Lucara Diamond Corp.’s sales dropped in the third quarter as the company supplied fewer large and expensive stones from its lucrative Karowe mine in Botswana.
Revenue fell 31% year on year to $49.9 million, while net profit slumped 86% to $1.8 million, Lucara reported Wednesday.
Sales of rough from Karowe declined 36% to $46.5 million, with volume down 15% at 99,301 carats and the average price falling 43% to $337 per carat. The remaining revenue came from sales of third-party goods on Lucara’s Clara online platform.
Management blamed a decrease in the number of high-value diamonds the company sold to HB Antwerp through the pair’s supply agreement. The Belgian manufacturer is contracted to buy all Karowe rough of 10.8 carats or more, with Lucara receiving a proportion of the final polished proceeds.
In the third quarter a year earlier, Lucara sold four pink diamonds and two white, type IIa stones — weighing 393.5 and 257.5 carats — to HB. As a result of the unfavorable comparison, revenue from the agreement plummeted 46% to $27.1 million.
“Despite the overall decrease in revenue recognized in [the third quarter], diamond-market fundamentals continued to support healthy prices as steady demand and some inventory shortages were reported,” Lucara said. Fluctuation in the availability of 10.8-carat production is expected, it added.
Output from Karowe slid 19% year on year to 78,879 carats for the quarter.
Sorting a parcel of rough diamonds Gaborone, Botswana.
De Beers lifted prices of smaller rough at this week’s sight, its second consecutive increase, as the industry continued to express concerns about a perceived mismatch with polished.
Goods weighing less than 0.75 carats saw price hikes of around 5% at the February sale, while larger items were mostly stable, sightholders and industry insiders told Rapaport News this week.
The latest adjustments follow a strong US holiday season for retail and come amid robust demand in the polished sector while the industry restocks. Rough prices have rocketed in recent months, reflecting this appetite as well as supply shortages.
Prices at auctions and tenders have risen even more strongly than sight goods, with traders enjoying unprecedented premiums when reselling De Beers boxes on the secondary market.
However, manufacturers’ margins have suffered. This was a major point of discussion at the Dubai Diamond Conference, which took place Monday.
“There is still some buzz, but people are very cautious now because they’ve understood that prices have hit the ceiling and [De Beers] is facing resistance now with the new prices,” a sightholder said Tuesday on condition of anonymity. “There will be some stability and there has to be some mindfulness, because rough prices are outpacing polished prices so anyone who buys rough at those prices is not going to make a profit.”
The increases at the February sight followed sharper hikes in January, when rates jumped by up to 15% in the smallest categories and by 5% to 12% in larger sizes.
“What we try and do very hard at De Beers is price properly in accordance with demand,” De Beers CEO Bruce Cleaver told Rapaport News on the sidelines of the Dubai event. This is based on expectations of how the final polished will sell when it becomes available two or three months later, he explained. “Our crystal ball is no better than anyone else’s, but it’s based on a lot of data at the time that we make these pricing decisions.”
China Sales ‘Average’
Meanwhile, sales in the Far East during the recent Chinese New Year were steady, producing figures broadly in line with last year, dealers reported. This came despite headwinds in the latter months of 2021, including fresh Covid-19 outbreaks, a real-estate crisis, and power shortages.
The unfavorable comparison with last year’s season of post-lockdown recovery also affected the numbers, while fewer consumers took trips within China — usually a driver of seasonal demand, Cleaver pointed out.
“There’s no question that people are not traveling as much between the big Chinese cities and coming into the big Chinese cities to buy as they might have been because of [Covid-19],” he noted, cautioning that the information was preliminary. “In a sense, it could have been a bit better, but the early data I’ve seen is that it’s been an average to reasonable New Year.”
However, store openings in the mainland’s tier 3 and 4 cities are progressing well, he said.
“I don’t think there’s any reason to think that will slow down, and our clients tell us that’s continuing to happen,” the executive added.
The February sight, the second sale of the year, began on Monday and ends Friday.
Botswana’s state-run diamond trader reported record revenue last year with sales surging almost five fold after U.S. imports recovered from a Covid-19 induced slowdown.
Okavango Diamond Company sold $963 million of rough diamonds last year, said Dennis Tlaang, a company spokesman. The revenue was the most since the company began operations in 2012, he said.
“The demand for natural rough diamonds remained strong throughout 2021 driven primarily by positive market sentiment in key markets such as the United States,” Tlaang said.
