Lucara Announces Strong Q4 2020 Sales and Operational Results
February 22, 2021
NEWS RELEASE
LUCARA ANNOUNCES STRONG Q4 2020 SALES AND OPERATIONAL RESULTS
VANCOUVER, February 22, 2021 /CNW/ (LUC – TSX, LUC – BSE, LUC – Nasdaq Stockholm)
Lucara Diamond Corp. (“Lucara” or the “Company”) today reports its results for the year and quarter ended
December 31, 2020.
HIGHLIGHTS:
• Revenue of $42.4 million or $402 per carat sold in Q4 2020. This includes diamonds sold through a
combination of regular tenders, Clara, and through HB Antwerp (“HB”) under the supply agreement
announced in July 2020.
• FY2020 total operating cash costs of $27.80 per tonne processed(1), 13% lower than the prior year.
• Adjusted EBITDA(1) in Q4 2020 of $10.2 million marks a continued strong operating margin of 49%.
• Lucara continues to have a strong availability of working capital, including $4.9 million in cash at the
end of Q4 and $19.5 million available from a revolving term credit facility. No long-term debt.
• Specials recovered (+10.8 carats) equated to 6.7% weight percentage of total recovered carats, the
fourth year to achieve greater than 6%.
• Extension of the Karowe mining license for a period of 25 years to 2046, marking a critical step in the
advancement of the Karowe underground expansion project.
• In January 2021, the Company announced the recoveries of two, top white gem quality diamonds (341
carats and 378 carats) from ore sourced from the M/PK(s) unit within t he South Lobe. Both stones
were recovered unbroken.
(1) See Non-IFRS measures
Eira Thomas, President & CEO commented: “ The measures that Lucara took early in the pandemic , including
the decision not to sell rough diamonds in excess of +10.8 carats after Q1, helped protect and support prices
for large, high value diamonds that account for more than 70% of our revenues. These efforts in conjunction
with our transformational supply agreement with HB Antwerp executed in July, resulted in strong price
recoveries by Q4, a trend which has continued into 2021. The recent recovery of two, high value +300 carat
stones continue to highlight the extraordinary nature of the Karowe resource and underpin the rationale for
underground expansion, extending our mine life out to at least 2040. In late 2020, the Government of Botswana
also granted Lucara a mining license extension for 25 ye ars, a critical milestone for the underground project,
paving the way for the completion of a supplementary debt financing in support of full project sanction ,
anticipated in the second half of 2021.”
REVIEW FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2020
• Mining and processing operations continued without interruption at the Karowe Mine, where more
than 98% of the workforce are Botswana Nationals.
• Operational highlights for the year ended December 31, 2020 were as follows:
o Continuous operations with implementation of new health and safety protocols to protect the
health and well-being of employees, contractors and local communities.
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o Ore and waste mined of 3.0 million tonnes and 2.7 million tonnes, respectively.
o 2.7 million tonnes of ore processed resulting in 381,706 carats recovered, achieving a
recovered grade of 14.3 carats per hundred tonnes.
o Successful completion of planned XRT upgrades, a key component of the diamond recovery
circuit.
• A record setting year for the recovery of Specials (single diamonds in excess of 10.8 carats):
o a 549 carat top-white gem diamond “Sethunya” (February 2020)
o a 998 carat, high white clivage diamond (November 2020)
o throughout the year, a total of 34 stones in excess of 100 carats, of which 10 stones exceeded
200 carats.
• Two unique collaboration agreements entered into with Louis Vuitton and HB Antwerp to create a high
jewellery collection from the historic 1,758 carat “Sewelô”, the largest diamond ever mined in
Botswana, and the 549 carat “Sethunya”.
• Clara’s customer base increased from 25 to 75 customers (+178% in 2020), with continuous bi-weekly
sales on Clara throughout 2020 providing regular cash flow and visibility into price trends.
• An i nvestment of $ 18.7 million on the Karowe undergr ound expansion project under a re -scoped
budget focused on de -risking the project schedule (procurement of long lead equipment , detailed
design and engineering).
• Financial highlights for the year ended December 31, 2020 included:
o Total revenues of $ 125.3 million (2019: $192.5 million) or $3 35 per carat (2019: $468 per
carat). Revenue, from this agreement, will continue to be recognised in 2021 as rough
diamonds delivered in 2020 are sold as polished, and “top-up” payments are realised. Price
improvement was observed in all size categories in sales concluded in December 2020.
o Adjusted EBITDA(1) of $18.4 million as compared to adjusted EBITDA for the same period in
2019 of $73.1 million, a decrease driven by lower revenues.
o Net loss for the year of $26.3 million ($0.07 loss per share) as compared to net income of $12.7
million ($0.03 per share) in 2019.
