TIDM0QUI
RNS Number : 1953Z
Lucara Diamond Corp
12 May 2023
May 11, 2023
NEWS RELEASE
LUCARA ANNOUNCES Q1 2023 RESULTS; UNDERGROUND EXPANSION
CONTINUES
VANCOUVER, May 11, 2023 /CNW/ (LUC - TSX, LUC - BSE, LUC -
Nasdaq Stockholm)
Lucara Diamond Corp. ("Lucara" or the "Company") today reports
its results for the quarter ended March 31, 2023.
Q1 2023 HIGHLIGHTS:
-- Guidance maintained.
-- All key operational metrics were on plan, with 0.5 million
tonnes of ore and 0.8 million tonnes of waste mined, 0.7 million
tonnes of ore processed, and 89,640 carats recovered.
-- The Q1 2023 operating cash cost of $26.65 per tonne of ore
processed(1) was well below the expected annual operating cash cost
range of $32.50 to $35.50 per tonne of ore processed.
-- Revenue for the quarter ended March 31, 2023 totalled $42.8
million, including $5.3 million through Clara.
-- Cash flow generated from operating activities was $20.4 million.
-- $30.5 million invested in the Karowe underground expansion
project ("UGP") in Q1 2023 focused on:
o Main shaft sinking activities in both the ventilation shaft,
currently at 213 metres below collar, and the production shaft,
currently at 187 metres below collar.
o The successful completion of the first grout programs in each
shaft during the first quarter of 2023.
o Completion and energization of the 11kV transmission line from
the new Karowe substation to the UGP.
o Stage two of the bulk power supply upgrade to connect all mine
power requirements to the new Karowe Substation and 132kV power
line. Both the existing operations and the UGP are now fully
powered through the upgraded grid-supplied electricity.
Eira Thomas, President & CEO commented: " As anticipated, Q1
delivered lower revenues than in the comparative period, owing to
the change in ore mix processed and diamond pricing weakness
resulting from continued geopolitical and economic uncertainty.
Lucara's outlook for the year remains unchanged as the largest
influence on our revenue in Q1, ore mix, returns to higher
contributions of south lobe ore in subsequent quarters. Sinking
continued in both the production and ventilation shafts with
material improvement to planned sinking rates achieved for the
production shaft and mitigations underway in the ventilation shaft
to achieve the same. Water management remains a key focus area. An
update to the schedule and budget for the underground project has
been initiated in response to slower than planned ramp up to
expected sinking rates, and, to account for time incurred and
anticipated for future grouting programs. We remain on-track to
complete the results of this analysis before the end of Q2,
2023."
REVIEW FOR THE QUARTERED MARCH 31, 2023
-- Operational highlights from the Karowe Mine for Q1 2023 included:
o Ore and waste mined of 0.5 million tonnes (Q1 2022: 0.8) and
0.8 million tonnes (Q1 2022: 0.5), respectively.
o 0.7 million tonnes (Q1 2022: 0.7) of ore processed.
o A total of 89,640 carats recovered (Q1 2022: 83,917) at a
recovered grade of 12.8 carats per hundred tonnes of direct milled
ore (Q1 2022: 12.6).
-- A total of 98 Specials were recovered, with two diamonds
greater than 100 carats including one diamond greater than 300
carats in weight.
-- Recovered Specials equated to 4% of the weight percentage of
total recovered carats from ore processed during Q1 2023 (Q1 2022 -
6.9%).
o The twelve-month Total Recordable Injury Frequency Rate of
0.36 (Q1 2022: 0.23) trended downwards following a three-month
period with no recordable injuries.
o The Karowe Mine has operated for over two years without a lost
time injury.
