LUCARA Diamond Corporation hoped to add its first third-party diamond supply – some of which could come from a listed diamond producer – to its online sales platform Clara “in the coming weeks”, said the firm’s CEO, Eira Thomas.
“We are under non-disclosure agreements, so I can’t say, but we have got public and private companies looking at sales [through Clara],” Thomas said in response to a question at her firm’s first quarter results presentation on Friday.
The company, which mines the Karowe mine in Botswana, said earlier it had a “waiting list” in order to manage supply and demand on Clara. “We have more demand than supply right now which is a good position to be in,” said Thomas during the presentation.
“We really do need more supply to fill the demand. This is a key objective. We have made good progress in the first quarter, and I hope to say more about that in the coming weeks.” Lucara earned $6m in first quarter sales through Clara – double the sales of a year ago.
The company supplies unpolished diamonds smaller than 10.8 carats to Clara, reserving most of its higher value goods for an exclusive sales agreement with HB Group, a specialist cutting and polishing firm based in Antwerp.
As a result, Lucara has relatively limited diamond availability to supply Clara which has around 80 customers currently. Supply to Clara from outside the company could transform global diamond sales, Thomas said.
“Change is hard, but people are increasingly open to embracing new technologies. We will definitely get there … All that it will take is one additional producer with decent volumes through the platform to have a positive experience,” said Thomas.
Lucara has estimated about 5% to 10% of world diamond supply could be traded on Clara which Thomas believed was “a conservative” estimate.
Lucara reported a $6.6m year-on-year turnaround in first quarter net income which came in at a $3.4m profit. On an adjusted earnings before interest, tax, depreciation and amortisation basis, the company registered earnings of $22.2m compared to $8.1m for the same period in the firm’s 2020 financial year.
Lucara ended the first quarter with about $5m in net cash following an increase in cash and cash equivalents of $27.9m during the period.
All in all, Lucara recognised earned $53.1m in revenue, equal to $579 per carat, from the sale of 91,760 carats. This compares to an average sales price of $396/carat a year ago when the company sold 86,178 carats. The first quarter’s revenue included about $9m in ‘top-up’ sales from HB Group.
HB Group estimates a polished sales value (minus commission and cutting/polishing costs) and then tops up the value of the sale if a higher price is received. Lucara recently extended its sales agreement with HB Group two years following an initial one year deal taken out during the early months of the Covid-19 crisis.
There were strong price increases since the beginning of the year.
“The diamond market began 2021 in a healthier position than it has at any stage over the past five years,” Lucara said in its first quarter results announcement. As a result, there was improved pricing in nearly all sizes and quality of diamonds during the first quarter.
However, Lucara had a word of caution regarding the diamond trade in India where a fresh surge in Covid-19 infections has reached crisis levels. The outbreak was “… of particular concern heading into the second quarter as infection rates have increased dramatically, resulting in new lock-down measures”.