Lucara Diamond Q1 costs exceed guidance as pressure builds

Lucara's Lesedi La Rona

LUCARA Diamond Corporation, a Toronto-listed company operating in Botswana, kept the dividend steady at 2.5 Canadian cents per share amid a shakier operating performance in its March quarter in which costs increased to the high end of its annual guidance.

Revenue was steady year-on-year at US$25.4m for the quarter compared to $26.1m in the corresponding quarter of Lucara’s previous financial year, equal to $401 per carat compared to $405 per carat previously.

And whilst the company continued to recover the high quality ‘specials’ for which its Karowe mine is famed – especially the historic 1,111 carat Lesedi La Rona – operating cash costs came in at $43.04 per tonne compared to guidance of $38 to $42 per tonne.

“Costs per tonne processed during Q1 are higher than full year guidance due to mill maintenance completed during the period,” the company said in its results statement. “Forecast costs are expected to be within full year guidance,” it added.

On a pre-tax basis, earnings came in at $1.4m compared to $4.9m in the first quarter of the 2017 financial year. The overall outcome, however, was a net loss for the quarter of $7m, equal to $0.02 cents per share compared to a net loss of $1.5m last year. The firm said this was attributable to lower revenues, higher depletion and amortisation costs, and an increase in administrative and other expenses.

Shares in Lucara were just under a percent lower on the Toronto Stock Exchange at its close on May 8. The share has been under tremendous pressure this year however, having fallen about 30% to C$2.02 per share from C$2.91/share.

“The strong sales result achieved from our first regular stone tender of the year is consistent with the improving sentiment of the broader diamond market, and positions Lucara well for its June sale, which will include both a Regular Stone Tender and an exceptional stone tender,” said Eira Thomas who was appointed CEO in February.

Cash and cash equivalents fell $17.5m to $43.6m as of the end of the quarter which the company put down to a reduction in non-cash working capital of $5.8m, capital expenditure totalling $4m and capitalised stripping costs of $6.8m. Lucara has, however, some $50m in credit facilities which was undrawn as of the end-quarter.