LUCARA Diamond CEO, Eira Thomas, said she was optimistic on the direction of the diamond market, but stopped short of saying whether improved pricing would make a substantial impact on the firm’s 2020 financial year.
“We know the diamond market is going to recover, we just don’t know how quickly,” said Thomas in response to questions following presentation of the firm’s 2019 financial results today. “Last year was a tough year.”
Earlier this month, De Beers reported 50% lower profits of $558m for the 2019 financial year – a hefty decline from its 10-year profit peak of $1.8bn in 2014. According to Bloomberg News, the 2019 performance was De Beers’ worst since it brought the curtain down on its monopoly in the early 2000s.
Thomas said sales for the firm’s fourth quarter had been “very encouraging” as there were price improvements across all diamond sizes.
“We are not at the point of changing our outlook in an [more] optimistic way, but the first tender of this year will help guide us,” she said. It was unlikely the market would return to the high pricing of large stones – which comprises the majority of Lucara’s income – as it did in 2017, she said.
Lucara Diamond’s reported an increase in net income for the year ended December 31 of $12.7m which equates to $0.03 per share. This compares to last year’s net income of $11.7m (also $0.03 per share). Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the year came in at $73.1m (2018: $60.5m), an increase of 21%. No fourth quarter dividend was paid following the company’s decision last year to progress the extension of its Karowe diamond mine, situated in Botswana
Production for the year totalled 433,060 total carats, including 29,990 carats from previously milled material which was the reason behind beating the lower end of guidance of 400,000 carats (the upper end being 425,000 carats).
Lucara sold diamonds for an average of $468 per carat compared to $502/ct in the previous 12-month period. Set against this, Lucara made a good fist of controlling its operating cash costs which were $31.88 per ton compared to $39.92/t in the previous year. The firm came to the end of a waste stripping campaign in the first quarter of the year that had been underway for the previous financial year.
Lucara is looking for a similar cash cost performance in 2020 with revenue coming in at $180m to $210m. Production and sales are guided to between 350,000 to 390,000 carats – lower than in the year under review as recoveries from historic ore is now at an end.
All eyes will be on the mid-year point, however.
Lucara is spending $53m investigating the underground development of Karowe with an investment decision to follow. Extending Karowe is estimated to cost $514m in pre-production costs.