Lucara Announces Q2 2020 Results Delivering Strong Operating Performance and a Groundbreaking Supply Agreement FOR 2020
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Registered Address: Suite 2600, Three Bentall Centre, P.O. Box 49314, 595 Burrard Street, Vancouver, BC V7X 1L3 Canada
PRESS RELEASE
LUCARA ANNOUNCES Q2 2020 RESULTS DELIVERING STRONG OPERATING PERFORMANCE AND
A GROUNDBREAKING SUPPLY AGREEMENT FOR 2020
VANCOUVER, August 10, 2020 /CNW/ - (LUC – TSX, LUC – BSE, LUC – Nasdaq Stockholm)
Lucara Diamond Corp. (“Lucara” or the “Company”) today reports its results for the quarter ended June 30, 2020.
KEY HIGHLIGHTS:
• Karowe has continued to operate throughout the COVID-19 pandemic, and delivered strong production and
cost results in Q2, consistent with the original 2020 plan and below budget.
• Lucara made a deliberate decision not to tender any of its +10.8 carat production after early March 2020
amidst the uncertainty caused by the global crisis , and instead entered into a ground breaking supply
agreement with HB Group, for the remainder of 202 0. This large, high value production from Karowe has
historically accounted for approximately 70% of Lucara’s annual revenues. Revenue from this agreement
will be realised starting in Q3 2020 based on a polished price mechanism.
• Cash inflows of $21.0 million d uring Q2, consisting of a partial payment of $13.5 million under the HB
agreement and proceeds of $7.5 million from continuous sales on Clara, Lucara’s digital sales platform and
a tender in Antwerp on June 18 for stones smaller than 10.8 carats.
• 5 sales were completed on Clara during Q2, providing liquidity for the Company in this unexpected period
of travel restrictions. Clara’s customer base increased from 32 to 35 during the second quarter and now
stands at 46. Third-party trial sales are expected to commence in Q3.
• Lucara continues to have a strong availability of working capital, including $13.7 million in cash at the end
of Q2 and $31 million available from its revolving term working capital facility.
Eira Thomas, President & CEO commented: “Though our 100% owned Karowe mine continues to operate at full
capacity, Lucara made the deliberate decision not to sell any of its +10.8 carat diamond production during the period,
in response to a weakened market demand. Subsequently, we are pleased to report that Lucara has now secured a
ground breaking supply agreement with the HB Group, which will deliver regular revenues on superior pricing terms
to those currently being achieved at tender, and helps position Lucara to move forward with key underground
expansion activities for Karowe in 2020.”
REVIEW FOR THE QUARTER AND FIRST HALF ENDED JUNE 30, 2020
• Karowe has continued to operate throughout the COVID-19 pandemic, and delivered strong production
results in Q2, consistent with the original 2020 plan and below budget. Adjustments were made to the
original 2020 mine plan by reducing waste and ore mined through the second quarter to ensure the
health and safety of employees operating in the pit and to reduce variable costs. The process plant
continued at full capacity, with additional safety measures in place, processing ore almost entirely from
the South Lobe. Overall performance during the second quarter remains consistent with the strong
operational results achieved over the past two years.
• Operational highlights from Q2 2020 were as follows:
o Ore and waste mined of 0.7 million tonnes and 0.6 million tonnes, respectively
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Registered Address: Suite 2600, Three Bentall Centre, P.O. Box 49314, 595 Burrard Street, Vancouver, BC V7X 1L3 Canada
o 0.71 million tonnes of ore processed resulting in 101,203 carats recovered, achieving a recovered
grade of 14.3 carats per hundred tonnes
o 201 Specials (+10.8 carats) recovered from direct milling during the second quarter, representing
6.4% weight percentage of total direct milling recovered carats, in line with mine plan expectations
o 9 diamonds were recovered greater than 100 carats in weight, including 2 > 200 carats in weight
o Karowe had no lost time injuries resulting in a twelve -month rolling Lost Time Injury Frequency
Rate of 0
• Sales of $7.5 million were generated through the second quarter tender of stones smaller than 10.8 carats
held on June 18th in Antwerp and through Clara. Sales on Clara continued throughout Q2 with 5 sales
completed, providing liquidity for the Company in this unexpected period of travel restrictions. Clara’s
customer base increased from 32 to 35 during the second quarter and now stands at 46.
