Lucara Announces 2019 Annual Results
PRESS RELEASE
LUCARA ANNOUNCES 2019 ANNUAL RESULTS
VANCOUVER, February 23, 2020 /CNW/ - (LUC – TSX, LUC – BSE, LUC – Nasdaq Stockholm)
Lucara Diamond Corp. (“Lucara” or the “Company”) today reports its results for the year ended December 31, 2019.
HIGHLIGHTS FOR THE YEAR ENDED DECEMBER 31, 2019
• Total revenues of $192.5 million (2018: $176.2 million) or $468 per carat (2018: $502 per carat) during fiscal
year 2019 (guidance: $170 million to $180 million).
• Strong operational performance at Karowe, including record production through the plant in 2019:
o Total tonnes mined of 9.8 million (guidance: 9.5 million to 10.9 million)
o Ore and waste mined were 3.3 million tonnes and 6.5 million tonnes respectively
o Ore processed totaled 2.8 million tonnes (guidance: 2.5 million to 2.8 million tonnes)
o 433,060 total carats recovered, including 29,990 carats recovered from previously milled material
(guidance: 400,000 to 425,000 carats)
• 2019 was another strong year for the recovery of Specials (single diamonds in excess of 10.8 carats) from direct
milling ore with 786 stones totaling 24,424 carats recovered, including 31 diamonds in excess of 100 carats, of
which 2 stones were in excess of 300 carats including the historic 1,758ct Sewelô diamond. Specials were also
recovered in treatment of historic, pre-XRT recovery tailings, including a 375 carat stone in Q3 2019. No further
treatment of historic recovery tailings is expected.
• Operating cash costs for the year ended December 31, 2019 were $31.88 per tonne processed (2018: $39.92
per tonne processed) compared to the fu ll year forecast cash cost of $32 -$37 per tonne processed (*Non-IFRS
measure). Operating cash cost per tonne processed was positively impacted by a combination of higher tonnes
processed and lower overall tonnes mined as planned in 2019 following the completion of a waste stripping
campaign in 2018. Cost optimization initiatives and favorable foreign exchange contributed to the lower
operating cash cost per tonne compared to guidance. Operating cash costs for 2020 are expected to continue
to trend between $32-$36 per tonne processed.
• Clara completed its first year of operations with a total of 15 sales, 27 customers and volume transacted of $8.4
million. Development activities were completed under budget at $0.4 million in 2019. Clara is poised to achieve
significant growth in 2020 with the addition of further customers and third-party production.
• Adjusted EBITDA for the year ended December 31, 2019 was $73.1 million as compared to adjusted EBITDA for
the same period in 2018 of $60.5 million, an increase of 21% (*Non-IFRS measure).
• Net income for the year ended December 31, 2019 was $12.7 million ($0.03 per share) as compared to net
income of $11.7 million ($0.03 per share) in 2018.
• As at December 31, 2019, the Company had cash and cash equivalents o f $11.2 million and no debt. In 2019,
the Company invested $29.0 million in the business, primarily towards the completion of an underground
feasibility study, and, improvements to plant and equipment to maximize carat recoveries. The Company’s $50
million credit facility was available for use as at December 31, 2019.
• During the first three quarters of 2019, the Company paid a CA$0.025 quarterly dividend, returning $22.4 million
(CA$0.075 per share) to shareholders in 2019 (2018: $30.3 million or CA$0.10 per share). Since inception in
June 2014, the Company has paid dividends of $271 million (CA$349 million).
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Eira Thomas, President & CEO commented: “Our strong operating results for 2019 reflect Lucara’s continued focus
on safe, reliable operations which has delivered increased productivity at lower costs and provides a solid foundation
to support our next stage of growth - an underground expansion at Karowe which has the potential extend our mine
life to 204 0, add net cash flow of $1.22 billion and gross revenues of $5.25 billion. Our second business, Clara,
continues to deliver solid results and is on track to steadily grow third party supply to the platform over the course
of the coming year. In 2019 Lucara also continued to explore ways and means to maximize the value it receives for
its diamonds. Our ground-breaking agreement with Louis Vuitton in January 2020 is another example of how we are
delivering on this commitment. Through this agreement, we will demonstrate that greater collaboration within the
supply chain can unlock value and increase transparency from mine to consumer.”
