mine were $46.5 million. The sales agreement with HB Trading
BV ("HB") accounted for 58% of total Karowe revenue recognized in
the quarter.
o Operating cash costs of $29.33 per tonne processed(1) on plan
reflect the impact of higher input costs, partially offset by a
comparatively stronger U.S. Dollar.
o Adjusted EBITDA(1) of $13.8 million and net income for the
quarter of $1.8 million ($0.00 basic earnings per share).
-- Cash position and liquidity:
o As at September 30, 2022, the Company had cash and cash
equivalents of $34.8 million.
o Drawn $65.0 million from the $170.0 million project loan
facility.
o The working capital facility of $50.0 million was undrawn as
at September 30, 2022.
2022 OUTLOOK
This section of the press release provides management's
production and cost estimates for 2022. These are "forward-looking
statements" and subject to the cautionary note regarding the risks
associated with forward-looking statements. No changes were made to
the Company's 2022 Guidance as of Q3 2022. In February 2022, based
on updated expectations for revenue in 2022, the diamond revenue
guidance issued was increased to between $195.0 million and $225.0
million (from $185.0 million to $215.0 million). Diamond revenue
guidance does not include revenue related to the sale of
exceptional stones (an individual rough diamond which sells for
more than $10 million), or the Sethunya.
Karowe Diamond Mine Full Year -
2022
In millions of U.S. dollars unless otherwise
noted
------------------------------------------------------ -----------------
Diamond revenue (millions) (revised as of February
2022) $195 to $225
Diamond sales (thousands of carats) 300 to 340
Diamonds recovered (thousands of carats) 300 to 340
Ore tonnes mined (millions) 3.1 to 3.5
Waste tonnes mined (millions) 1.5 to 2.1
Ore tonnes processed (millions) 2.6 to 2.8
Total operating cash costs(1) including waste $29.50 to $33.50
mined(2) (per tonne processed)
Botswana general & administrative expenses including $3.50 to $4.00
marketing costs (per tonne processed)
Tax rate(3) 0%
Average exchange rate - USD/Pula 11.0
------------------------------------------------------ -----------------
(1) Operating cash costs are a non-IFRS measure. See "Non-IFRS
Financial Performance Measures".
(2) Includes ore and waste mined cash costs of $5.75 to $6.25
(per tonne mined) and processing cash costs of $12.00 to $13.00
(per tonne processed).
(3) The Company is subject to a variable tax rate in Botswana
based on a profit and revenue ratio which increases as profit as a
percentage of revenue increases. The lowest variable tax rate is
22% while the highest variable tax rate is 55% (only if taxable
income were equal to revenue). Capital expenditures are deductible
when incurred. With planned capital expenditures of up to $110
million for the UGP, a tax rate of 0% is forecast for 2022. Should
capital expenditures vary from plan, the Company could be subject
to current tax.
DIAMOND SALES
Diamond sales in Q3 2022 continued through HB under the sales
agreement for those gem and near-gem diamonds greater than 10.8
carats which are to be manufactured and sold as polished. Other
diamonds continued to be sold through a combination of the Clara
platform and regular tenders.
The Company recognized total revenues of $49.9 million in Q3
2022. This included $46.5 million from the sale of 99,301 carats
from Karowe, top-up payments of $9.0 million as well as $3.4
million from the sale of third-party goods on the Clara platform.
In the comparative quarter, the Company achieved revenues of $72.7
million which included $72.5 million from the sale of 117,162
carats from Karowe, top-up payments of $2.7 million as well as $0.2
million in revenue from third-party goods sold through the Clara
platform.
HB SALES 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. In 2020,
Lucara announced a partnership agreement with HB, entering into a
definitive sales agreement for diamonds recovered that exceed +10.8
carats from the Company's 100% owned Karowe Diamond mine in
Botswana. This agreement was subsequently amended and extended to
December 31, 2022. The mechanisms of the agreement result in
complete transparency within the value chain and create important
alignment between the producer and the manufacturer for the first
time.
