Lucara posts $14m second-quarter net loss, but supply agreement will soon boost revenue

This follows after Lucara decided to not tender any of its diamonds larger than 10.8 ct in March, amid the uncertainty caused by Covid-19.

Instead, the company entered into a supply agreement with Antwerp-based HB Group for it to buy all the diamonds in excess of 10.8 ct recovered at Lucara’s Karowe mine, in Botswana.

Under the terms of the novel supply agreement, the purchase price paid for Lucara’s 10.8-ct-plus rough diamonds will be based on the estimated polished outcome, determined through state-of-the-art scanning and planning technology, with a true-up paid on actual achieved polished sales thereafter, less a fee and the cost of manufacturing.

In this way, Lucara secured regular revenue and superior pricing terms, compared with those received through tender. This bodes well for the company’s drive to garner cash flow for the Karowe mine’s underground expansion.

Meanwhile, the company reported cash inflows of $21-million for the second quarter of the year, consisting of a partial payment of $13.5-million under the HB Group agreement and proceeds of $7.5-million from continuous sales on Lucara’s digital sales platform called Clara.

The company says its customer base on Clara now stands at 46.

Lucara also hosted a tender in Antwerp on June 19 for diamonds smaller than 10.8 ct.

The company has $13.7-million of cash on hand and $31-million available from a revolving term working capital facility.

Lucara recovered 101 203 ct in the second quarter, while achieving a recovered grade of 14.3 carats per hundred tonnes.

The company recovered 201 “special” diamonds weighing more than 10.8 ct from direct milling during the quarter under review, representing 6.4% in weight percentage of total direct milling recovered carats, as well as nine diamonds greater than 100 ct in weight.

Lucara recorded a net loss of $13.9-million for the second quarter, resulting in a loss of $0.04 a share for the quarter. This compares to net income of $700 000 in the second quarter of last year.

A decrease in total revenue, predominantly from deferral of sales of "special" diamonds, had the most significant impact on the quarter`s results.

The company`s adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) was negative $1.8-million in the year-to-date, compared with Ebitda of $38.6-million in the prior comparable months, mainly owing to the decision to withhold "special" diamond sales, as well as market conditions for smaller goods sold.