(1) See Non-IFRS measures
SUPPLY AGREEMENT FOR +10.8 CARAT DIAMOND PRODUCTION FROM KAROWE
Karowe’s large, high value diamonds have historically accounted for approximately 60% to 70% of Lucara’s
annual revenues. Though the mine remained fully operational following the declaration of COVID-19 as a global
pandemic, Lucara made a decision not to tender any of its +10.8 carat production after early March 2020 amidst
the uncertainty caused by the global crisis and the significant weakness observed in the rough diamond market.
The polished diamond market performed better through this period and subsequently, in July 2020, Lucara
announced a ground breaking partnership agreement with 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 is being 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 amount payable to Lucara on actual achieved polished sales in excess of the initial
estimated polished price, less a fee and the cost of manufacturing. This unique pricing mechanism has delivered
regular cash flow for this important segment of our production profile . The decision to enter into the supply
agreement with HB for the remainder of 2020 followed a trial period during Q2 2020 (“Shipment 1”). Lucara
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is receiving payment for the polished diamonds from Shipment 1 as those diamonds are sold by HB to end
customers, less a fee and the cost of manufacturing.
For the year ended December 31, 2020, the Company recognized revenue totalling $55.2 million from the two
agreements with HB, including an accrual for variable consideration of $ 7.2 million related t o “top -up”
payments arising from polished diamond sales in excess of the initial purchase price paid to Lucara. A slower
than expected ramp -up in both manufacturing and polished sales resulted in certain amounts, that would
otherwise have been recorded as revenue in 2020, now expected to be realized in 2021.
SALES
Diamond sales for the fourth quarter of 2020 were held through a combination of regular tenders, Clara, for
diamonds less than 10.8 carats, and through HB under the supply agreement for those diamonds greater than
10.8 carats. The Company recognized revenue of $ 42.4 million or $ 402 per carat from the sale of 105,64 8
carats. Price recovery was observed in most size and quality classes. Of note, prices achieved for goods sold on
Clara (under 10.8 carats in size) in January 2021 have now recovered to the level of pricing achieved early in
2020.
Total revenue for the year ending December 31, 2020 of $125.3 million was impacted by challenging market
conditions, a longer ramp-up for production and polished sales in the latter half of 2020 under the HB supply
agreement. As a result, revenue from certain polished diamonds from Lucara’s highest value stones, that would
otherwise have been recorded as revenue in 2020, is now expected to be realized in 2021 . During the year
ended December 31, 2020, Lucara sold 373,748 carats at an average price of $335 carat.
CLARA
With global restrictions impeding travel for many diamantaires, interest in Clara grew significantly in 2020 and
the number of buyers on the platform increased from 27 to 75. During 2020, Clara began selling stones on
behalf of third party sellers, which w as a significant objective for the year. As Clara becomes the online
marketplace of choice for rough buyers, discussions are underway with several producers to begin trials for
the sale of their diamonds on Clara.
KAROWE UNDERGROUND UPDATE
During the year ended December 31, 2020, $18.7 million was spent on project execution activities including
the following: S ite earthworks (consisting of laydown preparation and clearing of shaft and surface
infrastructure locations), geotechnical test pitting and drilli ng, and completion of two pilot holes at the shaft
locations, a 746 metre hole for the ventilation shaft and a 768 metre hole for the production shaft. The Company
was able to complete on-site earth works and geotechnical studies by using local contractors while a State of
Emergency remained in effect in Botswana. Long lead time item orders were also placed for shaft muckers,
and hoist and winder refurbishment was initiated. In addition, power line engineering and detailed shaft
design and engineering (consistent with original targets for 2020) progressed. In Q4 2020, the Government of
Botswana approved the proposed powerline route and granted a 25-year extension to the Karowe Mine License
to 2046, sufficient to cover the remaining open -pit life (to 2026) and the expected life of the proposed
underground expansion, currently planned to 2040.
The Company is actively exploring opportunities to arrange debt financing for the underground expansion for
those amounts which are expected to exceed the Company’s cash flow from operations during the construction
period. The underground expansion progra m has an estimated capital cost of $514 million and a five year
period of development.
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DIAMOND MARKET
The diamond industry begins 2021 with a healthier supply-demand balance than it has had at any stage in the
past five years. This follows an incredibly challenging year in 2020, characterized by global travel restrictions,
low sales volumes, pricing pressure and overall, difficult economic conditions for miners, manufacturers ,
retailers and consumers.
Since the end of last year, the market has seen healthy price improvements in the rough market, supported by
a strong holiday sales period. Looking ahead, supply curtailments and a pick up in consumer demand are
expected to support a continuation of a stable, positive price trend in both the roug h and polished markets.
