Lucara Diamond Corp.’s sales dropped in the third quarter as the company supplied fewer large and expensive stones from its lucrative Karowe mine in Botswana.
Revenue fell 31% year on year to $49.9 million, while net profit slumped 86% to $1.8 million, Lucara reported Wednesday.
Sales of rough from Karowe declined 36% to $46.5 million, with volume down 15% at 99,301 carats and the average price falling 43% to $337 per carat. The remaining revenue came from sales of third-party goods on Lucara’s Clara online platform.
Management blamed a decrease in the number of high-value diamonds the company sold to HB Antwerp through the pair’s supply agreement. The Belgian manufacturer is contracted to buy all Karowe rough of 10.8 carats or more, with Lucara receiving a proportion of the final polished proceeds.
In the third quarter a year earlier, Lucara sold four pink diamonds and two white, type IIa stones — weighing 393.5 and 257.5 carats — to HB. As a result of the unfavorable comparison, revenue from the agreement plummeted 46% to $27.1 million.
“Despite the overall decrease in revenue recognized in [the third quarter], diamond-market fundamentals continued to support healthy prices as steady demand and some inventory shortages were reported,” Lucara said. Fluctuation in the availability of 10.8-carat production is expected, it added.
Output from Karowe slid 19% year on year to 78,879 carats for the quarter.
Sorting a parcel of rough diamonds Gaborone, Botswana.
De Beers lifted prices of smaller rough at this week’s sight, its second consecutive increase, as the industry continued to express concerns about a perceived mismatch with polished.
Goods weighing less than 0.75 carats saw price hikes of around 5% at the February sale, while larger items were mostly stable, sightholders and industry insiders told Rapaport News this week.
The latest adjustments follow a strong US holiday season for retail and come amid robust demand in the polished sector while the industry restocks. Rough prices have rocketed in recent months, reflecting this appetite as well as supply shortages.
Prices at auctions and tenders have risen even more strongly than sight goods, with traders enjoying unprecedented premiums when reselling De Beers boxes on the secondary market.
However, manufacturers’ margins have suffered. This was a major point of discussion at the Dubai Diamond Conference, which took place Monday.
“There is still some buzz, but people are very cautious now because they’ve understood that prices have hit the ceiling and [De Beers] is facing resistance now with the new prices,” a sightholder said Tuesday on condition of anonymity. “There will be some stability and there has to be some mindfulness, because rough prices are outpacing polished prices so anyone who buys rough at those prices is not going to make a profit.”
The increases at the February sight followed sharper hikes in January, when rates jumped by up to 15% in the smallest categories and by 5% to 12% in larger sizes.
“What we try and do very hard at De Beers is price properly in accordance with demand,” De Beers CEO Bruce Cleaver told Rapaport News on the sidelines of the Dubai event. This is based on expectations of how the final polished will sell when it becomes available two or three months later, he explained. “Our crystal ball is no better than anyone else’s, but it’s based on a lot of data at the time that we make these pricing decisions.”
China Sales ‘Average’
Meanwhile, sales in the Far East during the recent Chinese New Year were steady, producing figures broadly in line with last year, dealers reported. This came despite headwinds in the latter months of 2021, including fresh Covid-19 outbreaks, a real-estate crisis, and power shortages.
The unfavorable comparison with last year’s season of post-lockdown recovery also affected the numbers, while fewer consumers took trips within China — usually a driver of seasonal demand, Cleaver pointed out.
“There’s no question that people are not traveling as much between the big Chinese cities and coming into the big Chinese cities to buy as they might have been because of [Covid-19],” he noted, cautioning that the information was preliminary. “In a sense, it could have been a bit better, but the early data I’ve seen is that it’s been an average to reasonable New Year.”
However, store openings in the mainland’s tier 3 and 4 cities are progressing well, he said.
“I don’t think there’s any reason to think that will slow down, and our clients tell us that’s continuing to happen,” the executive added.
The February sight, the second sale of the year, began on Monday and ends Friday.
Botswana’s state-run diamond trader reported record revenue last year with sales surging almost five fold after U.S. imports recovered from a Covid-19 induced slowdown.
Okavango Diamond Company sold $963 million of rough diamonds last year, said Dennis Tlaang, a company spokesman. The revenue was the most since the company began operations in 2012, he said.
“The demand for natural rough diamonds remained strong throughout 2021 driven primarily by positive market sentiment in key markets such as the United States,” Tlaang said.
Sales may rise further this year after De Beers, the world’s biggest producer of the stones, pushed through one of its most aggressive diamond price increases in recent years. Okavango also got higher than normal prices in the sole auction it held this year, Tlaang said.
De Beers Implements Big Diamond Price Hike as Demand Runs Hot. A Buying Frenzy in Cheap and Tiny Diamonds Sends Prices Soaring. Diamond Sold for $12 Million in Cryptocurrency at Sotheby’s. “We believe this is a good indicator of the market dynamics of 2022, at least for the first half of the year,” he said. “The company will continue to drive customer participation by marketing its rough diamond assortment in key markets such as Antwerp and Dubai.”
Under a 2011 agreement between De Beers and the government of Botswana, Okavango purchases 25% of the nation’s annual production for independent marketing, while the balance is sold through the De Beers’ trading network.
