Diamond prices end year on improved note as midstream demand shows signs of revival

DIAMOND prices improved in the final weeks of 2019 owing to increased demand from cutters and polishers and “strong holiday season jewellery sales in America,” said Lucapa Diamond Company in a quarterly update.

“While 2019 was a challenging year for all diamond producers in respect of sales prices, the year ended on a more positive note with a turnaround in mid-stream demand and prices – as evidenced in a number of rough diamond tenders and sales,” it said. The company also reported best ever production for the year.

Production totalled 49,120 carats for 2019 largely owing to its 70%-owned Mothae, a mine  that Lucapa bought in 2017 with redevelopment beginning in 2018. Lucapa also has a 40% stake in Lulo alluvial mine in Angola.

Mothae, which is situated in Lesotho, yielded more than 30,000 carats in its first year of production, some 45% ahead of plan.

Total annual sales were $55m from the two mines on a 100% basis. Among the stones were 287 diamonds that were more than 4.8 carats in size, equal to 1,164 carats. This included a conbined total of five diamonds of some 100 carats or more.

Lucapa said it would provide further details of production and exploration activities at the Mothae and Lulo diamond projects in its quarterly activities report.

Lucapa said in November it was in advanced discussions with the Angolan government to lift its stake in their Lulo exploration joint venture to above 50% from the firm’s current 39% holding.

Discussions were with the Angola’s mineral resources and petroleum ministry and the national diamond company, Endiama, which owns a controlling 51% stake in the Lulo joint venture which holds a kimberlite exploration licence for the 3,000km² Lulo diamond concession in Angola.

In addition to the shares owned by Lucapa and Endiama, a local firm, Rosas & Petalas, owns a 10% share in the joint venture holding the mining licence area.

Earlier in the month it said it had renegotiated repayment of a $7.5m loan with its Singaporean shareholder, Equigold, in terms of which it will extend the repayment period – releasing pressure on the company to sell diamonds at a time when the market is poor.

In terms of the agreement, the $7.5m will be repaid in eight quarterly instalments of $0.9m each instead of four instalments of $1.9m. The next repayment is deferred to 1 April 2020, with the final of the eight scheduled payments now due on 1 January 2022.

The net effect will be to defer until 2021/22 a total of $4.7m in capital repayments which would have otherwise been payable by Lucapa to Equigold in 2020, the company said.

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