CHANGE IN DIVIDEND POLICY
In November 2019, the Company announced the results of a positive feasibility study for development of an
underground mine at its 100% owned Karowe Diamond Mine. Concurrently with the announcement of the feasibility
study, Lucara’s Board of Directors determined that it would be in the best interest of the Company and its
shareholders to suspend the quarterly dividend payment of C$0.025 pe r share, effective as of Q4 2019. The
feasibility study demonstrated the potential to extend the mine life at Karowe to 2040 while generating significant
economic benefits for the Company, its shareholders, 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
during 2020, the Board of Directors decided to re-direct the Company’s available cash to the early works of the
underground including detailed engineering, procurement initiatives and project financing. These activities will be
funded from operating cash-flow in 2020, under a Board approved budget of up to $53 million.
KAROWE DIAMOND SALES
Diamonds are heterogeneous by nature, with thousands of different price points depending on weight, colour,
shape, and quality. Diamond production from Karowe is characterised by a coarse diamond size frequency
distribution and is positively impacted by the regular recovery of diamonds in excess of 10.8 carats in size, referred
to as “Specials.” Karowe production is further distinguished by the consistent recovery of high value, gem quality
Specials.
Specials are reported by total stone count and as a percentage of the total production. In 2019, a total of 786 stones
were recovered representing 6.1 weight percent of total carats recovered from direct milling ore, consistent with
the resource model for Karowe. Overall processing in 2019 had contributions from the North, Centre and both the
EM/PK(S) and M/PK(S), distinct units within the South lobe. The proportion of carats from the lower value and less
coarse North and Centre lobes was approximately 20%, the highest contribution since 2016.
In 2019, a total of 30 individual diamonds were sold for a value of > $1 million including 11 diamonds > $2 million of
which 2 diamonds sold for > $5 million each. Sales of individual stones at prices between $2 million and $5 million
were consistent with previous years. Achieved prices in 2019 for high value single diamonds were impacted by
significant price erosion in high colour (D) 10 carat and 20 carat polished.
Certain stones from the Karowe production and other aggregated diamonds were offered for sale through the Clara
platform during 2019. As 2020 progresses, a greater proportion of certain sales parcels from Karowe will move to
the Clara platform, rather than being sold through the quarterly tender process.
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FINANCIAL HIGHLIGHTS
Three months ended
December 31
Year ended
December 31
In millions of U.S. dollars, except carats or
otherwise noted
2019 2018 2019 2018
Revenues $ 56.0 $ 40.6 $ 192.5 $ 176.2
Net income (loss) for the period 8.7 (6.2) 12.7 11.7
Earnings (loss) per share (basic and diluted) 0.02 (0.02) 0.03 0.03
Operating cash flow per share* 0.05 0.02 0.15 0.14
Cash on hand 11.2 24.4 11.2 24.4
Average price per carat sold ($/carat)* 568 367 468 502
Operating expenses per carat sold ($/carat)* 209 233 189 216
Operating margin per carat sold ($/carat)* 359 134 279 286
Carats sold 98,547 110,553 411,732 350,798
(*) Operating cash flow per share, average price per carat sold, operating expenses per carat sold and operating margin per c arat sold are Non-
IFRS measures.
The Company achieved revenues of $56.0 million or $568 per carat for its sales in the fourth qua rter, yielding a
strong operating margin of 63% during the period. During the fourth quarter of 2019, stabilization in rough pricing
was observed across all size classes. The general improvement in pricing as compared to earlier in the year,
combined with a higher value blend of ore to the process plant resulted in revenue for the quarter and for the year
ending December 31, 2019 being achieved above expectations. The increase in average price per carat sold, along
with a 10% decrease in operating expens es per carat sold, resulted in an operating margin of 63% in Q4 2019; this
represents a significant improvement from the 36% operating margin achieved in Q4 2018.
Operating expenses decreased approximately 20% from $25.8 million in Q4 2018 to $20.6 million in Q4 2019, mostly
due to a decrease in the average cost per tonne mined. Operating expenses in Q4 2018 included additional one -
time costs following the transition between mining contractors during the third quarter of 2018.
Adjusted EBITDA increase d from $4.7 million in Q4 2018 to $22.8 million in Q4 2019. The significant quarter -to-
quarter increase resulted from the combination of a $13.9 million increase in net revenue and a $5.2 million decrease
in operating expenses (*Non-IFRS measure).