• No diamonds in excess of +10.8 carats were sold in the second quarter. Instead, these diamonds, which
represent about 70% of Lucara’s revenue, will be sold under the recently announced 2020 supply
agreement with HB. The purchase price paid for Lucara's +10.8 carat rough diamonds will be based on the
estimated polished outcome, with a true up paid on actual achieved polished sales thereafter, less a fee
and the cost of manufacturing. Starting in Q3 2020, this pricing mechanism is expected to deliver regular
cash flow for this important segment of our production profile at superior prices.
• A deposit of $13.5 million was received by the Company as partial payment for +10.8 carat goods delivered
to HB under the new sales agreement. This deposit has been recognized as deferred revenue as of June 30,
2020. As polished goods are sold by HB under the new sales agreement, the Company will recognize the
revenue associated with the sale of those goods and their corresponding inventory cost.
• Total revenue of $7.5 million was recognized in Q2 2020 (Q2 2019: $42.5 million) or $109 per carat (Q2
2019: $417 per carat) from the sale of 68, 979 carats (Q2 2019: 101,931 carats). Only stones in size classes
below 10.8 carats were sold during the second quarter of 2020. The achieved price in Q2 2020 for the
stones in size classes below 10.8 carats reflects the overall rough market price erosion.
• Lucara recognized revenue of $41.6 million for the six months ended June 30, 2020 (“H1 2020”) from the
sale of 155,158 carats or $26 8 per carat. This represents a decrease from revenue of $91.2 million
recognized for the six months ended June 30, 2019 (“H1 2019”) from the sale of 196,989 carats or $463 per
carat. The decrease in revenue is largely attributed to the sales of Q2 production of the +10.8 carat
diamonds being deferred to Q3 2020 under the new supply agreement with HB.
• The Company recorded a net loss of $13.9 million for Q2 2020 resulting in a $0.04 loss per share for the
quarter. This compares to net income of $0.7 million for Q2 2019 and earnings per share of $Nil. A decrease
in total revenue, predominantly from deferral of sales of +10.8 carat stones, had the most significant impact
on the current quarter’s results.
• Cash flow used in operations in Q2 2020 totaled $4.9 million compared to cash flow earned from operations
of $6.5 million in Q2 2019, largely due to the $35.1 million decrease in comparable revenue between the
periods and an increased outflow for taxes payable relating to 2019 tax payments required in 2020.
• Operating cash cost(1) per tonne of ore processed for the six months ended June 30, 2020 was $27.14 per
tonne (H1 2019: $31.16 per tonne), which is below the initial full year forecast cash cost of $32- $36 per
tonne processed and 13% lower than the comparative period last year. The operating cash cost per tonne
processed in Q2 2020 was positively impacted by foreign exchange depreciation of the Botswana Pula of
7% against the U.S. dollar and the benefits of cost optimization efforts undertaken in the second half of
2019, offset by a 9% decrease in tonnes processed as compared to H1 2019.
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Registered Address: Suite 2600, Three Bentall Centre, P.O. Box 49314, 595 Burrard Street, Vancouver, BC V7X 1L3 Canada
• Adjusted EBITDA(1) year to date was negative $1.8 million (H1 2019: $38.6 million). Adjusted EBITDA was
affected by the decrease in total revenue mainly from the decision to withhold the +10.8 carat diamonds
from the Q2 tender but also in part due to market conditions for the smaller goods sold, particularly in the
second quarter tender held in June.
• Operating expenses per carat(1) sold totalled $189 per carat in the six months ended June 30, 2020, up from
$171 per carat sold in the comparable period last year. Total carats sold were approximately 21% less by
volume than the same period last year (H1 2020: 155,158 carats sold; H1 2019: 196,989 carats sold).
• Adjusted EBITDA and the average price per carat sold were significantly affected by the absence of large
stone sales in the second quarter. Each carat holds the same cost to produce, however, the revenue and
resulting margin is driven by the value of the large stones which were not sold in Q2 2020.
• As at June 30, 2020, the Company had cash and cash equivalents of $13.7 million, an increase of $2.5 million
from December 31, 2019. The Company maintained draws totaling $19.0 million on the working capital
facility from Q1 2020, however up to $31.0 million is available to be drawn for working capital, if required.
The Company ended the second quarter with a strong cash position and available liquidity.
• The full impact of COVID -19 on Lucara's operations and production outlook for 2020 remains highly
uncertain, and as a result, the Company is maintaining the suspension of it s 2020 guidance until further
notice.
(1) See Non-IFRS measures
DIAMOND SALES
Karowe’s large, high value diamonds have historically accounted for approximately 70% of Lucara’s annual revenues.
