LUCAPA Diamond’s current management has succumbed to years of poor diamond prices announcing on Friday administrators had been appointed to save the company.
KordaMentha Restructuring, an advisor specialising in distressed companies, said it would undertake “an urgent assessment of the group and its operations ahead of a dual-track recapitalisation and sale process”.
Shares in Lucapa will remain suspended on the Australian Securities Exchange.
The company reported improved revenues for the March quarter after resolving a blockade by community members at the premises of its Lulo mine in Angola. Lulo is held in joint venture with the government diamond company, Endiama. There was even a substantial 42% improvement in the price received for its 6,027 in rough diamonds produced in the quarter.
In an effort to reduce corporate overheads it halved the number of office employees. It also received “firm commitments” for a share sales agreement with new and existing shareholders to raise A$2.67m. However, cash and receiveables quarter-end had fallen to $2m, a year-on-year decline of 41%.
The diamond market has been unrelentingly poor putting many miners on the edge. London-listed Petra Diamonds, which operates the Cullinan and Finsch mines in South Africa and is targeting up to 2.7 million carats in production in its current financial year, is in a struggle to stay afloat.
Amid poor rough diamond prices, and an urgent need to repay a $273m bond next year, shares in the company troughed to an all-time low this week. The company drew further on corporate debt facilities to the tune of $33m to fund working capital. This took consolidated net debt to $258m as of end-March.
Ratings agency S&P said Petra faced mounting liquidity challenges with increased likelihood of default over the next 12 months if it was unable to refinance its debt maturities.
There are no sustained signals of broad improvement yet in the diamond market. According to a report by Bloomberg News last week De Beers has been “quietly selling rough diamonds at sharply marked-down prices” to selected customers. The newswire said it was a “highly unusual move that’s fueling tensions across an industry”.
The secret deals appear aimed at reducing De Beers’s ballooning inventories without openly cutting prices, the newswire said. De Beers has about $2bn in diamond stocks consisting of rough and polished goods. In February, Anglo American said it had written down its 85% owned diamond producer by $2.9bn, valuing the company at $4bn.
