Lucara Announces Q1 2020 Results Van
PRESS RELEASE
LUCARA ANNOUNCES Q1 2020 RESULTS
VAN
COUVER, May 7, 2020 /CNW/ - (LUC – TSX, LUC – BSE, LUC – Nasdaq Stockholm)
L
ucara Diamond Corp. (“Lucara” or the “Company”) today reports its results for the quarter ended March 31, 2020 .
HIGHLIGHTS FOR THE QUARTER ENDED MARCH 31, 2020
• As at March 31, 2020, the Company had cash and cash e quivalents of $27.4 million, an increase of $16.2
million from December 31, 2019. The Company maintained draws total ling $19.0 million on the working
capital facility from Q1 2020. A balance of $31.0 million i s available to be drawn for working capital, i f
required, subsequent to March 31, 2020. The Company begins the second quarter with a strong
cash position and available liquidity.
• A strong operating environment prevailed at the K arowe Mine in Q1 and delivered results consistent with
the 2020 plan and budget:
o Ore and waste mined of 0.9 million tonnes and 1.2 million tonnes respectively
o 0.64 million tonnes of ore processed resulting in 91,536 carats recovered, achieving a recovered
grade of 14.3 carats per hundred tonnes
o 190 Specials (+10.8 carats) were recovered from direct milling during the first quarter,
representing 6.7% weight percentage of total direct milling recovered carats, in line with mine plan
expectations
o 8 diamonds were recovered greater than 100 carats in weight
• In early February 2020, an unbroken 549 carat white diamond of exceptional purity was recovered
from direct milling of ore sourced from the EM/PK(S) unit of the South Lobe. This diamond was not
made available for sale in Q1.
• Total revenue of $34.1 million was recognized in Q1 2020 (Q1 2019: $48. 7 million) or $396 per carat (Q1
2019: $512 per carat) from the sale of 86, 178 carats (Q1 2019: 95,053 carats). The Q1 2020 tender
represents the smallest planned sale for the year and reflects a reduction in realized prices in the larger size
classes compared to those achieved from the equivalent period in 2019.
• The Company recorded a net loss of $3.2 million for Q1 2020 resulting in a $0.01 loss per share for the
quarter. This compares to net income of $7.4 million for Q1 2019 and earnings per share of $0. 02. A
decrease in total revenue had the most significant impact on the current quarter’s results.
• Cash flow from operations in Q1 2020 totalled $2.4 million compared to cash flow from operations of $10.6
million in Q1 2019, largely due to a weaker pricing environment and a decrease in revenue between the
periods.
• The value of the rough diamonds transacted through the Clara platform in Q1 2020 was $3.0 million over
six sales, which brings the total value transacted on the platform between December 2018 and March 2020
to$12.1 million.
• Operating cash cost(1) per tonne of ore processed for the three months ended March 31, 2020 was $31.43
per tonne (Q1 2019: $30.52 per tonne), which is below the initial full year forecast cash cost of $32-$36 per
tonne processed but 3% higher than the comparative quarter last year. The operating cash cost pe r tonne
processed in Q1 2020 was positively impacted by a favourable foreign exchange rate and the benefits of
cost optimization e fforts undertaken i n the second half of 2019, offset by a 16% decrease in tonnes
processed as compared to Q1 2019.
• A continued focus on operational discipline at Karowe has resulted in a strong operating margin of 49% year
to date (Q1 2019: 67%) and adjusted EBITDA (1) year to date of $8.1 million (Q1 2019: $23.4 million).
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Operating expenses per carat sold totalled $201 per carat in the three months ended March 31, 2020, up
from $169 per carat sold in the comparable period last year. Total carats sold were approximately 10% less
by volume than the same quarter last year (Q1 2020: 86,178 carats sold; Q1 2019: 95,053 carats sold).
• In January 2020, Lucara entered into an unprecedented collaboration with Louis Vuitton ("LV"), the famous
luxury house, and the HB Company ("HB"), a diamond manufacturer from Antwerp, to manufacture its
historic, record setting, 1,758 carat Sewelô diamond recovered from the Karowe Mine in Botswana in April
2019. Lucara will receive an upfront non-material payment for the Sewelô and retain a 50% interest in the
individual polished diamonds that result. Further, 5% of all retail sales proceeds generated from this historic
collection will be invested directly back into Botsw ana on community- based initiatives undertaken by
Lucara.
(1) See Non-IFRS measures
Eira Thomas, President & CEO commented: “I am extremely proud and heartened by the efforts of our employees,
contractors, partner communities and governments who have all c ome together and taken swift action in support
of Lucara’s COVID -19 crisis management strategy, designed to keep our people safe and our mine operating.
