Lucara Diamond Corp says it has been able to maintain a relatively consistent average diamond price due to the changes in its production profile as it aligns itself to the environment characterised by weaker commodity prices.
Lucara, which is listed on the Botswana Stock Exchange (BSE) under the Venture Capital Board, said this week that it managed to recover a greater number of high value stones from South lobe and sold them in the regular market.
“The increase in higher value stones recovered from the South lobe and sold in the company’s regular tenders as well as the continued recovery of its exceptional diamonds has resulted in the development of a strong customer base for the company’s diamonds,” the company said, adding that higher value stones also differentiates Lucara in terms of its strong operating margin and cash flow.
The diamond industry has been characterised by softer prices, particularly in the small and medium size classes and according to Lucara, the downward pressure is a result of large volumes of polished inventories which have increased due to a reduction in consumption in the Asia Pacific region.
In addition to the high level of polished inventory, it is said that a significant volume of rough diamonds has not been able to get sold at many of the large producers rough diamond auctions.
“This has resulted in an oversupply situation for specific quality and size goods across the diamond supply chain,” said Lucara. The company predicts a prolonged weakness in smaller lower quality goods due to the current high levels on inventories held.
The company whose head office is in Vancouver, Canada, has its operations, development and exploration activities in Botswana and Lesotho, and runs Karowe and Mothae mines in the two countries.
At Karowe mine in Botswana, operational performance at the mine is said to have been generally in line with forecast at the close of the third quarter. However, with regard to Mothae Diamond Project which is Lesotho-based, Lucara says it has signed a Memorandum of Understanding with Paragon Diamonds Limited and entered into a share purchase agreement.
Lucara expects to continue to receive five (5) percent of profits earned from the sale of polished stones and rough diamonds not selected for polishing from the first 6.75 million tonnes of ore processed from Mothae by Paragon.
From the Karowe mine, Lucara forecasts to draw revenue of $200-$220 million from the sales of 350,000-400,000 carats of diamond in 2015, whereas operating cash costs for the year are expected to remain in line with previous guidance of between $33 and $36 per tonne ore treated and process between 2.2 to 2.3 million tonnes of ore.
Lucara was awarded two precious stone prospecting license known as BK02, AK11 AND AK12, located within a distance of 15 km and 30 km from the Karowe Diamond mine in 2014. The company conducted geophysical surveys over known kimberlite occurrences within the prospecting licenses during 2014.
For the three months and nine months ended 30 September, Lucara achieved revenues of $90.9 million or $1,081 per carat during the period. During the same period, the operating margin was $951 per carat or 88 percent, largely due to the company’s first exceptional stone tender in 2015, which achieved proceeds of $68.7 million from the sale of 1,674 carats.