Lucara Diamond’s 2020 losses mount, but online sales thrive & finds 998c whopper at Karowe

Lucaras Sewelô 1,758ct Pic: Louis Vuitton

LUCARA Diamond Corporation’s losses mounted in the nine months ended September despite a recovery in the third quarter triggered a more stable diamond market.

The net loss for the three months totalled $5.4m (Q2: -$4m) taking losses for the year to $22.4. The company had reported a profit of $4.1m at the same point in its 2019 financial year.

Eira Thomas, CEO of Lucara Diamond, said in third quarter results announcement overnight that the diamond market, devastated by the Covid-19 related travel interruptions, as well as a loss in consumer confidence, was showing signs of stabilisation.

However, the company cut spending on its underground expansion project at Karowe, its Botswana diamond mine, to $22m this year from $53m previously. It would focus on long-lead capital items critical to the project whilst the long-term market remained unpredictable.

Shares in Lucara Diamond ended 2 Canadian cents stronger on Tuesday on the Toronto Stock Exchange. The stock has staged a 24% recovery since the end of October.

Revenue for the three months totalled $41.3m, equal to an average $365 per carat. This compares to revenue of $45.3m last year. “Lucara was pleased to see a stabilisation of the rough diamond market and an improvement in consumer demand for polished diamonds in both Asia and the US markets,” said Thomas in notes to the numbers.

But selling prices remain depressed year-on-year. The company’s nine months revenue number of $82.9m is well down on last year’s $136.5m in which the average sales price per carat was $436.

Thomas has been critical of the sales model in the diamond sector, saying it was crying out for reinvention. Lucara is consequently working on new ways to deliver diamonds in the market that provides predictable revenue.

It recently signed a second supply agreement with fashion brand Louis Vuitton to which it would supply a 549 carat diamond called ‘Sethunya’ via Lucara’s preferred diamond manufacturer HB Antwerp. The agreement provides for a price discovery based on polished goods, and is paid upfront to Lucara rather than through a rough diamond tender as is traditional in the industry. The final sales price of the diamond is settled once sold, with Lucara receiving the upside.

Lucara agreed with HB Antwerp in July to sell all its diamonds above 10 carats – representing 70% of Karowe’s production – in an effort to establish predictable, and potentially better, income.

Similarly, the company patented its blockchain diamond sales platform ‘Clara’ which has been given a window of opportunity amid Covid-19 where physical tender meetings have not been possible. Clara’s customer base had doubled in the third quarter and that first third party sales had taken place representing a tick against a strategic goal this year.

Karowe is prolific in its delivery of high value diamonds.

Lucara said that during the quarter it had discovered another large diamond – a 998 carat white ‘clivage’ diamond. The mine has yielded 31 diamonds larger than 100 carats this year of which 10 were larger than 200 carats.