-- Financial highlights for the three months ended March 31, 2023 included:
o Revenues of $42.8 million (Q1 2022: $68.2 million) reflected a
planned change in product mix beginning in early 2023 combined with
the continuation of weaker diamond prices when compared to the
strong diamond pricing observed in Q1 2022. During Q1 2023, 64% of
the carats processed were recovered from the Centre and North Lobes
and 36% were recovered from South Lobe material (Q1 2022: 100%
South Lobe ore).
o Karowe's +10.8 production, sold through HB, accounted for 57%
(Q1 2022: 66%) of total revenues recognized in Q1 2023.
o Sales of non-Karowe diamonds through Clara were $1.5 million
in Q1 2023 (Q1 2022: $1.0 million).
o Adjusted EBITDA(1) was $15.3 million (Q1 2022: $36.0 million),
with the change directly attributed to a decrease in revenues.
o Cash flow of $20.4 million (Q1 2022: $30.8 million) from
operating activities.
-- Cash position and liquidity at March 31, 2023:
o Cash and cash equivalents of $31.2 million.
o Funded $18.0 million into a Cost Overrun Facility in the first
quarter of 2023.
o Drew $25.0 million from the $170.0 million project finance
facility for the Karowe UGP resulting in $90.0 million drawn at
quarter-end.
o The outstanding balance on the working capital facility
increased from $15.0 million to $23.0 million through Q1 2023,
resulting in available liquidity of $27.0 million.
DIAMOND MARKET
Despite a positive, longer-term outlook for natural diamonds,
anchored on improving fundamentals around supply and demand, softer
diamond prices observed in the latter half of 2022 have continued
into 2023 as global economic concerns combined with geopolitical
uncertainty, including the ongoing conflict in Ukraine continue to
play out in the market, particularly in North America. Prices are
beginning to show signs of stabilization as China begins to open-up
post-Covid, a trend which is anticipated to continue towards the
end of the year. Though sales of lab-grown diamonds increased
during the period, intense competition combined with improvements
in technology continue to drive prices of lab grown diamonds down.
This further differentiates this market segment from the natural
diamond market and highlights the unique nature and inherent rarity
of natural diamonds. The longer-term market fundamentals remain
unchanged and positive, pointing to strong price growth over the
next few years as demand is expected to outstrip future supply.
2023 OUTLOOK
This section of the press release provides management's
production and cost estimates for 2023. These are "forward-looking
statements" and subject to the cautionary note regarding the risks
associated with forward-looking statements. Diamond revenue
guidance does not include revenue related to the sale of
exceptional stones (an individual rough diamond which sells for
more than $10 million), or the Sethunya.
No changes were made to the Company's 2023 Guidance (released in
December 2022).
Karowe Diamond Mine Full Year -
2023
In millions of U.S. dollars unless otherwise
noted
------------------------------------------------------ -----------------
Diamond revenue (millions) $200 to $230
Diamond sales (thousands of carats) 385 to 415
Diamonds recovered (thousands of carats) 395 to 425
Ore tonnes mined (millions) 1.9 to 2.3
Waste tonnes mined (millions) 2.2 to 2.8
Ore tonnes processed (millions) 2.6 to 2.9
Total operating cash costs(1) including waste $32.50 to $35.50
mined(2) (per tonne processed)
Botswana general & administrative expenses including $3.50 to $4.50
marketing costs (per tonne processed)
Tax rate(3) 0%
Average exchange rate - USD/Pula 12.0
------------------------------------------------------ -----------------
(1) Operating cash costs are a non-IFRS measure. See "Non-IFRS
Financial Performance Measures".
(2) Includes ore and waste mined cash costs of $7.00 to $8.00
(per tonne mined) and processing cash costs of $12.00 to $13.00
(per tonne processed).
(3) The Company is subject to a variable tax rate in Botswana
based on a profit and revenue ratio which increases as profit as a
percentage of revenue increases. The lowest variable tax rate is
22% while the highest variable tax rate is 55% (only if taxable
income were equal to revenue). Capital expenditures are deductible
when incurred. With planned capital expenditures of up to $105
million for the UGP, a tax rate of 0% is forecast for 2023. Should
capital expenditures vary from plan, the Company could be subject
to current tax.
DIAMOND SALES
Karowe diamonds are sold through three separate and distinct
sales channels: through the HB sales agreement, on the Clara
digital sales platform and through quarterly tenders.