62.7-carat fancy pink diamond “Boitumelo” in Botswana
Lucara keeps raking in the big diamond finds, this time recovering a 62.7-carat fancy pink diamond from its Karowe mine in Botswana.
It is the largest fancy pink gem to found in Botswana, according to the diamond miner, and one of the largest rough pink diamonds on record in the world.
The stone has been named “Boitumelo,” which means joys in Setswana.
Measuring 26 x 17 x 16 mm, it is described as a high-quality fancy pink Type IIa gem.
Lucara uncovered it from the direct ore milling at the EM/PK(S) unit of the South Lobe, the site of many of its biggest finds.
The company said a 22.21-carat fancy pink gem of similar quality was found during the same production period, as were two more pink gems of similar color weighing 11.17 carats and 5.05 carats.
Asked if those additional small pink diamonds could’ve broken off from the same piece as the 62.7-carat diamond, a company spokesperson said: “As the diamonds all came from a similar production period it may be possible, but we cannot confirm this at this time. Further detailed analysis needs to be carried out to confirm if they did indeed originally stem from one diamond.”
Regarding the find, CEO Eira Thomas said, “Lucara is delighted to announce another historic diamond with the recovery of the Boitumelo, and very pleased to demonstrate the continued potential for large, colored diamonds from the South Lobe production.
“These remarkable pink diamonds join a collection of significant diamond recoveries in 2021 produced from the EM/PK(S), which forms a key economic driver for the proposed underground mine at Karowe.”
Botswana Diamonds (LON:BOD) said on Monday it had completed the acquisition of Sekaka, the exploration vehicle that belonged to embattled rival Petra Diamonds (LON:PDL) and which held three prospecting licenses in the country’s Central Kalahari Game Reserve.
In one of its licenses, Sekaka had singled out the KX36 kimberlite pipe, which is situated about 70 km from Gem Diamonds’ Ghaghoo mine, and 260 km north-west of Botswana’s capital Gaborone.
SIGN UP FOR THE PRECIOUS METALS DIGEST Sekaka also had a recently built, fit-for-purpose bulk sampling plant on-site that includes crushing, scrubbing, dense media separation circuits and X-ray recovery modules within a secured area.
The acquisition includes an extensive database, built up over 15 years of exploration.
Botswana Diamonds believes the information contained in the database will provide substantial support to its future kimberlite exploration activities in the mining-dependent country, the world’s second-largest diamond producer.
“We are delighted that this acquisition has now closed. This paves the way to explore commercial development options for KX36 and begin to evaluate the extensive database in conjunction with ours to discover more kimberlites in prime diamond real estate,” chairperson John Teeling said in a media statement.
Diamond exports from the southern African nation dropped 42% to $1.49 billion in the first nine months of this year as production fell 29% to 12.3 million carats due to covid-related restrictions.
Botswana’s mining sector provides a fifth of the country’s GDP and 80% of its foreign exchange earnings.
Mounting woes Petra Diamonds, the former owner of Sekaka, has been struggling for over two years. Its weak financial position pushed it to shed non-core assets and put itself up for sale in June.
The company reversed the decision in October, opting instead for a debt-for-equity restructuring. The deal would leave existing shareholders with just 9% of the company.
Petra is also dealing with allegations of human rights abuses at its Williamson mine in Tanzania, resulting from the actions of its security guards.
It recently reported a 36% fall in revenue and a net loss of $223 million (168.7 million pounds) for the year ended June 30, as the coronavirus pandemic deepened the company’s financial woes.
Shares in Botswana Diamonds PLC jumped Thursday after it extended two “strategic” diamond licences for further two years, as it considered forming a joint venture to develop the projects.
Shares in Botswana Diamonds were 9.9% higher at 0.54 pence in London on Thursday.
Botswana Diamonds – through its wholly-owned Sunland Minerals Ltd subsidiary – extended the Prospecting Licences PL232 and PL235 in Botswana to the end of September 2021.
The firm explained the “key” licences were “strategically located” in the centre of the Kalahari Desert in Botswana, covering 500 square kilometres. Botswana Diamonds has already identified “prospective drill ready targets” following “intensive” work at the sites.
Botswana Diamonds said it was “already in extended discussions” with a “major” diamond producer regarding the formation of a joint venture for the next phase of the work on the licences.
Shares of Botswana Diamonds PLC fell 12.1% during mid-day trading on Friday .
The stock traded as low as GBX 0.74 ($0.01) and last traded at GBX 0.73 ($0.01). 2,614,274 shares traded hands during trading, an increase of 75% from the average session volume of 1,490,000 shares. The stock had previously closed at GBX 0.83 ($0.01).
Separately, Northland Securities reaffirmed a “speculative buy” rating on shares of Botswana Diamonds in a research report on Thursday, November 15th.
Botswana Diamonds Company Profile
Botswana Diamonds plc operates as a diamond exploration and project development company in Botswana and South Africa. The company’s flagship property is the Thorny River project, a long narrow kimberlite dyke stretching over 7 kilometers located in the Limpopo Province. Botswana Diamonds plc was founded in 2010 is based in Dublin, Ireland.