Declared an essential service by the government on April 2, Karowe continues to operate safely and at full
production. Demand for our product, however, continues to be weak and Lucara is necessarily focused on cost
management and capital discipline through this period of uncertainty. To this end, Lucara’s capital spending program
for 2020 is now being re -scoped to focus on critical path elements, largely in support of our ongoing, underground
expansion program. As a reminder, Lucara entered this crisis with a strong balance sheet and no debt. As a further
positive development, Lucara’s $50 million credit facility with the Bank of Nova Scotia was recently renewed for
another year, providing the Company with additional flexibility and liquidity to continue to effectively manage our
business through 2020. Though our near-term outlook on diamond prices remains uncertain, global rough diamond
production curtailments combined with early indications of polished diamond demand recovery in Asia provide
some optimism that demand will improve in the latter half of the year.”
COVID-19 RESPONSE & RECENT DEVELOPMENTS
In March 2020, the Company implemented a crisis management strategy in relation to COVID -19, to protect the
health and well -being of its employees in Botswana and Canada and to protect the financial well -being of the
business. The Karowe Mine remains fully operational, under new measures and guidelines implemented by the
Government of Botswana in late March 2020. These measures designate mining as an essential service in Botswana
and include increased travel restrictions, reduced overall staffi ng levels and increased and appropriate social
distancing. Employees who are able to work remotely are doing so. As travel restrictions relating to COVID- 19 are
expected to remain in place for an unknown period, the Company's ability to complete tenders in Botswana is
expected to be impacted. As a temporary measure, the Government of Botswana has granted Lucara permission to
hold diamond sales in Antwerp, Belgium if required.
Lucara completed the first of four planned diamond tenders for the year on March 5 th, and achieved sales prices
within 1% of forecast, however, diamond prices have since deteriorated in response to weaker demand as COVID -
19 has continued to spread globally. The full impact of COVID-19 on Lucara's operations and production outlook for
2020 remains highly uncertain, and as a result, the Company has suspended its 2020 guidance until further notice.
Lucara’s second quarter tender, originally scheduled for mid- May 2020, has been postponed and will be re -
scheduled to a more appropriate date in the near-term, as market conditions are evaluated. The Clara digital sales
platform, which allows for buyers to place orders without physically viewing the goods and to purchase only the
diamonds they need on a stone by stone basis, continues to hold sales. Travel restrictions in Botswana, South Africa,
India and Europe have caused disruptions during April preventing some deliveries from taking place.
Lucara's planned capital spending program for 2020 is largely focused on the initiation of our Karowe underground
expansion project and was previously designed to ramp up in Q3, funded entirely from cash-flow, under a budget of
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$53 million. Given the pres ent uncertainty related to our 2020 revenue forecast, this program is being re -scoped
and reduced to focus on critical-path items through the remainder of the year. The underground expansion program
has an estimated capital cost of $514 million and a five year period of development. The Company expects to finance
part of the capital cost with debt and the balance from cash flow generated by operations. In light of the uncertainty
resulting from the COVID-19 pandemic, the Company is also reviewing its original estimates and assumptions for the
quantum and timing of cash flows expected from the current operations against the anticipated financing
requirement for the underground expansion program.
The Company’s $50 million revolving term working capital facility with the Bank of Nova Scotia has been extended
by one year to May 5, 2021. The Bank of Nova Scotia has first ranking security by way of a charge over the Company’s
Karowe assets and a guarantee by the Company’s subsidiaries, which hold the Karowe as sets. As part of the
extension, and until Lucara obtains greater clarity on its cash flow projections in the short -term, Lucara has agreed
to limit capital expenditures related to the underground expansion project. The extension of this facility provides
an important source of liquidity to Lucara during a period of significant uncertainty in global markets.
FINANCIAL HIGHLIGHTS
Three months ended March 31
In millions of U.S. dollars, except carats or otherwise noted 2020 2019
Revenues $ 34.1 $ 48.7
Net income (loss) for the period (3.2) 7.4
Earnings (loss) per share (basic and diluted) (0.01) 0.02
Operating cash flow per share* 0.02 0.05
Cash on hand 27.4 17.9
Amounts drawn on the working capital facility 19.0 Nil
Average price per carat sold ($/carat)* 396 512
Operating expenses per carat sold ($/carat)* 201 169
Operating margin per carat sold ($/carat)* 195 343
Carats sold 86,178 95,053
(*) Operating cash flow per share, average price per carat sold, operating expenses per carat sold and operating margin per carat sold are Non -
IFRS measures.