HB SALES AGREEMENT FOR +10.8 CARAT DIAMOND PRODUCTION FROM
KAROWE
For the three months ended March 31, 2023, the Company recorded
revenue of $24.5 million from the HB agreement (inclusive of top-up
payments of $6.6 million), as compared to revenue of $45.2 million
(inclusive of top-up payments of $11.7 million). The revenue
achieved in Q1 2023 is comparable to the $24.1 million earned from
the HB agreement (inclusive of top-up payments of $3.6 million) in
Q4 2022.
The decrease in revenue in Q1 2023 versus the comparative
quarter can be attributed primarily to the number of high value
diamonds delivered to HB in 2022 and the value of diamonds
delivered earlier in 2021 for which top-up revenue was received in
the period. Top-up values will typically increase as the more
valuable stones move through production and become available for
sale. Adjusting for the sale of Sewelô, a lower number of carats
from production were delivered to HB in Q1 2023 compared to Q1
2022. The lower initial value of the shipments was reflective of
the value in the stones delivered consistent with the change in
product mix. This result is consistent with the resource model and
expected.
At March 31, 2023, a number of higher value and more technically
complex stones that take longer to manufacture had not fully
completed the manufacturing and sales process. As these stones
finish the manufacturing process, the Company may record additional
revenue in the form of "top-up" payments when these diamonds are
sold.
Despite the overall decrease in revenue recognized in Q1 2023,
diamond market fundamentals continued to support healthy prices as
the number of polished stones sold by HB has improved from Q4 2022.
Natural variability in the quality profile of the +10.8ct
production in any production period or fiscal quarter results in
fluctuations in recorded revenue and associated top-ups. During Q1
2023, 4% weight percentage of Specials of total carats recovered
was consistent with the Karowe resource model.
CLARA SALES PLATFORM
As Clara grows, to complement goods from the Karowe mine,
additional supply is being made available through diamonds
purchased by the Company and re-sold through Clara and secondary
market suppliers. Total volume transacted on the platform was $5.3
million in Q1 2023, with Karowe goods representing 63% of the total
sales volume transacted. Sales of third-party diamonds increased to
$1.5 million in Q1 2023 (Q1 2022: $1.0 million). The Company is
focused on growing Clara through building additional supply in
2023, both from third-party producers and the secondary market. The
number of buyers on the platform continues to grow with 99 buyers
on the platform at March 31, 2023.
During Q1 2023, the sales volume transacted was $5.3 million (Q1
2022: $7.0 million), as lower volumes were placed for sale (due to
a shift in product mix from the Karowe Mine). A softening in market
prices was observed between Q1 2023 and Q1 2022.
QUARTERLY TER
The Q1 2023 tender of $12.9 million (Q1 2022: $16.1 million)
reflected a good performance in rough diamond pricing with strength
in the small stones. Rough diamond prices had reached a multi-year
high point at the time of the Q1 2022 tender. Pricing achieved
through the tender remained at or above price levels in 2019. A
total of 77,750 carats were sold in the March 2023 tender,
generating revenues of $12.9 million (Q1 2023 tender: $16.1 million
from the sale of 74,638 carats).
KAROWE UNDERGROUND EXPANSION UPDATE
The Karowe UGP is expected to extend the mine life to at least
2040, with initial underground carat production predominantly from
the highest value EM/PK(S) unit and is forecast to contribute
approximately $4 billion in additional revenues, using conservative
diamond prices.
During 2022, the Company updated the estimated capital cost for
the Karowe UGP to $547 million (including contingency). As a result
of sinking delays and grouting events beginning in mid-2022 and
which are ongoing, the Company is evaluating the impact of the
incurred delays against the overall project schedule and budget.
Several operational adjustments were implemented beginning in Q4
2022 to address the challenges encountered. An update to the
project schedule and budget to take into account these developments
is expected to be completed before the end of Q2, 2023.