Sales may rise further this year after De Beers, the world’s biggest producer of the stones, pushed through one of its most aggressive diamond price increases in recent years. Okavango also got higher than normal prices in the sole auction it held this year, Tlaang said.
De Beers Implements Big Diamond Price Hike as Demand Runs Hot. A Buying Frenzy in Cheap and Tiny Diamonds Sends Prices Soaring. Diamond Sold for $12 Million in Cryptocurrency at Sotheby’s. “We believe this is a good indicator of the market dynamics of 2022, at least for the first half of the year,” he said. “The company will continue to drive customer participation by marketing its rough diamond assortment in key markets such as Antwerp and Dubai.”
Under a 2011 agreement between De Beers and the government of Botswana, Okavango purchases 25% of the nation’s annual production for independent marketing, while the balance is sold through the De Beers’ trading network.
Jwaneng, the richest diamond mine in the world by value, is Debswana’s flagship mine, contributing 60% to 70% of the company’s total revenue.
Sales of rough diamonds by Debswana Diamond Company jumped 64% in 2021, statistics released by the Bank of Botswana showed on Monday, driven by the reopening of key global consumer markets.
The total value of Debswana’s diamond exports stood at $3.466 billion in 2021 compared with $2.120 billion in 2020, the central bank data showed.
Debswana, a joint venture between Anglo American unit De Beers and Botswana’s government, sells 75% of its output to De Beers with the balance taken up by the state-owned Okavango Diamond Company.
Debswana sales fell by 30% in 2020 as the coronavirus pandemic hit demand while global travel restrictions impacted trading. Since mid-2020 De Beers has shifted some of its rough diamond viewings to international diamond centres such as Antwerp to cater for customers unable to travel to Gaborone.
“Demand for rough diamonds remained robust, with positive midstream sentiment and strong demand for diamond jewellery continuing over the holiday period, particularly in the key U.S. consumer market,” Anglo American said in a production update last Thursday.
Debswana accounts for almost all Botswana’s diamond exports, with Lucara Diamond Corp’s Karowe mine being the only other operating diamond mine in the country.
Botswana gets about 30% of its revenues and 70% of its foreign exchange earnings from diamonds. The southern African country expects its economy to have grown by 9.7% in 2021, after an 8.5% contraction in 2020.
Debswana’s production increased by 35% to 22.326 million carats in 2021 from 16.559 million carats in 2020, mostly due to higher-grade ore being treated at its flagship Jwaneng mine, Anglo American said.
Russia’s Alrosa, the world’s largest producer of rough diamonds and a competitor of De Beers, reported revenue jumped by 49% to $4.2 billion last year as demand exceeded supply.
62.7-carat fancy pink diamond “Boitumelo” in Botswana
Lucara keeps raking in the big diamond finds, this time recovering a 62.7-carat fancy pink diamond from its Karowe mine in Botswana.
It is the largest fancy pink gem to found in Botswana, according to the diamond miner, and one of the largest rough pink diamonds on record in the world.
The stone has been named “Boitumelo,” which means joys in Setswana.
Measuring 26 x 17 x 16 mm, it is described as a high-quality fancy pink Type IIa gem.
Lucara uncovered it from the direct ore milling at the EM/PK(S) unit of the South Lobe, the site of many of its biggest finds.
The company said a 22.21-carat fancy pink gem of similar quality was found during the same production period, as were two more pink gems of similar color weighing 11.17 carats and 5.05 carats.
Asked if those additional small pink diamonds could’ve broken off from the same piece as the 62.7-carat diamond, a company spokesperson said: “As the diamonds all came from a similar production period it may be possible, but we cannot confirm this at this time. Further detailed analysis needs to be carried out to confirm if they did indeed originally stem from one diamond.”
Regarding the find, CEO Eira Thomas said, “Lucara is delighted to announce another historic diamond with the recovery of the Boitumelo, and very pleased to demonstrate the continued potential for large, colored diamonds from the South Lobe production.
“These remarkable pink diamonds join a collection of significant diamond recoveries in 2021 produced from the EM/PK(S), which forms a key economic driver for the proposed underground mine at Karowe.”
The diamond firm Debswana has announced the discovery in Botswana of a 1,098-carat stone that it described as the third largest of its kind in the world.
The company’s acting managing director, Lynette Armstrong, presented the stone, which was found on 1 June, to the country’s president, Mokgweetsi Masisi, on Wednesday.
It is the third largest in the world, behind the 3,106-carat Cullinan found in South Africa in 1905 and the 1,109-carat Lesedi La Rona discovered in Botswana in 2015.