Though the mine has remained fully operational throughout t he COVID-19 pandemic, Lucara made a deliberate
decision not to tender any of its +10.8 carat production after early March 2020 amidst the uncertainty caused by the
global crisis. Subsequently, in July 2020, Lucara announced a ground breaking partnership a greement with the HB
Group headquartered in Antwerp, Belgium (“HB”), entering into a definitive supply agreement for the remainder of
2020, for all of the diamonds produced in excess of +10.8 carats from our 100% owned Karowe Diamond mine in
Botswana. Under the supply agreement with HB, Lucara’s +10.8 carat production will be sold at prices based on the
estimated polished outcome of each diamond, determined through state of the art scanning and planning
technology, with a true up paid on actual achieved polished sales thereafter, less a fee and the cost of manufacturing.
This unique pricing mechanism is expected to deliver regular cash flow for this important segment of our production
profile at superior prices. The Company will start recognizing revenue from this sales agreement inclusive of the
production from the +10.8 carat stones that would have ordinarily been part of the Q2 tender in the third quarter
this year. As of June 30, 2020, the Company received a deposit of $13.5 million for a portion of +1 0.8 carat goods
delivered under the new sales agreement. This deposit has been recognized as deferred revenue and will be brought
into income as the polished diamonds are sold. Quarterly revenue of $7.5 million for the three months ended June
30, 2020 includes only proceeds from the sale of diamonds smaller than 10.8 carats that were sold on Clara or
through the re -scoped Q2 tender. As a result, revenue recognized in Q2 2020 is materially lower than previous
quarters.
Travel restrictions in response to COVID -19 continue, impacting the Company's ability to complete tenders in
Botswana. As a temporary measure, the Government of Botswana has granted Lucara permission to hold diamond
sales in Antwerp. Lucara completed its rescheduled Q2 tender on June 18th in Antwerp, Belgium, selling diamonds
in size classes below 10.8 carats and achieving sales prices within 5% of forecast. Diamonds that are suitable
continue to be re -directed from the tender offering for sale through Clara, the digital sales platform that allows
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Registered Address: Suite 2600, Three Bentall Centre, P.O. Box 49314, 595 Burrard Street, Vancouver, BC V7X 1L3 Canada
buyers to place orders without physically viewing the goods and to purchase only the diamonds they need on a stone
by stone basis.
S
ales of stones between 1 and 10 carats have continued on Clara, with five sales taking place on Clara during the
second quarter of 2020. S ince the beginning of 2020 Clara’s customer base has increased from 27 to 46 buyers.
Discussions continue with third parties to grow supply on Clara to match de mand from the larger customer base.
We anticipate starting trials of third party diamonds during the third quarter.
COVID-19 RESPONSE
In response to the COVID-19 pandemic, the Company implemented its crisis management strategy in March of this
year, designed to protect the health and well-being of our employees in Botswana and Canada as well as 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 designated mining as an essential
service in Botswana and included increased travel restrictions, reduced overall staffing levels and increased and
appropriate social distancing. A strong operating environment continued at the Karowe Mine with Q2 delivering
operating results consistent with the original 2020 plan and costs achieved below budget. The full impact of COVID-
19 on Lucara's operations and production outlook for 2020 remains highly uncertain, and as a result, the Company
is maintaining the suspension of its 2020 guidance until further notice.
L
ucara's planned capital spending program for 2020 was to be largely focused on the initiation of an underground
expansion project at Karowe and funded entirely from free cash flow generated by operations. Although the recently
announced supply agreement with HB is expected to provide regular monthly cash flow for the remainder of the
year, some uncertainty remains around estimating revenue for that period. As a result, the underground expansion
program has been re-scoped and reduced from the previous budget of $53 million and will focus on long lead time
critical-path items through the remainder of the year. During H1 2020, $5.6 million was spent on project execution
activities including detailed engineering and design work and early procurement initiatives.
T
he underground expansion program, as previously announced, has an estimated capital cost of $514 million and a
five year period of development, with flexibility to adjust capital spending depending on market conditions. The
Company expects to finance part of the capital cost with debt and the balance from cash flow generated from
operations. Financing options continue to be assessed.
The Company continues to have a strong availability of working capital, including $13.7 million in cash at the end of
Q2 and $31 million available from its revolving term working capital facility with the Bank of Nova Scotia. The $50
million credit facility was extended to May 5, 2021 during the second quarter of 2020. 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.
