Rough Slowdown Hits Lucara

Lucara Diamond Corp.’s revenue and earnings fell in the first quarter as the market weakened and the miner had a lower average value of rough available to sell.

Sales declined 37% year on year to $42.8 million, the company reported last week. It sold $41.3 million worth of goods from its Karowe mine in Botswana, including top-up payments as part of an arrangement with HB Antwerp. The remaining $1.5 million in revenue came from sales of other companies’ goods on Lucara’s Clara online platform. Net profit slumped 95% to $1 million.

The miner experienced a planned weakening of the product mix in early 2023. A smaller proportion of diamonds came from the high-value south lobe, and more came from the center and north lobes, which produce fewer stones weighing 10.8 carats or more. Like-for-like rough valuations also dropped relative to a year earlier.

“As anticipated, [the first quarter] delivered lower revenues than in the comparative period [of 2022], owing to the change in ore mix processed and diamond-pricing weakness resulting from continued geopolitical and economic uncertainty,” said Lucara CEO Eira Thomas.

Proceeds from the HB deal — under which the miner is contracted to sell all of its stones of 10.8 carats or more to the Belgian manufacturer — fell 46% year on year to $24.5 million, including $6.6 million in top-up payments Lucara received based on the final polished value. This reflected the changes to the product mix at Karowe as well as the fact that a number of higher-value and more complex stones were still at the manufacturing and polished-sales stages when the quarter ended.

The company maintained its revenue projection of $200 million to $230 million for 2023, noting a positive long-term outlook for the diamond industry.

While late 2022’s soft pricing continued into this year, “prices are beginning to show signs of stabilization as China begins to open up post-Covid-19, a trend [that] is anticipated to continue towards the end of the year,” management added.

Image: The Karowe mine at dusk. (Lucara Diamond Corp.)