Adjusted EBITDA (* Non-IFRS measure ), earnings per share and the Company’s ending cash position were as
expected and reflect the overall performance of the Company’s sales tenders.
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QUARTERLY RESULTS OF OPERATIONS – KAROWE MINE, BOTSWANA
FOURTH QUARTER OVERVIEW – KAROWE MINE
Safety: Karowe had one lost time injury during the three months ended December 31, 2019 resulting in a twelve -
month rolling Lost Time Injuries Frequency Rate (“LTIFR”) of 0.78.
Production: Ore and waste mined during the fourth quarter of 2019 totaled 0.7 million tonnes and 0.7 million tonnes
respectively. Tonnage processed was on target at 0.6 million tonnes, with a total of 86,422 carats recovered. Ore
processed was predominantly from the South Lobe. During Q4, a total of 177 Specials (single diamonds larger than
10.8 carats) were recovered including seven diamonds greater than 100 carats in weight and two diamonds greater
than 200 carats. Recovered Specials equated to 6.1% weight percentage of total recovered carats during the year,
the third year to achieve greater than 6% weight percentage of total recovered carats, in line with expectations.
UNIT Q4-19 Q3-19 Q2-19 Q1-19 Q4-18
Sales
Revenues generated from
sales tenders conducted in the
quarter
US$M 56.0 45.3 42.5 48.7 40.6
Carats sold for revenues
recognized during the period
Carats 98,547 116,200 101,931 95,057 110,553
Average price per carat for
proceeds received during the
period
US$ 568 390 417 512 367
Production
Tonnes mined (ore) Tonnes 694,591 823,875 773,861 1,011,048 563,279
Tonnes mined (waste) Tonnes 740,593 1,489,668 1,826,972 2,485,548 2,743,586
Tonnes processed Tonnes 647,502 680,665 713,037 763,313 602,376
Average grade processed cpht (*) 13.31 13.92 14.23 15.94 13.65
Carats recovered Carats 86,4221 104,9902 109,3123 132,3364 81,8505
Costs
Operating costs per carats sold
(see Non-IFRS measures)
US$ 209 201 174 169 233
Capital expenditures US$M 13.0 0.7 1.4 2.4 6.5
(*) carats per hundred tonnes
(1) Carats recovered during the period included 273 carats recovered from re-processing historic recovery tailings from previous milling and
are excluded from the average grade processed.
(2) Carats recovered during the period included 10,646 carats recovered from re -processing historic recovery tailings from previous milling
and are excluded from the average grade processed.
(3) Carats recovered during the period included 8,172 cara ts recovered from re -processing historic recovery tailings from previous milling
and are excluded from the average grade processed.
(4) Carats recovered during the period included 10,899 carats recovered from re -processing historic recovery tailings from pre vious milling
and are excluded from the average grade processed.
(5) Carats recovered during the period included 1,505 carats recovered from re -processing historic recovery tailings from previous milling
and are excluded from the average grade processed.
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A record 2.8 million tonnes of ore were processed during 2019, at the top end of 2019 guidance of 2.5 to 2.8 million
tonnes. A total of 3.3 million tonnes of ore was mined for the year, surpassing the original guidance of 2.5 – 2.8
million tonnes and meeting revised guidance of 3.0 – 3.4 million tonnes. Following the tra nsition to a new mining
contractor in mid -2018, productivity improved considerably and continued through 2019. Beginning in the fourth
quarter of 2018, Trollope Mining Services Pty (“Trollope”) was responsible for all waste and ore mining.
Karowe’s operating cash cost : Karowe’s full year 2019 operating cash cost ( *Non-IFRS measure) was $31.88 per
tonne processed (2018: $39.92 per tonne processed) compared to the full year forecast of $32- 37 per tonne
processed. The decrease in cost per tonne processed compared to the prior year comparable periods reflects a 7%
increase in total tonnes processed, a favourable exchange rate and cost optimization of the operations offsetting an
increase in the cost per tonne mined following the transition to a new mining contractor in mid-2018.
Labour relations: In April 2019, the Botswana Mine Workers Union and Lucara Botswana entered into a
Memorandum of Agreement which governs the working relationship between the two parties. In May 2019, the
parties successfully negotiated and signed a Salaries and Conditions of Service Agreement which covers the terms
and conditions of employment, including wages, to March 31, 2021. In Botswana, a majority of currently operating
mines are unionized.