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Registered Address: Suite 2600, Three Bentall Centre, P.O. Box 49314, 595 Burrard Street, Vancouver, BC V7X 1L3 Canada
FINANCIAL HIGHLIGHTS
Three months ended
June 30
Six months ended
June 30
In millions of U.S. dollars, except carats or
otherwise noted
2020 2019 2020 2019
Revenues $ 7.5 $ 42.5 $ 41.6 $ 91.2
Net income (loss) for the period (13.9) 0.7 (17.1) 8.1
Earnings (loss) per share (basic and diluted) (0.04) 0.00 (0.04) 0.02
Operating cash flow per share* (0.02) 0.03 0.00 0.08
Cash on hand 13.7 7.1 13.7 7.1
Amounts drawn on the working capital facility 19.0 5.0 19.0 5.0
Average price per carat sold ($/carat)* 109 417 268 463
Operating expenses per carat sold ($/carat)* 174 174 189 171
Operating margin per carat sold ($/carat)* (65) 243 76 292
Carats sold 68,979 101,931 155,158 196,989
(*) Operating cash flow per share, average price per carat sold, operating expenses per carat sold and operating margin per c arat sold are Non-
IFRS measures.
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Registered Address: Suite 2600, Three Bentall Centre, P.O. Box 49314, 595 Burrard Street, Vancouver, BC V7X 1L3 Canada
QUARTERLY RESULTS OF OPERATIONS – KAROWE MINE, BOTSWANA
CONFERENCE CALL
The Company will host a conference call and webcast to discuss the results on Tuesday, August 11, 2020 at 7:00 a.m.
Pacific, 10:00 a.m. Eastern, 3:00 p.m. UK, 4:00 p.m. CET.
CONFERENCE CALL:
Please call in 10 minutes before the conference call starts and stay on the line (an operator will be available to assist
you).
Conference ID:
80135892 / Lucara Diamond
UNIT Q2-20 Q1-20 Q4-19 Q3-19 Q2-19
Sales
Revenues generated from sales
tenders conducted in the
quarter
US$M 7.3 33.8 56.0 45.3 42.5
Carats sold for revenues
recognized during the period
Carats 68,861 86,010 98,547 116,200 101,931
Average price per carat for
proceeds received during the
period
US$ 107 393 568 390 417
Production
Tonnes mined (ore) Tonnes 683,282 878,087 694,591 823,875 773,861
Tonnes mined (waste) Tonnes 591,804 1,199,660 740,593 1,489,668 1,826,972
Tonnes processed Tonnes 705,421 639,430 647,502 680,665 713,037
Average grade processed cpht (*) 14.3 14.3 13.31 13.92 14.23
Carats recovered Carats 101,203 91,536 86,4221 104,9902 109,3123
Costs
Operating costs per carats sold
(see Non-IFRS measures)
US$ 174 201 209 201 174
Sustaining capital expenditures US$M 3.7 2.4 13.0 0.7 1.4
Underground expansion project US$M 3.9 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.
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Registered Address: Suite 2600, Three Bentall Centre, P.O. Box 49314, 595 Burrard Street, Vancouver, BC V7X 1L3 Canada
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=1346455&tp_key=ac4554d235
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 August 19 ,
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: 135892#.
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 Investor Relations & Communications
+1 604 678 5834 | [email protected]
Sweden Robert Eriksson, Investor Relations & Public Relations
+46 701 112615 | [email protected]
UK Public Relations Emily Moss / Jos Simson, Tavistock
+44 778 855 4035 | [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% interest 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 development 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.
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Registered Address: Suite 2600, Three Bentall Centre, P.O. Box 49314, 595 Burrard Street, Vancouver, BC V7X 1L3 Canada
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.
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 August 10, 2020 at 2:30pm Pacific Time.
NON-IFRS MEASURES
This news release refers to certain financial measures, such a s operating cash flow per share, adjusted EBITDA,
average price per carat sold, operating cost per carat sold, 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 s tatements, 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 second quarter, 2020 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, this release may contain forward looking information pertaining to the following: the impact of COVID-
19 on the Company’s cash flows and operations and its plans with respect to the Karowe underground expansion
project; the estimates of the Company’s mineral reserves and resources; estimates of the Company’s production
and sales volumes for the Karowe Diamond Mine; estimated costs for capital expenditures related to the Karowe
Diamond Mine; production costs; exploration and development expenditures and reclamation costs; expectation of
diamond prices and the potential for the supply agreement with HB to achieve both higher prices from the sale of
polished diamonds and to provide more regular cash flow than in previous periods ; changes to foreign currency