Lucara Skids to Loss in 2023 Amid Challenging Market

Lucara Diamond Corp. reported a net loss in 2023 as weak demand for rough-diamonds led to decreased sales and the company incurred a “significant expense” related to the underground expansion of its Karowe mine in Botswana.

The miner posted a net loss of $20.2 million for the full year, compared to a profit of $40.4 million in 2022, it said Wednesday. During the year, an oversupply in the midstream amid a slow polished-diamond market impacted the industry. The termination in September of Lucara’s rough-supply contract with HB Antwerp, through which it sold all its diamonds over 10.8 carats, also hit its revenue. The parties have since renewed the contract.

The loss was also the result of an impairment charge on the company’s intangible assets as well as a significant tax expense related to the expansion of Karowe to underground mining, it explained.

Revenue for the year dropped 17% to $177.4 million, even as sales volume increased 16% to 379,287 carats. The drop in revenue is due to a weaker product mix than during the equivalent period a year ago, when Lucara offered only goods from its high-value south lobe. In 2023, the company recovered just 71% of rough from that area, while the remainder came from the lower-quality north and center lobes, it noted. Production grew 18% to 395,134 carats.

In the fourth quarter, revenue fell 14% to $36.5 million. Sales volume rose 37% to 111,523 carats.

Revenues from Lucara’s supply deal with HB slipped 28% to $17.4 million for the three months, dented by the company’s cancellation of its contract with HB at the end of the third quarter as well as by a lower proportion of large, high-quality stones following the addition of rough from the center lobe. The miner recorded income from the deal during the quarter as it received top-up payments comprising a portion of the profits from diamonds delivered to HB before the agreement ended.

The miner expects revenue of $220 million to $250 million in 2024 from the sale of between 345,000 and 375,000 carats.

“2023 was a challenging year for Lucara,” said Lucara CEO William Lamb. “The diamond market in general remains a volatile environment with market challenges coming from multiple areas. Although mining activities in the open pit continued to show ongoing sustainable improvements…the development on the underground project experienced delays in the early part of the year. The company has dedicated significant effort and resources to focus on the underground project as this project represents a very exciting and valuable future for Lucara.”

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Main image: Ore being processed at the Karowe mine. (Lucara Diamond Corp.)