Under the amended sales agreement, +10.8 carat gem and near gem
diamonds from the Karowe Mine of qualities that can directly enter
the manufacturing stream are being sold to HB at prices based on
the estimated polished outcome of each diamond. The estimated
polished value is 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.
Following the extension of the HB Agreement in 2021, all +10.8
carat non-gem quality diamonds and all diamonds less than 10.8
carats in weight which did not meet the criteria for sale on Clara
are being sold as rough through the quarterly tender. In the
agreement extension, payment terms were amended 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.
For the three months ended September 30, 2022, the Company
recorded revenue of $27.1 million from the HB agreement (inclusive
of top-up payments of $9.0 million), as compared to revenue of
$50.5 million in Q3 2021 (inclusive of top-up payments of $2.7
million). The decrease in revenue in Q3 2022 versus the comparative
quarter can be attributed primarily to the number of high value
diamonds delivered to HB in Q3 2021 (four pink diamonds and two
Type IIa top white gem diamonds (393.5 carats and 257.5 carats))
for which an initial MPV payment was received in Q3 2021. In
addition, more carats were delivered to HB in the comparative
quarter (6,258 carats vs.2,412 carats). Despite the overall
decrease in revenue recognized in Q3 2022, diamond market
fundamentals continued to support healthy prices as steady demand
and some inventory shortages were reported. Natural variability in
the quality profile of the +10.8ct production in any production
period or fiscal quarter results in fluctuations in recorded
revenue and associated top-ups between periods is expected. During
Q3 2022, 7.1% weight percentage Specials of total carats recovered
was consistent with the Karowe resource model.
As a result of the sales agreement with HB, the Company also
participated in polished diamond price increases during Q3 2022 as
rough diamonds sold to HB in previous quarters were polished and
sold. In Q3 2022, estimated top-up payments of $9.0 million (Q3
2021: $2.7 million) were included in revenue for the quarter. At
September 30, 2022 a number of higher value and more technically
complex stones that take longer to manufacture had not fully
completed the manufacturing and sales process. These stones were
delivered to HB in 2021 and the first nine months of 2022. As these
stones finish the manufacturing process and are sold, the Company'
may record additional revenue in the form of "top-up" payments from
these sales.
CLARA SALES PLATFORM
Clara, Lucara's 100% owned proprietary, secure, web-based
digital sales platform, continues to gain scale and interest.
Interest in Clara continues to grow as the benefits of purchasing
rough diamonds in an innovative way become evident. In Q3 2022,
four sales (Q3 2021: four sales) took place with a total sales
volume transacted of $8.3 million, a 26% increase from the $6.6
million transacted in Q3 2021, as Karowe goods were supplemented by
growth in supply from additional sources. The number of buyers on
the platform remained stable during the quarter with the Company
maintaining a waiting list to manage supply and demand.
Additional supply is required to meet existing demand and drive
the platform's growth and the Company continued trial sales on the
Clara platform with a third-party producer in Q3 2022. The Company
intends to continue to seek additional supply in 2022, both from
third-party producers and the secondary market.
KAROWE UNDERGROUND EXPANSION UPDATE
The Karowe UGP is expected to extend the mine life to at least
2040, with initial underground carat production predominantly from
the highest value EM/PK(S) unit and is forecast to contribute
approximately $4 billion in additional revenues, using conservative
diamond prices. The updated estimated capital cost for the Karowe
UGP is $547 million (including contingency) and reflects expected
pricing changes following execution of the main sink contract in Q2
2022. Mine ramp up is expected in 2026 with full production from
the Karowe UGP expected in H2 2026. The Company is using a
combination of cash flow from operations and project debt for the
investment in the Karowe UGP, which is fully financed.
During the three months ended September 30, 2022, a total of
$23.9 million was spent on the Karowe UGP development, primarily in
relation to ongoing construction activities and procurement of long
lead items, including:
-- Main sinking of the production shaft commenced at the end of
September while main sinking in the ventilation shaft continued. As
main sinking activity ramped up in the ventilation shaft during the
third quarter, several operational issues arose resulting in
sinking rates achieving less than plan due to longer cycle times.