“This is the largest diamond to be recovered by Debswana in its history of over 50 years in operation,” Armstrong said.
“From our preliminary analysis it could be the world’s third largest gem-quality stone. We are yet to make a decision on whether to sell it through the De Beers channel or through the state owned Okavango Diamond Company.”
The “rare and extraordinary stone … means so much in the context of diamonds and Botswana,” she said. “It brings hope to a nation that is struggling.”
The minerals minister, Lefoko Moagi, said the discovery of the stone, which is yet to be named but measures 73 by 52 by 27mm, could not have come at a better time after the Covid-19 pandemic hit diamond sales in 2020.
Debswana is a joint venture between Anglo American’s De Beers and the Botswanan government, which receives as much as 80% of the income from sales through dividends, royalties and taxes.
Production at Debswana fell by 29% in 2020 to 16.6m carats and sales fell by 30% to $2.1bn as the pandemic affected production and demand.
Debswana plans to increase output by as much as 38% to pre-pandemic levels of 23m carats in 2021 as the global diamond market recovers with the easing of travel restrictions and reopening of jewellers.
470 carat diamond recovered from the Karowe Mine in Botswana
Lucara Diamond Corp. is pleased to announce the recovery of a 470 carat top light brown clivage diamond from its 100% owned Karowe Diamond Mine located in Botswana.
The diamond, measuring 49x42x26mm, was recovered from direct milling of ore sourced from the EM/PK(S) unit of the South Lobe. The 470 carat recovery forms a notable contribution to a series of top quality gem and clivage quality diamond recoveries during a recent production run, including an additional 5 diamonds greater than 100 carats (265ct, 183ct, 161ct, 116ct, 106ct) and 13 diamonds between 50 and 100 carats in weight.
The May production run, dominated by EM/PK(S) ore, produced diamonds greater than 10.8 carat in weight accounting for 12.7% weight percent of total production, exceeding resource expectations. Continued strong resource performance and recovery of large diamonds reinforces the significance of the EM/PK(S) as an important economic driver for the proposed underground mine at Karowe.
The 470 carat diamond was recovered in the Coarse XRT circuit and represents the third +300 carat diamond recovered to date in 2021. Year to date, Karowe has produced 10 diamonds greater than 100 carats including 6 diamonds greater than 200 carats, including the 341 carat (link to press release) and 378 carat (link to press release) top white diamonds recovered in January 2021.
Lucara Diamond Corp. said it has secured $220 million in financing to help take the Karowe Mine in Botswana underground and extend its life by about 20 years.
Karowe is responsible for producing some of the most significant diamonds recovered in recent years, including the 1,109-carat “Lesedi La Rona,” which Graff bought for $53 million, and a 1,758-carat diamond that Louis Vuitton is turning into jewelry.
The credit-approved senior debt facilities include two tranches: $170 million to go toward the development of the underground mine and $50 million to support the ongoing operation of the open pit.
The underground expansion has an estimated capital cost of $514 million and is expected to take five years. The balance of development capital for the project is expected to come from cash flow from the mine’s ongoing open-pit operations.
In a statement announcing the financing, Lucara President and CEO Eira Thomas called securing the financing “an important achievement for Lucara and a strong endorsement of our underground expansion plans.” She said the loans will supplement the cash flow from the open-pit portion of Karowe for the next five years and will extend the life of the mine from 2025 to at least 2040.
The five lenders on the $220 million financing facility for Lucara are: ING Bank N.V., Natixis, the London branch of Societe Generale, Africa Finance Corp., and Afreximbank. Thomas described them as having “significant mining and metals track records and experience in Africa.”
Closing on the facilities is subject to completion of definitive documentation and the satisfaction of certain terms and conditions, including Know Your Customer (KYC) checks.
The target closing date for the financing package is mid-2021, with financing expected to be in place by the second half of the year.
Lucara made the financing announcement the day before it released its first-quarter 2021 results.
Revenues totaled $53.1 million, or $579 per carat sold, for the miner in Q1. Net income was $3.4 million.
That is a significant improvement over Q1 2020, when the onset of the pandemic limited sales to $34.1 million and caused Lucara to record a loss of $3.2 million.
First-quarter 2021 results also are up when compared with 2019, when Lucara reported revenues of $48.7 million, or $512 per carat sold. Net income for the latter, however, was higher at $7.4 million.
The company said overall, the diamond market started 2021 in its healthiest position in five years following strong holiday seasons in the United States and China, and careful rough supply management by producers, which has helped to recalibrate polished inventories.