KAROWE UNDERGROUND UPDATE
In 2018, t he Company embarked on a technical program to support a feasibility level study for a potential
underground operation at the Karowe Diamond Mine. This program included the completion of an updated mineral
resource, geotechnical drilling of the country rock and AK06 kimberlite, hydrogeological drilling and modelling, and
mining trade off studies to address risks and issues identified during the PEA. A total of $21.0 million was spent in
2018 in support of this work, which resulted in significant de-risking of the key technical components associated with
the potential underground development.
During 2019, $13.4 million ($14.8 million - 2019 budget) was spent on the completion of a geotechnical drilling
program, geotechnical and geological logging, downhole geophysical survey, hyperspectral analysis of core,
geotechnical modeling, hydrogeological drilling and studies, mine planning, engineering, and activities related to
dewatering associated with underground preparations.
On November 4, 2019, the Company announced the results of a Feasibility Study (“FS”) for an underground mine at
Karowe. A copy of the Company’s news release and the related technical report prepared pursuant to the
requirements of NI 43 -101 – Standards of Disclosure for Mineral Projects (“NI 43 -101”) were filed on Sedar
(www.sedar.com) and are available on the Company’s website at: www.lucaradiamond.com.
Key findings of the FS include:
• The FS outlines the potential to double the mine life from the original mine design of 2010 and add net cash
flow of $1.22 billion and gross revenue of $5.25 billion.
• Updated resource confirms increasing value with depth. Indicated resource from the base of the current
open pit to the 250 metres above sea level elevation is 35 million tonnes at a grade of 15 cpht for a
contained diamond resource of 5.1 million carats.
• Long hole shrinkage underground bulk mining method was selected, providing early access to higher value
ore and allows for a short pay-back period of 2.8 years and operating costs of $28.43 per tonne processed.
• On the basis of a construction start in mid -2020, ore from underground mining will seamlessly integrate
into current operations providing mill feed starting in 2023 with a ramp up to 2.7Mtpa to the processing
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plant by 2026, and the opportunity to increase throughput after 2029. Current production rates will be
maintained through the underground ramp up period.
• The underground is designed to access the South L obe kimberlite resource below the current planned
bottom of the open pit (which is expected to be at approximately 700 meters above sea level (“masl”)), to
a depth of 310 masl. Access to the South Lobe underground will be via two vertical shafts (production and
ventilation) of approximately 765 and 715 meters deep respectively.
• Identified key risk areas of hydrogeology, geotechnical constraints of the kimberlite and host rocks have
been addressed through an intensive set of work programs, data collection, analysis, and modelling.
Next steps: Following completion of the FS dur ing the 4th quarter of 2019, the focus of work shifted to project
execution, including detailed engineering and design work. In the first half of 2020, the Company will continue to
focus on detailed engineering and design work and early procurement initiat ives under a Board -approved capital
program of up to $53 million, to be funded from operating cash flow. The Company will also be reviewing financing
options, with a specific focus on the availability of debt to finance the capital costs for the underground development
which exceed the Company’s cash flow from operations. An update to the market will be provided as progress is
made.
CLARA
Following an inaugural diamond sale in December 2018 on the Clara platform, Lucara’s 100% owned digital sales
platform, the focus in 2019 was to increase the frequency of diamond sales and the number of customers regularly
purchasing through the platform. As of December 31, 2019, the customer base had increased to 27 participants ,
with total sales volumes of $8.4 million from 15 sales on the platform, predominately from the sale of Karowe goods.
Further growth is expected through 2020 as more supply is made available through the platform, balanced with
demand from the customer base. Third-party supply will complement the diamonds from Karowe which are sold
through the platform and will support increased transaction volumes through 2020. Between December 2018 and
February 2020, Clara’s customer base grew to 32 and total sales volumes of approximately $11.0 million had been
transacted from 19 sales on the platform.
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2020 OUTLOOK
This section of the press release provides management's production and cost estimates for 20 20. These are
“forward-looking statements” and subject to the cautionary note regarding the risks associated with forward-looking
statements. No changes have been made to our 2020 outlook previously provided.