In response to the operational challenges and longer duration cycle
times, changes and mitigations were actioned during the quarter.
Observed cycle times and sinking rates are improving. The start of
main sink activity in the production shaft was delayed due to
longer than planned commissioning of the winders and hoisting
plant. Cycle times are now improving.
-- Procurement of shaft station underground mobile equipment
progressed with equipment deliveries expected to commence in Q4
2022 and Q1 2023.
-- The Letlhakane and Karowe substation construction continued
with focus on civil work and cable pulling for control equipment
installation. The transmission line towers were equipped with
stringing hardware and safety nets were installed over existing
line crossings.
Activities for the Karowe UGP in the fourth quarter of 2022 are
expected to include the following:
-- Sinking within both the ventilation and production shafts.
-- Procurement of underground equipment, including awarding the bulk air cooler tender.
-- Continuation of detailed design and engineering of the
underground mine infrastructure and layout.
-- Commissioning the 29 km, 132kV bulk power supply powerline.
DIAMOND MARKET
After a strong start to the third quarter of 2022, diamond price
softening was observed in late August and into September, however,
solid market fundamentals continue to support diamond prices
despite growing concerns of a global economic slowdown. High levels
of reported inflation persisted, and governments responded with
increasingly forceful measures in attempts to reduce it to
sustainable levels.
A cautious economic outlook combined with the uncertainty caused
by geopolitical events, including the ongoing conflict in Ukraine
and continuing implications of the COVID-19 pandemic (specifically
in China where the demand for diamonds has not yet recovered)
remain a risk to diamond pricing trends in the short term with
demand from the US a critical driver on prices of both rough and
polished diamonds. The longer-term market fundamentals remain
unchanged and positive, however, pointing to strong price growth
over the next few years as demand is expected to outstrip future
supply.
The benefits of the committed sales agreement with HB continued
to be realized during the third quarter of 2022 as the Company
participated in the upside to manufacturing polished diamonds for
goods delivered in previous quarters. The integrated approach,
using state of the art scanning and planning technology has further
enhanced the final achieved polished outcome for very large (+50
carat polished) and high value diamonds, a critical production
segment for the Company.
FINANCIAL HIGHLIGHTS
Three months Nine months
ended September ended September
30, 30,
In millions of U.S. dollars, 2022 2021 2022 2021
except carats or otherwise noted
----------------------------------- -------- --------- --------- --------
Revenues 49.9 72.7 170.5 172.1
Operating expenses (25.8) (23.2) (60.8) (58.0)
Net income for the period 1.8 12.8 33.3 22.2
Earnings per share (basic) 0.00 0.03 0.07 0.05
Earnings per share (diluted) 0.00 0.03 0.07 0.05
Operating cash flow per share(1) 0.03 0.08 0.17 0.19
Cash on hand 34.8 26.6 34.8 26.6
Amounts drawn on working capital
facility - 30.0 - 30.0
Amounts drawn on project finance
facility 65.0 25.0 65.0 25.0
Karowe Revenue 46.5 72.5 163.7 171.4
Average price per carat sold
($/carat)(2) 337 596 528 546
Carats sold 99,301 117,162 245,763 277,702
QUARTERLY RESULTS OF OPERATIONS - KAROWE MINE, BOTSWANA
UNIT Q3-22 Q2-22 Q1-22 Q4-21 Q3-21
Sales
Revenues from the sale of
Karowe diamonds US$M 46.5 50.0 67.2 56.5 72.5
Karowe carats sold Carats 99,301 66,167 80,295 102,791 117,162
Average price per carat
- excluding top-ups(1) US$ 377 557 690 436 596
Production
Tonnes mined (ore) Tonnes 920,410 1,091,192 811,947 610,072 1,190,856
Tonnes mined (waste) Tonnes 453,860 357,764 482,104 276,263 696,907
Tonnes processed Tonnes 693,398 719,207 666,488 705,877 738,986
cpht
Average grade processed(2) (*) 11.4 12.0 12.6 12.8 13.0
Carats recovered Carats 78,879 86,317 83,917 90,634 97,412
Costs
Operating expense per Karowe
carat sold(3) US$ 227 221 212 200 193
Margin (mining operations)
per Karowe carat sold US$ 150 336 478 236 403
Operating cost per tonne
of ore processed(4) US$ 29.33 28.78 27.80 29.74 29.73
Capital Expenditures
Sustaining capital expenditures US$M 4.0 4.1 0.8 9.1 3.4
Underground expansion project(5) US$M 23.9 29.1 31.1 21.8 32.0
--------------------------------- ------- ------- --------- ------- ------- ---------
CONFERENCE CALL
CONFERENCE CALL
The Company will host a conference call and webcast to discuss
the results on Thursday, November 3, 2022 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:
9230878 / Lucara Diamond
Dial-In Numbers:
Toll-Free Participant Dial-In North America (+1) 888 204 4368
UK Toll free 0800 358 6377
Local Vancouver (+1) 604 449 6082
Local Toronto (+1) 647 794 4605
Webcast:
To view the live webcast presentation, please log on using this
direct link: https://app.webinar.net/oVQNzQ4mERL
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 10, 2022.
