Lucara re-enters diamond sales agreement with HB Antwerp

LUCARA Diamond Corp, the Toronto-listed miner, has re-entered a diamond sales agreement with cutter and polisher HB Group for goods larger than 10.8 carats mined from the Karowe mine in Botswana.

The agreement comes only five months after severing an agreement with the Belgian business amid claims of “a material breach of financial commitments”.

Botswana, where Lucara mines diamonds at its Karowe project, has been reassessing plans to acquire 24% of HB Antwerp, according to a report by Reuters.

The two companies’ first diamond sales agreement was struck in 2020 and extended for 10 years in 2022, the newswire said.

Lucara said the purchase price for rough stones in its revised deal would be based on mutual agreement of the estimated value of polished diamonds, with a further payment based on actual achieved polished sales, said Reuters.

The pricing mechanism is expected to deliver regular cash flow, Lucara said. “This partnership reflects our commitment to ensuring stability and sustainability in our operations,” said Lucara CEO, William Lamb.

Said Lamb: “We remain steadfast in our dedication to delivering exceptional quality and premium value from our diamonds to all stakeholders, even amidst external pressures”.

Lucara ran into trouble last year when it announced the underground extension of Karowe – its only operating asset – would take 18 months longer to complete, putting the entire company at huge risk. The main implication of the delay was a significant increase in its capital cost to $683m as well as later-than-planned cash flow just as the mine’s open-pit reserves ran down.

Unfortunately for Lucara, this bad news landed just as project capital and debt repayment obligations fell due and as global diamond prices slumped amid a large supply surplus.

Lucara’s balance sheet was in deep, deep trouble. Lucara’s 24.5% shareholder Lundin Group rushed to the firm’s support, but the die was cast for Eira Thomas, Lucara’s CEO of five years, who promptly resigned in August.

Lamb said in January the company it had secured finance for Karowe in which its total debt package of $220m remain unchanged but it is constituted slightly differently.

It has been rebased (different start date) and therefore has a different repayments schedule, and now consists of $190m in project finance ($170m previously) and a $30m working capital facility ($50m).

In addition, the debt package will attract an interest rate of Libor plus a 6.5% margin annually from rebase date to completion with the margin reducing to 6% from project completion and 7% thereafter. Lucara Botswana will pay 35% of the margin annually as it relates to the project loan facility.