Botswana Diamonds has announced that eleven diamonds and abundant kimberlitic indicators were recovered from drill samples at the recently discovered River Kimberlite pipe at Thorny River in South Africa.
John Teeling, Chairman, commented:
“The recovery of so many kimberlitic indicators and in particular diamonds, which are very rare to recover in small sample narrow reverse circulation drill holes is highly encouraging and bodes well for the potential commerciality of this exciting discovery”.
Following a detailed ground geophysical programme in October 2020, 6, six-inch percussion reverse circulation holes were drilled into the newly discovered River Kimberlite pipe.
A combined total of 39.5 m intersected kimberlite while an additional 55 m intersected a weathered kimberlite breccia.
Samples from these holes were taken at one metre intervals and twenty of these totalling about 500 kg were selected and submitted to an independent processing facility for assessment through screening, dense media separation and hand sorting.
11 Diamonds, 172 G10 pyrope garnets, 623 G9 pyrope garnets, 555 eclogitic garnets, 438 chromites and 268 chromium diopsides (clinopyroxene) were recovered at sizes between -1.0+0.3mm.
Recoveries of a specific mineral species were capped at 20 grains and thus this picture is a snapshot of the overall sample indicator content. Importantly, all the samples contained abundant kimberlitic indicators.
The diamonds are all notably of good colour and clarity and are of commercial quality and in high demand by the market. The diamonds were not weighed as the sample size was small and they are not representative of a possible population.
Pyrope garnets are common in peridotite xenoliths from kimberlite pipes, some of which are diamond-bearing. Pyrope found in association with diamond commonly has a Chromium Oxide content of three to eight percent which imparts a distinctive violet to deep purple colouration.
These are called G10 and G9 pyrope garnets. Eclogites typically result from high to ultrahigh pressure metamorphism of mafic rocks at low thermal gradients as they were subducted to the upper mantle in a subduction zone.
Garnets found in eclogitic xenoliths tend to have a deep orange colour. Diamonds in kimberlite come from both peridotitic and eclogitic xenoliths so the abundance of both types of garnet in this sample is noteworthy and this is supported by the recovery of diamonds from a relatively small drill sample.
Of significance too is that these diamonds are all of good colour and clarity. The next step is a detailed core drilling programme which is planned for the dry season.
The Karowe mine has produced a 998-carat diamond, the latest in a string of large rough stones from the lucrative deposit in Botswana.
Lucara Diamond Corp., which owns Karowe, will work with manufacturing partner HB Antwerp to assess how to maximize value from the rough, the miner said Wednesday. The unbroken, high-white, clivage stone — meaning it needs to be split before further processing — came from the EM/PK(S) unit of the site’s south lobe, which has yielded some of the world’s biggest and most famous diamonds.
“Lucara is extremely pleased with the continued recovery of large, high-quality diamonds from the south lobe of the Karowe mine,” said CEO Eira Thomas. “To recover two [500-carat-plus] diamonds in 10 months, along with the many other high-quality diamonds across all the size ranges, is a testament to the unique aspect of the resource at Karowe and the mine’s ability to recover these large and rare diamonds.”
The EM/PK(S) area produced the 1,109-carat Lesedi La Rona in 2015, as well as the 1,758-carat Sewelô, which HB bought in January this year in collaboration with luxury brand Louis Vuitton.
The Belgian manufacturer later agreed to purchase all of Lucara’s rough above 10.8 carats for the remainder of the year. Last week, Lucara announced the sale of a 549-carat diamond from the same high-value patch of Karowe, with HB and Louis Vuitton again partnering on the stone.
The arrangement with HB prevented a heavier decline in Lucara’s sales in the third quarter, the first period in which income from the partnership started appearing in the miner’s top line.
Group revenue fell 9% year on year to $41.3 million in the three months ending September 30, reflecting Lucara’s decision not to hold its usual tenders of stones above 10.8 carats, the company reported Wednesday. Instead, it sold 5,633 carats through the HB partnership, with sales taking place approximately twice a month, while the miner’s online selling platform, Clara, boosted sales of smaller goods.
Total sales volume fell 3% to 112,943 carats, with the average price down 6% to $365 per carat. The company’s net loss deepened by 35% to $5.4 million.
“Lucara is now receiving regular, predictable revenue for its [10.8-carat-plus] diamonds using a superior pricing mechanism based on estimated polished outcomes less a commission and the cost of polishing,” Thomas added.