Replay number (Toll Free North America) (+1) 888 390 0541
Replay number (Local) (+1) 416 764 8677
The pass code for the replay is: 910144#.
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:
Hannah Reynish 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 Diamond Mine
in Botswana. The Karowe Mine has been in production since 2012 and
is the focus of the Company's operations and development
activities. Clara Diamond Solutions Limited Partnership ("Clara"),
a wholly-owned subsidiary of Lucara, has developed a secure,
digital sales platform that uses proprietary analytics together
with cloud and blockchain technologies to modernize the existing
diamond supply chain, driving efficiencies, unlocking value and
ensuring diamond provenance from mine to finger. Lucara has an
experienced board and management team with extensive diamond
development and operations expertise. Lucara and its subsidiaries
operate transparently and in accordance with international best
practices in the areas of sustainability, health and safety,
environment, and community relations. Lucara has adopted the IFC
Performance Standards and the World Bank Group's Environmental,
Health and Safety Guidelines for Mining (2007). Accordingly, the
development of the Karowe underground expansion project ("UGP")
adheres to the Equator Principles. Lucara is committed to upholding
high standards while striving to deliver long-term economic
benefits to Botswana and the communities in which the Company
operates.
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 2, 2022 at 4:30pm Pacific Time.
NON-IFRS FINANCIAL PERFORMANCE MEASURES
This news release refers to certain financial measures, such as
adjusted EBITDA, adjusted operating earnings, operating cash flow
per share, 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 three and nine
months ended September 30, 2022 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, forward-looking information and forward-looking
statements in this news release may include, but are not limited
to, information or statements with respect to the equity and
project debt financings, the intended use of proceeds, the
Company's ability to comply with the terms of the Facilities which
are required to construct the Karowe UGP, that expected cash flow
from operations, combined with external financing will be
sufficient to complete construction of the Karowe UGP, that the
estimated timelines to achieve mine ramp up and full production
from the Karowe UGP can be achieved, the economic potential of a
mineralized area, the size and tonnage of a mineralized area,
anticipated sample grades or bulk sample diamond content, future
production activity, the future price and demand for diamonds,
future forecasts of revenue and variable consideration in
determining revenue, estimation of mineral resources, exploration
and development plans, cost and timing of the development of
deposits and estimated future production, permitting time lines,
currency exchange rates, success of exploration, requirements for
and availability of additional capital, capital expenditures,
operating costs, timing of completion of technical reports and
studies, tax rates, timing of drill programs, government regulation
of operations, environmental risks and ability to comply with all
environmental regulations, reclamation expenses, title matters
including disputes or claims, limitations on insurance coverage,
negotiations and agreements among the Company and the Botswana Mine
Workers Union, the completion of transactions and timing and
possible outcome of pending litigation, the profitability of Clara
and the Clara Platform, and the scaling of the digital platform for
the sale of rough diamonds owned by Clara, the benefits to the
Company of diamond supply agreements with HB and the ability to
generate better prices from the sale of the Company's +10.8 carat
production as a polished stone.
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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