During the three months ended March 31, 2023, a total of $30.5
million was spent on the Karowe UGP development, primarily in
relation to ongoing construction activities, including:
-- Main sinking in the production and ventilation shafts:
o In response to water inflows from the sandstones, one cover
grouting event in the ventilation shaft and two events in the
production shaft were successfully completed during February and
March 2023. Experiences gained from these first grouting events
will inform future anticipated cover grouting events as the shafts
progress to depth.
o Planned sinking rates achieved in the production shaft in Q1
following active interventions and mitigations implemented in Q4
2022. Further investments made in Q4 2022 are expected to similarly
improve sinking cycle times to planned rates in the ventilation
shaft and progress is being closely monitored. Cycle time is the
period it takes to complete a series of activities within the
sinking process to achieve the next planned vertical advance.
o The ventilation shaft is currently at 213 metres below collar,
with a planned final depth of 731 metres. The production shaft is
currently at 187 metres below collar, with a planned final depth of
765 metres.
-- The 11kV transmission line to the project site was
commissioned in mid-January 2023. This represents a significant
milestone for the Karowe UGP as it is now fully powered through
grid-supplied electricity.
-- Transition of the temporary power supply to a back-up power
configuration. Back-up power will continue to be provided by diesel
generators.
-- Stage two of the bulk power supply upgrade to connect all
mine power requirements to the new Karowe Substation and 132kV
power line. This upgrade is expected to deliver stable and
dedicated power to the Karowe Mine operations.
-- The roll out of a behavioural-based safety training program
in Q4 2022 has continued in the first quarter of 2023. The UGP
achieved a three-month period with no reportable incidents
delivering a three-month rolling Total Recordable Injury Frequency
Rate of zero.
Activities for the Karowe UGP in Q2 2023 are expected to include
the following:
-- Sinking and grouting within both the ventilation and production shafts.
-- Procurement of underground equipment, including dewatering
pumps, underground crush and convey systems and the permanent stage
winder.
-- Initiation of construction on the bulk air cooler system.
-- Development of a request for proposal for the underground lateral development work; and,
-- Continuation of detailed design and engineering of the
underground mine infrastructure and layout.
The capital cost estimate for the underground expansion in 2023
is $105 million - see "2023 Outlook". The program will focus
predominantly on shaft sinking and grouting activities in both
shafts, along with construction of the bulk air cooler, tendering
of the underground development contract and underground equipment
purchases. Ramp-up to planned sinking rates for the ventilation
shaft continues and additional cover grouting events are expected
for both shafts in 2023 and 2024.
FINANCIAL HIGHLIGHTS - Q1 2023
Three months ended March 31,
In millions of U.S. dollars, except carats or otherwise noted 2023 2022
--------------------------------------------------------------- --- --------------- --------------
Revenues $ 42.8 68.2
Operating expenses (18.3) (18.0)
Net income for the period 1.0 19.0
Earnings per share (basic and diluted) 0.00 0.04
Operating cash flow per share(1) 0.03 0.08
Cash on hand 31.2 39.1
Amounts drawn on working capital facility(2) 23.0 12.0
Amounts drawn on project finance facility 90.0 45.0
Karowe Revenue 41.2 67.2
Carats sold 83,374 80,295
-------------------------------------------------------------------- --------------- --------------
QUARTERLY RESULTS OF OPERATIONS - KAROWE MINE, BOTSWANA
UNIT Q1-23 Q4-22 Q3-22 Q2-22 Q1-22
Sales
Revenues from the sale of
Karowe diamonds US$M 41.3 40.1 46.5 50.0 67.2
Karowe carats sold Carats 83,374 81,264 99,301 66,167 80,295
Production
Tonnes mined (ore) Tonnes 541,400 484,705 920,410 1,091,192 811,947
Tonnes mined (waste) Tonnes 761,295 199,385 453,860 357,764 482,104
Tonnes processed Tonnes 700,678 690,946 693,398 719,207 666,488
cpht
Average grade processed(1) (*) 12.8 12.5 11.4 12.0 12.6
Carats recovered Carats 89,640 86,655 78,879 86,317 83,917
Costs
Operating cost per tonne
of ore processed(2) US$ 26.65 26.20 29.33 28.78 27.80
Capital Expenditures
Sustaining capital expenditures US$M 0.8 9.9 4.0 4.1 0.8
Underground expansion project(3) US$M 30.5 22.3 23.9 29.1 31.1
--------------------------------- ------- ------- ------- ------- --------- -------
CONFERENCE CALL
The Company will host a conference call and webcast to discuss
the results on Friday, May 12, 2023 at 5:00am Pacific, 8:00am
Eastern, 1:00pm UK, 2:00pm CET.
