Lucara Slashes Outlook Amid Severed HB Deal

Lucara Diamond Corp. has lowered its full-year forecast due to the termination of its supply agreement with HB, as well as the broader slowdown in the rough market.

The miner believes 2023 revenue will reach between $160 million and $190 million, compared with the $200 million to $230 million it announced in December, it said last week. Sales volume will fall to between 365,000 and 385,000 carats, rather than the initial estimate of 385,000 to 415,000 carats, while output will come to 395,000 to 405,000 carats, versus the original prediction of 395,000 to 425,000 carats.

“Revisions to diamond-revenue guidance reflect changes to the sales mechanism for the rough diamonds larger than 10.8 carats in size following the termination of the company’s agreement with HB, combined with global rough-diamond market impacts,” the company noted.

Lucara had been selling rough from its Karowe mine in Botswana in three ways: through quarterly tenders; on its Clara digital platform, which matches buyers with the exact stones they need; and through an offtake agreement with HB for rough over 10.8 carats. In September, after three years, the miner severed that agreement, citing a “material breach of financial commitments” by the Belgian manufacturer.

Revenue for the third quarter that ended September 30 rose 14% to $56.9 million, as the miner sold a heavier proportion of large stones, which were in higher demand, it explained. Sales volume climbed 12% to 111,673 carats, while the average price increased 1% to $510 per carat. Profit jumped to $10.5 million, compared to $1.8 million during the same period a year ago.

During the quarter, Lucara recovered 189 special-sized stones, including six diamonds greater than 100 carats. Of those, three weighed more than 300 carats. Lucara’s sales through the HB supply deal accounted for 67% of total revenue for the three months, it noted.

Output from the deposit rose 25% year on year to 98,311 carats for the quarter.