The Company recognized revenue of $34.1 million or $396 per carat from the sale of 86,178 carats in the first quarter
of 2020, inclusive of all diamonds sold on Clara . The average price per carat sold was $396 per carat yielding an
operating margin of $195 per carat (49%). The number of carats sold in Q1 2020 decreased by 10% compared to Q1
2019. The decrease in the average price per carat sold and in total revenue achieved in Q1 2020 was due to a
combination of variability in quality of the stones available for sale in the Q1 2020 tender along with lower achieved
prices similar to those realized in mid-2019.
During the first quarter, the Company entered into a binding term sheet with Louis Vuitton and the HB Company to
manufacture the historic 1,758 carat Sewelô diamond recovered in April 2019. Sewelô, which means “rare find” in
Setswana, is the second, +1,000 carat diamond recovered from Karowe in four years and the largest ever recovered
in Botswana. The diamond has been characterized as near gem of variable quality, with recent analysis confirming
that it also includes domains of higher -quality white gem. Lucara believes that the full potential of the Sewelô will
only be revealed once polished. The purpose of this unprecedented collaboration between a miner, a cutting edge
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manufacturer and a large luxury brand will be the planning, cutting a nd polishing of a collection of diamonds from
Sewelô.
While most of Karowe’s diamond production is sold through sales tenders, beginning in late 2018 certain stones
from Karowe’s production sized between 1 and 10 carats and of better quality were offered for sale on Clara, Lucara’s
revolutionary, web based, digital sales platform that allows customers to purchase rough diamonds individually,
based on specific demand. Six sales were completed on the platform during the first quarter of 2020 with $3.0 million
in value transacted. The customer base of Clara grew significantly in the fourth quarter of 2019 and continues to
grow at a strong pace with an increase of 19% in the number of participants. The addition of third- party production
to the platform has be en delayed due to significant disruptions resulting from the COVID -19 pandemic. While this
remains an objective for 2020, the nature and timing of this onboarding is presently uncertain.
Operating expenses increased from $16.1 million in the three months ended March 31, 2019 to $17.3 million in the
three months ended March 31, 2020 mainly due to an increase in the average cost per tonne mined due to lower
volumes of total tonnes mined. Waste tonnes mined decreased as compared to the same period in 2019 as the
significant waste stripping campaign (“Cut 2”) which started in 2017 was substantially completed in Q1 2019. The
combination of a decrease in the number of carats sold and an increase in operating expenses resulted in an overall
increase in the operat ing expense per carat sold from $169/carat in the three months ended March 31, 2019 to
$201/carat in the three months ended March 31, 2020.
Depletion and amortization, a non -cash expense, decreased from $11.6 million for the three months ended March
31, 2019 to $10.5 million for the three months ended March 31, 2020 due to a 10% lower volume of carats sold. The
decrease in revenue in the first quarter of 2020 compared to the first quarter of 2019 generated a similar decrease
to Adjusted Earnings Before In terest, Tax, Depletion and Amortization (“Adjusted EBITDA”) (*Non-IFRS measure),
net income and earnings per share when comparing results from each quarter.
Operations in the first quarter of 2020 were consistent with the strong, stable operating environment achieved at
the Karowe Mine in 2019. Ore tonnes mined (0.9 million tonnes) and waste tonnes mined (1.2 million tonnes) were
on plan for the first quarter. The plant processed 0.64 million tonnes during the first quarter, also consistent with
the 2020 plan. The total tonnes processed in 2020 are expected to be slightly less than the record 2.8 million tonnes
processed in 2019 due to several planned multi -day shut-downs to upgrade the XRT technology which is a key part
of the recovery circuit at the Karowe Mine. Despite the challenges presented by the COVID-19 pandemic, as at May
7, 2020 the Karowe Mine continues to operate at full production levels, with social distancing and other critical
health and safety measures designed to limit the spread of the virus being observed.