To join the conference call please use the following link
https://emportal.ink/3MK80nT or the phone numbers listed below.
Conference ID:
33643944 / Lucara Diamond
Dial-In Numbers:
Toll-Free Participant Dial-In North America (+1) 888 390 0605
UK Toll free 0800 652 2435
Local Vancouver (+1) 416 764 8609
Webcast:
To view the live webcast presentation, please log on using this
direct link: https://app.webinar.net/8rMY2nz2Z7p
The presentation slideshow will also be available in PDF format
for download from the Lucara website ( Link to presentation ).
Conference Replay:
A replay will be available until May 19, 2023. The pass code for
the replay is: 643944#.
Replay number (Toll Free North America) (+1) 888 390 0541
Replay number (Local) (+1) 416 764 8677
On behalf of the Board,
Eira Thomas
President and Chief Executive Officer
Follow Lucara Diamond on Facebook , Twitter , Instagram , and
LinkedIn
For further information, please contact:
Hannah Reynish Investor Relations & Communications
+1 604 674 0272| info@lucaradiamond.com
Sweden Robert Eriksson, Investor Relations & Public
Relations
+46 701 112615 | reriksson@rive6.ch
UK Public Relations Charles Vivian / Jos Simson, Tavistock
+44 778 855 4035 | lucara@tavistock.co.uk
ABOUT LUCARA
Lucara is a leading independent producer of large exceptional
quality Type IIa diamonds from its 100% owned Karowe Diamond Mine
in Botswana. The Karowe Mine has been in production since 2012 and
is the focus of the Company's operations and development
activities. Clara Diamond Solutions Limited Partnership ("Clara"),
a wholly-owned subsidiary of Lucara, has developed a secure,
digital sales platform that uses proprietary analytics together
with cloud and blockchain technologies to modernize the existing
diamond supply chain, driving efficiencies, unlocking value and
ensuring diamond provenance from mine to finger. Lucara has an
experienced board and management team with extensive diamond
development and operations expertise. Lucara and its subsidiaries
operate transparently and in accordance with international best
practices in the areas of sustainability, health and safety,
environment, and community relations. Lucara has adopted the IFC
Performance Standards and the World Bank Group's Environmental,
Health and Safety Guidelines for Mining (2007). Accordingly, the
development of the Karowe underground expansion project ("UGP")
adheres to the Equator Principles. Lucara is committed to upholding
high standards while striving to deliver long-term economic
benefits to Botswana and the communities in which the Company
operates.
The information is information that Lucara is obliged to make
public pursuant to the EU Market Abuse Regulation and the Swedish
Securities Markets Act. This information was submitted for
publication, through the agency of the contact person set out
above, on May 11, 2023 at 5:00pm Pacific Time.
NON-IFRS FINANCIAL PERFORMANCE MEASURES
This news release refers to certain financial measures, such as
adjusted EBITDA, adjusted operating earnings, operating cash flow
per share, operating margin per carat sold and operating cost per
tonne of ore processed, which are not measures recognized under
IFRS and do not have a standardized meaning prescribed by IFRS.
These measures may differ from those made by other corporations and
accordingly may not be comparable to such measures as reported by
other corporations. These measures have been derived from the
Company's financial statements, and applied on a consistent basis,
because the Company believes they are of assistance in the
understanding of the results of operations and financial position.
