LUCARA Diamond Company has prolonged a gross sales settlement for 24 months wherein it would provide HB Antwerp, a cutter and polisher, with excessive worth tough diamonds it recovers from its Karowe mine in Botswana.

Lucara, which has argued up to now {that a} provide settlement utilizing a pricing mechanism with a single purchaser would supply it with a extra predictable money move.

This might be important within the period of Covid-19 disruption particularly as Lucara is about to embark on the $514m underground extension of Karowe. The corporate introduced in March that it had secured $220m in funding from a syndicate of banks for the mission.

The Toronto-listed miner entered right into a trial gross sales settlement with HB Antwerp final 12 months amid the early onset of the Covid-19 pandemic. The virus prevented tough diamond consumers from congregating and depressed tough diamond costs. Consequently, Lucara determined to not promote any of its greater worth diamonds – outlined as 10.eight carats or bigger – which usually account for 70% of annual income.

Lucara Diamond CEO, Eira Thomas, mentioned in an announcement right now that it was value extending the gross sales settlement to see whether or not diamond gross sales could possibly be supported over an extended interval. “The choice to promote our +10.eight carat tough diamonds underneath a dedicated provide settlement with HB starting in July of 2020 has helped assist costs … amidst pricing uncertainty brought on by the continued world pandemic,” she mentioned.

“Not solely have tough diamond costs skilled a optimistic re-bound over the previous two quarters, however Lucara can be starting to see the advantages of this technique in accessing a broader market and delivering common money move based mostly on last polished gross sales.”

Lucara’s income for 2021 has been forecast at $180m to $210m in comparison with $125.3m within the 2020 monetary 12 months. Gross sales have been forecast at between 350,000 to 390,000 carats in comparison with 373,748 carats in gross sales final 12 months (2019: 411, 732 carats). Lucara fetched a mean worth of $335 per carat final 12 months in comparison with $468/carat in 2019.

Beneath the phrases of its provide settlement with HB, which is prolonged to December 2022, the acquisition worth paid for every +10.eight carat tough diamond is predicated on the estimated polished consequence with a ‘true up’ paid on precise achieved polished gross sales achieved, much less a charge and the price of manufacturing.

Lucara argues that the provision settlement gives income upside, particularly for Lucara’s distinctive diamonds for which Karowe is famend.

The Karowe mine has yielded a few of the world’s most spectacular diamonds. Since 2014, 19 diamonds in extra of 300 carats have been recovered, together with two bigger than 1,000 carats: the 1,758-carat ‘Sewelô’ in 2019, and the 1,109-carat ‘Lesedi La Rona’, recovered in 2015.

“Greater than a provide settlement, this collaboration structurally embeds a brand new clear and sustainable manner of working within the diamond worth chain,” mentioned Oded Mansori, CEO HB Antwerp. “For the primary time, totally different companions of the worth chain are absolutely aligned, sharing information and knowledge all through the method from mine to client.”

The diamond market is slowly discovering its toes.

De Beers reported a robust restoration in seasonal, year-end gross sales though it added right now in its third cycle replace – wherein $440m in gross sales was a fifth decrease than within the second cycle – that the Covid-19 pandemic would proceed to make its presence felt available in the market.


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