A recovery in the pricing environment for both polished and rough diamonds which began in late -2019 has been
severely impacted by the COVID-19 pandemic and as a result, several large and small diamond producers have placed
their oper ations on care & maintenance and deferred or cancelled regularly scheduled sales due to economic
uncertainties and logistical challenges resulting from an unprecedented, global “lock -down”. Karowe’s annual
production represents a small fraction of the global rough diamond supply that is mined and sold each year. Buyers
of Karowe diamonds do not have firm purchasing commitments so they are free to bid only on the diamonds which
are of interest to them. This system benefits both Lucara and its customers and typically results in competitive pricing
for Karowe goods. Diamonds mined from Karowe are sold either through a quarterly tender in Botswana or through
the Clara digital sales platform. The Government of Botswana has granted temporary permission to the Company to
conduct sales in Antwerp, Belgium and the second quarter tender which was originally scheduled to close mid- May
in Botswana is expected to be rescheduled and will be held in Antwerp, as soon as market conditions permit. Clara
has continued sales during the global “lock-down” but has encountered some difficulties in delivering certain goods
purchased due to restrictions on travel and non- essential work implemented by many countries. However, these
restrictions are anticipated to be scaled -back in man y countries in the coming weeks. Clara represents a unique
opportunity to purchase rough diamonds without the requirement to travel.
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QUARTERLY RESULTS OF OPERATIONS – KAROWE MINE, BOTSWANA
FIRST QUARTER OVERVIEW – KAROWE MINE
Safety: Karowe had no lost time injuries during the three months ended March 31, 2020 resulting in a twelve-month
rolling Lost Time Injury Frequency Rate of 0.
Production: Ore and waste mined during the three months ended March 31, 2020 totaled 0.9 million tonnes and 1.2
million tonnes respectively. Tonnage processed was 0.64 million tonnes, with a total of 91,536 carats recovered.
During Q1 2020, ore processed was almost entirely from the South lobe and a total of 190 Specials were recovered
including 8 diamonds greater than 100 carats in weight. Recovered Specials equated to 6.7% weight percentage of
total recovered carats from ore processed during Q1 2020, consistent with expectations.
Overall performance during the first quarter remains consistent with the strong operational results achieved over
the past two years. Processing capacity was slightly lower in Q1 2020 compared to previous quarters due to a
planned extended shutdown in early March for improvements to the XRT technology in the process plant.
UNIT Q1-20 Q4-19 Q3-19 Q2-19 Q1-19
Sales
Revenues generated from sales
tenders conducted in the
quarter
US$M 33.8 56.0 45.3 42.5 48.7
Carats sold for revenues
recognized during the period
Carats 86,010 98,547 116,200 101,931 95,057
Average price per carat for
proceeds received during the
period
US$ 393 568 390 417 512
Production
Tonnes mined (ore) Tonnes 878,087 694,591 823,875 773,861 1,011,048
Tonnes mined (waste) Tonnes 1,199,660 740,593 1,489,668 1,826,972 2,485,548
Tonnes processed Tonnes 639,430 647,502 680,665 713,037 763,313
Average grade processed cpht (*) 14.3 13.31 13.92 14.23 15.94
Carats recovered Carats 91,536 86,4221 104,9902 109,3123 132,3364
Costs
Operating costs per carats sold
(see Non-IFRS measures)
US$ 201 209 201 174 169
Sustaining capital expenditures US$M 2.4 13.0 0.7 1.4 2.4
Underground expansion project US$M 1.7 - - - -
(*) 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 carats 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 previous milling
and are excluded from the average grade processed.
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Continuous improvements to maintenance scheduling and better availability of equipment offset some of the
additional downtime required in Q1 2020. Mining and processing results were on plan during Q1 2020.
Karowe’s operating cash cost: Karowe’s year to date operating cash cost (*Non-IFRS measure) was $31.43 per tonne
of ore processed (YTD 2019: $30.52 per tonne of ore processed) below the initial full year forecast of $32 -$36 per
tonne processed, and approximately 3% higher than the same period in 2019. The current period result includes the
impact of a 5% depreciation of the Botswana Pula compared to the US Dollar reporting c urrency, and realized cost
savings following a cost optimization process in the second -half of 2019, offset by a 16% decrease in tonnes
processed as compared to Q1 2019.
Significant diamond recoveries: In early February 2020, an unbroken 549 carat white diamond of exceptional purity
was mined from the EM/PK(S) unit of the South Lobe and was recovered in the Mega Diamond Recovery XRT circuit.
A decision on the sale of this special diamond will be underta ken in due course.
KAROWE UNDERGROUND UPDATE
On November 4, 2019, the Company announced the results of a Feasibility Study 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 were filed on Sedar (www.sedar.com) and are available on
the Company’s website at: www.lucaradiamond.com.
In November 2019, Lucara’s Board of Directors approved a $53 million capital program for the Karowe underground
expansion project, with the majority of the budget scheduled to be spent in the latter part of the year and funded
through the cash flow from current operations. During Q1 2020, $1.7 million was spent on project execution
activities including detailed engineering and design work and early procurement initiatives.