Please refer to the Company's MD&A for the quarter ended March
31, 2023 for an explanation of non-IFRS measures used.
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain of the statements made and contained herein and
elsewhere constitute forward-looking statements as defined in
applicable securities laws. Generally, these forward-looking
statements can be identified by the use of forward-looking
terminology such as "expects", "anticipates", "believes",
"intends", "estimates", "potential", "possible" and similar
expressions, or statements that events, conditions or results
"will", "may", "could" or "should" occur or be achieved.
Forward-looking statements are based on the opinions and
estimates of management as of the date such statements are made,
and they are subject to a number of known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially
different from any future results, performance or achievement
expressed or implied by such forward-looking statements. The
Company believes that expectations reflected in this
forward-looking information are reasonable, but no assurance can be
given that these expectations will prove to be accurate and such
forward-looking information included herein should not be unduly
relied upon.
In particular, forward-looking information and forward-looking
statements in this news release may include, but are not limited
to, information or statements of projected capital costs associated
with the Karowe UGP,, the Company's ability to comply with the
terms of the facilities which are required to construct the Karowe
UGP, that expected cash flow from operations, combined with
external financing will be sufficient to complete construction of
the Karowe UGP, the potential impacts of COVID-19, economic and
geopolitical risks, including potential impacts from the Russian
military invasion of Ukraine, expectations regarding longer-term
market fundamentals and price growth, the disclosure under "2023
Outlook", expectations regarding top-up payments, processing
expectations, expectations that the Karowe UGP will extend mine
life, forecasts of additional revenues, estimated capital costs,
production and cost estimates, tax rates, expectations regarding
the scheduling of activities for the Karowe UGP in 2023 and in
future, that the estimated timelines to achieve mine ramp up and
full production from the Karowe UGP can be achieved, the economic
potential of a mineralized area, the size and tonnage of a
mineralized area, anticipated sample grades or bulk sample diamond
content, future production activity, the future price and demand
for, and supply of, diamonds, future forecasts of revenue and
variable consideration in determining revenue, estimation of
mineral resources, exploration and development plans, cost and
timing of the development of deposits and estimated future
production, currency exchange rates, success of exploration,
requirements for and availability of additional capital, capital
expenditures, operating costs, the completion of transactions the
profitability of Clara and the Clara Platform, and the scaling of
the digital platform for the sale of rough diamonds owned by Clara,
the Company's intent to continue to seek additional supply, both
from third-party producers and the secondary market, the benefits
to the Company of diamond supply agreements with HB and the ability
to generate better prices from the sale of the Company's +10.8
carat production as a polished stone.
There can be no assurance that such forward looking statements
will prove to be accurate, as the Company's results and future
events could differ materially from those anticipated in this
forward-looking information as a result of those factors discussed
in or referred to under the heading "COVID-19 Global Pandemic,
Economic and Geopolitical Risks" in the Company's most recent
MD&A and under the heading "Risks and Uncertainties" in the
Company's most recent Annual Information Form, both available at
http://www.sedar.com, as well as changes in general business and
economic conditions, the ability to continue as a going concern,
changes in interest and foreign currency rates, changes in
inflation, the supply and demand for, deliveries of and the level
and volatility of prices of rough diamonds, costs of power and
diesel, impacts of potential disruptions to supply chains, acts of
foreign governments and the outcome of legal proceedings,
inaccurate geological and recoverability assumptions (including
with respect to the size, grade and recoverability of mineral
reserves and resources), and unanticipated operational difficulties
(including failure of plant, equipment or processes to operate in
accordance with specifications or expectations, cost escalations,
unavailability of materials and equipment, government action or
delays in the receipt of government approvals, industrial
disturbances or other job actions, adverse weather conditions, and
unanticipated events relating to health safety and environmental
matters).
Accordingly, readers are cautioned not to place undue reliance
on these forward-looking statements which speak only as of the date
the statements were made, and the Company does not assume any
obligations to update or revise them to reflect new events or
circumstances, except as required by law.
This information is provided by RNS, the news service of the
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END
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