Lucara Records Net Loss of US$4 Mn for Q3 2019 On the Back of Flat Revenue Y-o-Y

Lucara Diamond

Announcing its results for the quarter ended September 30, 2019 (Q3 2019) Lucara Diamond Corp. reported total revenue of US$45.3 million for the period against revenue of US$45.7 million recorded Q3 2018. This was raised from the sale of 116,200 carats of rough diamonds as compared to the sale of 101,600 carats of rough diamonds in the same period of the previous year.

“Better recoveries in smaller, lower-value diamonds resulted in a 14% increase in the number of carats sold,” Lucara stated. “While still profitable, the smaller goods impact the average price per carat sold.”

Lucara also noted that the value of the rough diamonds sold through Clara Diamond Solutions (a digital platform wholly owned by Lucara) doubled in Q3 2019 with US$2.4 million of goods transacted and five sales held. This, the Company said, brings the total value transacted on the platform as of September 30, 2019, to US$6.0 million since sales began.

The Company reported a net loss of US$4.0 million for Q3 2019 (resulting in a $0.01 loss per share for the quarter) compared to net income of US$5.1 million recorded for Q3 2018 (earnings per share of US$0.01). “An increase in operating expenses and depletion and amortization (a non-cash expense) had the most significant impact on the current quarter’s results,” Lucara explained.

Cash flow from operations in Q3 2019 totaled US$13.8 million compared to cash flow from operations of US$3.7 million in Q3 2018.

For the nine months ended September 30, 2019 (YTD 2019) Lucara recorded a revenue of US$136.5 million from three tenders as well as sales through Clara; this compares with a revenue of US$135.6 million for the same period in the previous year, during which three regular stone tenders and one exceptional stone tender were held.

“A continued focus on operational discipline at Karowe has resulted in a strong operating margin of 58% year to date (YTD 2018: 63%) and adjusted EBITDA year to date of US$50.2 million (YTD 2018: US$55.7 million),” Lucara said. “Operating expenses per carat sold have decreased to US$182 per carat in the nine months ended September 30, 2019, from US$208 per carat in the comparable period in 2018, due to a 30% higher volume of carats sold period to period.”

The Company’s net income for the nine months ended September 30, 2019, stood at US$4.1 million, resulting in earnings per share of US$0.01; as against a net income of US$17.9 million and earnings per share of US$0.05 reported for the nine months ended September 30, 2018.

Lucara’s cash flow from operations for the nine months ended September 30, 2019, totaled US$31.0 million as compared to US$35.7 million for the nine months ended September 30, 2018.

“As at September 30, 2019, the Company had cash and cash equivalents of US$4.8 million,” the company asserted. “All draws on the Company’s working capital facility were repaid during Q3 2019, leaving US$50 million available for use on September 30, 2019.”

The Company paid a quarterly dividend of CA$0.025 per share on September 19, 2019.

On the production front, Lucara noted that “A strong operating environment prevailed at the Karowe Mine in Q3 2019 with guidance met or exceeded with respect to all mining and processing activities….”

This included 0.68 million tonnes of ore processed for a recovered grade of 13.9 carats per hundred tonnes; and the recovery of 104,990 carats (including 10,646 carats recovered from re-processing historic recovery tailings from the previous milling).

A total of 211 Specials were recovered from direct milling during the third quarter, representing 6.1% weight percentage of total direct milling recovered carats, in line with mine plan expectations, Lucara noted. Moreover, seven diamonds were recovered which were greater than 100 carats in weight; as well as a 9.74-carat gem-quality blue diamond and a 4.13-carat gem-quality pink diamond.

The Company announced some changes in guidance saying: “total revenue in 2019 is expected to be at the lower end of guidance, between US$170 million and US$180 million; operating cost per tonne processed is also expected to be at the lower end of guidance, between US$32-$34/tonne. Total carats recovered and sold are expected to be between 400,000 and 425,000 carats and total tonnes mined is expected to be between 9.5 and 11.0 million tonnes.”

Eira Thomas, President & CEO commented: “Lucara continues to deliver solid results and strong margins on the back of a strong operational performance at Karowe in Q3. With operating margins at Karowe approaching 60% and no long-term debt, Lucara is well-positioned to continue to weather the difficult diamond pricing environment that has prevailed since the beginning of the year.”

Thomas added: “Moreover, this continued strong performance combined with the encouraging results reported in our recently completed feasibility study, provides a compelling rationale for investing in an underground expansion at Karowe, potentially adding 13+ years of mine life and generating an after-tax NPV (@5%) of US$718 million and in excess of US$5.0 billion in gross revenue. Our latest special stone recoveries, which include a 9.7 carat blue diamond, a 4.1 carat pink diamond, atop white 123 carat diamond and most recently, a top white 106 carat diamond continue to bode well for our final sale of the year, and we remain on track to meet or exceed our guidance in every respect. We continue to see positive progress with Clara, reaching US$6 million of total value transacted on the platform since sales began in December 2018.”

The Company also announced a change in the Dividend Policy, as a result of the positive feasibility study for the development of an underground mine at the Karowe Diamond Mine.

“…Lucara’s Board of Directors has determined that it is in the best interest of the Company and its shareholders to suspend the quarterly dividend payment of C$0.025 per share, effective immediately,” the Company stated. “The feasibility study demonstrates the potential to extend the mine life at Karowe to 2040 while generating significant economic benefits for the Company, its shareholders, and employees, the communities surrounding the mine and the country of Botswana. In anticipation of a decision to proceed with construction of an underground mine at Karowe, the Board of Directors are of the view that it would be prudent to re-direct the Company’s available cash so that those funds can be available for early works including detailed engineering, procurement initiatives, and project financing.”

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