Given the uncertainty in global markets resulting from COVID- 19, the originally planned capital budget will be
reduced until more certainty exists around Lucara's cash flow projections. The 2020 program is now being re-scoped
to focus on critical -path items for the remainder of the year. Activities are focused on procurement of long lead
time equipment, engineering and design work, physical site activity using l ocal contractors for site preparation and
geotechnical studies.
The Company is continuing to explore debt financing options for the underground expansion for those amounts
which are expected to exceed the Company’s cash flow from operations during the c onstruction period. The
underground expansion program has an estimated capital cost of $514 million and a five year period of development.
In light of the uncertainty resulting from the COVID-19 pandemic, the Company is also reviewing its original estimates
and assumptions for the quantum and timing of cash flows expected from the current operations against the
anticipated financing requirement for the underground expansion program.
CLARA
Further sales on Clara are planned for the remainder of 2020, subject to the existence of demand and Clara’s ability
to complete delivery of the stones purchased. The timing to onboard third- party production, a key objective for
2020, is uncertain presently due to the unprecedented global upheaval which has resulted in response to the COVID-
19 pandemic.
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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.
On March 31, 2020, the Company announced the suspension of its 2020 guidance until further notice. The full
impact of the COVID-19 pandemic on Lucara's operations and production outlook for 2020 remains highly uncertain
and may remain that way for several months. Further guidance will be released as the impact of COVID-19 becomes
known.
The global diamond industry is experiencing the widespread impacts of COVID -19 throughout the value chain,
manifested as fewer sales, weaker pricing, logistical challenges/delays in the movement of goods and people and,
production curtailments at several mines. Following the Company’s first quarterly tender which closed on March 5,
2020, diamond prices have continued to deter iorate in response to weaker demand as COVID -19 has continued to
spread globally and governments have implemented a variety of restrictions on the movement of people and goods
in an effort to curtail its spread. While full production levels are currently b eing sustained at the Karowe Diamond
Mine, Lucara cannot predict if future changes or regulations implemented by the Government of Botswana will affect
its operations in the near term. As a temporary measure, in response to the COVID -19 crisis, the Governm ent of
Botswana has granted Lucara permission to hold diamond sales in Antwerp, Belgium if required.
Lucara’s second quarter tender, originally scheduled for mid- May 2020, has been postponed and will likely be re -
scheduled in the coming weeks, pending an evaluation of the market conditions closer to the time. Sales are
continuing on the Clara platform, although di sruptions have been experienced during April due to certain travel
restrictions in Botswana, South Africa, India and Europe which have prevented some deliveries from taking place.
Lucara's capital spending program for 2020 is also being re -scoped to focu s on critical -path items through the
remainder of the year. Most of the previously approved capital spend of $53 million for the Karowe underground
expansion project was scheduled to be invested in the latter part of the year and funded through cash flow f rom
operations. Given the uncertainty in global markets resulting from COVID -19, these capital expenditures will be
reduced until more certainty exists around Lucara's cash flow projections.
CONFERENCE CALL
The Company will host a conference call and webc ast to discuss the results on Friday , May 8, 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:
36146504 / Lucara Diamond
Dial-In Numbers:
Toll-Free Participant Dial-In North America (+1) 888 390 0546
All International Participant Dial-In (+1) 778 383 7413
Webcast:
To view the live webcast presentation, please log on using this direct link:
https://produceredition.webcasts.com/starthere.jsp?ei=1308278&tp_key=664b5059a3
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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 May 15, 2020.
Replay number (Toll Free North America) (+1) 888 390 0541
Replay number (International) (+1) 416 764 8677
The pass code for the replay is: 146504#
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:
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]
UK Public Relations Emily Moss / Jos Simson, Tavistock
+447788554035 | [email protected]
ABOUT LUCARA
Lucara is a leading independent producer of large exceptional quality Type IIa diamonds from its 100% owned
Karowe Mine in Botswana and owns a 100% interes t in Clara Diamond Solutions, a secure, digital sales platform
positioned to modernize the existing diamond supply chain and ensure diamond provenance from mine to finger.
The Company has an experienced board and management team with extensive diamond dev elopment and
operations expertise. The Company operates transparently and in accordance with international best practices in
the areas of sustainability, health and safety, environment, and community relations.
ABOUT CLARA
Clara Diamond Solutions Limited Partnership (Clara), wholly owned by Lucara Diamond Corp, is 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.
The information in this release is accurate at the time of distribution but may be superseded or qualified by
subsequent news releases.