Karowe Diamond Mine Full Year – 2020
In millions of U.S. dollars unless otherwise noted
Diamond revenue (millions) $180 to $210
Diamond sales (thousands of carats) 350 to 390
Diamonds recovered (thousands of carats) 370 to 410
Ore tonnes mined (millions) 3.5 to 3.9
Waste tonnes mined (millions) 3.6 to 4.2
Ore tonnes processed (millions) 2.5 to 2.8
Total operating cash costs(1) including waste mined(2) (per tonne processed) $32.00 to $36.00
Botswana general & administrative expenses including marketing costs (per tonne
processed)
$3.00 to $4.00
Tax rate 22%
Average exchange rate – USD/Pula 10.5
(1) Operating cash costs are a non-IFRS measure.
(2) Includes ore and waste mined cash costs of $4.40 to $4.90 (per tonne mined) and processing cash costs of $11.50 to $12.50 (per
tonne processed).
In 2020, the Company forecasts revenues between $180 million and $210 million, as the proportion of carats
recovered from the higher grade M/PK(S) and EM/PK(S) units increases. Diamond price assumptions are considered
to be consistent with 2019. The Company expects to recover 350,000 to 390,000 carats from the processing of 2.5
to 2.8 million tonnes of ore. Diamonds sold are expected to be between 350,000 carats and 390,000 carats.
Following the completion of a significant waste stripping campaign between 2017 and early 2019, total tonnes mined
in 2020 are expected to be between 7.1 million and 8.1 million tonnes, of which the Company expects to mine
between 3.5 million to 3.9 million tonnes of ore and between 3.6 and 4.2 million tonnes of waste. The average strip
ratio is expected to be approximately 1.0 in 2020.
The 2020 estimated cash cost per tonne of ore processed is expected to be between $32.00 and $36.00. The cost
per tonne mined is expected to be between $4.40 and $4.90 and the estimated processing cost per tonne processed
is expected to be between $11.50 and $12.50, a reflection of optimization work and strong operating performance
in the plant.
A budget of up to $53 million has been approved for early works related to a proposed underground mine at Karowe.
An investment decision, subject to receipt of all required authorizations and the arrangement of financing, is
expected in H2 2020. Following the positive results of a feasibility study announced on November 4, 2019 and based
on the Company’s ability to fund these initial capital expenditures from operating cash flow, a program of early
works, including detailed engineering and design work has been approved to mitigate key risks related to schedule.
Lucara Botswana’s progressive tax rate computation allows for the immediate deduction of operating costs,
including capital expenditures, in the year in which they are incurred. Based on 2020 revenue guidance of $180
million to $210 million the expected tax ra te is 22% for 2020 but could decrease depending on the amount and
timing of capital expenditures during the year.
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Sustaining capital and project expenditures are expected to be up to $25.0 million in 2020, including expenditures
associated with slimes dam wall raising (a multi-year project), upgrades to the XRT recovery circuit and a provision
for the implementation of body scanning technology (to enhance security ) which had originally been planned for
2019, subject to receipt of regulatory approval.
CONFERENCE CALL
The Company will host a conference call and webcast to discuss the results on Monday, February 24, 2020 at 6:00
a.m. Pacific, 9:00 a.m. Eastern, 2:00 p.m. UK, 3:00 p.m. CET.
CONFERENCE CALL:
Please call in 10 minutes before the conference call starts and stay on the line (an operator will be available to assist
you).
Conference ID:
29977628/ Lucara Diamond
Dial-In Numbers:
Toll-Free Participant Dial-In North America (+1) 888 390 0605
All International Participant Dial-In (+1) 778 383 7417
Webcast:
To view the live webcast presentation, please log on using this direct link:
https://event.on24.com/wcc/r/2189968/E31B8773C3D82E2976CB79C1ED68E0D1
The presentation slideshow will also be available in PDF format for download from the Lucara website
www.lucaradiamond.com shortly before the conference call.
Conference Replay:
A replay of the telephone conference will be available two hours after the completion of the call until March 2, 2020.
The pass code for the replay is: 977628 #
Replay number (Toll Free North America) (+1) 888 390 0541
Replay number (International) (+1) 416 764 8677
On behalf of the Board,
Eira Thomas
President and Chief Executive Officer
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For further information, please contact:
North America Christine Warner, Investor Relations & Communications
+1 604 689-7842 | [email protected]
Sweden Robert Eriksson, Investor Relations & Public Relations
+46 701 112615 | [email protected]