Longer-term fundamentals are expected to remain strong, with the lack of new projects in the pipeline and the
expected increase in demand from growth markets, particularly in China, due to rising wealth levels and
consumerism.
FINANCIAL HIGHLIGHTS
Three months ended
December 31
Twelve months ended
December 31
In millions of U.S. dollars, except carats or
otherwise noted
2020 2019 2020 2019
Revenues $ 42.4 $ 56.0 $ 125.3 $ 192.5
Net income (loss) for the period (3.9) 8.7 (26.3) 12.7
Earnings (loss) per share (basic and diluted) (0.01) 0.02 (0.07) 0.03
Operating cash flow per share* 0.02 0.05 0.04 0.15
Cash on hand 4.9 11.2 4.9 11.2
Amounts drawn on the working capital
facility
30.5 - 30.5 -
Average price per carat sold ($/carat)* 402 568 335 468
Operating expenses per carat sold ($/carat)* 205 209 194 189
Operating margin per carat sold ($/carat)* 196 359 141 279
Carats sold 105,648 98,547 373,748 411,732
(*) Operating cash flow per share before working capital adjustments , average price per carat sold, operating expenses per carat sold and
operating margin per carat sold are Non -IFRS measures.
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QUARTERLY RESULTS OF OPERATIONS – KAROWE MINE, BOTSWANA
UNIT Q4-20 Q3-20 Q2-20(1) Q1-20 Q4-19
Sales
Revenues generated from the
sale of Karowe diamonds in
the quarter
US$M 42.3 41.2 7.3 33.8 56.0
Carats recovered from
Karowe sold for revenues
recognized during the quarter
Carats 105,329 112,741 68,861 86,010 98,394
Average price per carat for
proceeds received during the
quarter
US$ 401 366 107 393 568
Production
Tonnes mined (ore) Tonnes 748,296 678,110 683,282 878,087 694,591
Tonnes mined (waste) Tonnes 434,082 436,781 591,804 1,199,660 740,593
Tonnes processed Tonnes 684,768 646,447 705,421 639,430 647,502
Average grade processed cpht (*) 14.6 13.8 14.3 14.3 13.32
Carats recovered Carats 100,059 88,909 101,203 91,536 86,4222
Costs
Operating costs per carats
sold (see Non-IFRS measures)
US$ 205 192 174 201 209
Sustaining capital
expenditures
US$M 4.4 4.7 3.7 2.4 13.0
Underground expansion
project
US$M 8.3 4.8 3.9 1.7 -
(*) carats per hundred tonnes
(1) During the three months ended June 30, 2020 the Company made a decision to withhold from sale all +10.8 carat stones due to
market uncertainty arising from the global pandemic. As a result, the quarterly revenue recognized during Q2 2020 and the average
price per carat sold are not directly comparable to the other quarterly results presented in the table above.
(2) 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.
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2021 OUTLOOK
This section provides management's production and cost estimates for 2021. These are “forward -looking
statements” and subject to the cautionary note regarding the risks associated with forward-looking statements.
Karowe Mine (all amounts in US Dollars) Full Year 2021
Diamond revenue $180 million to $210 million
Diamond sales 350,000 carats to 390,000 carats
Diamonds recovered 340,000 carats to 370,000 carats
Tonnes mined – Ore 2.8 million to 3.2 million
Tonnes mined – Waste 2.8 million to 3.4 million
Tonnes processed – Ore 2.6 million to 2.9 million
Total operating cash costs per tonne processed (including (a) to
(b) below):
$28.00 to $32.00
(a) Cash cost per tonne mined (ore and waste) $5.00 to $5.50
(b) Cash cost per tonne processed $11.15 to $12.15
Botswana G&A expenses, including sales and marketing, per tonne
processed
$3.00 to $4.00
Tax rate 0% to 25%
Average exchange rate – USD/Pula 11.0
In 2021, the Company’s revenue forecast incorporates an increase in the proportion of carats recovered from
the higher value M/PK(S) and EM/PK(S) units within the South Lobe in accordance with the mine plan. The
assumptions for carats recovered and sold ar e consistent with achieved performance in recent years. The
number of tonnes processed is also consistent with recent achievements, noting that actual tonnes processed
in 2020 was lower than 2019 due to several multi -day shut-downs for upgrades within the XRT recovery
circuit. Waste tonnes that were deferred in 2020 as a cost saving measure are expected to be caught up in 2022
and 2023. The estimated processing cost per tonne processed is lower than previous years, reflecting a
combination of strong operating performance in the plant and insourcing of the process plant contract in 2020.
The proposed underground expansion at the Karowe Mine has an estimated capital cost of $514 million and a
five year development period. An investment decision, subject to receipt of all required authorizations and the
arrangement of financing, is expected in H2 2021. The year one capital spend on the expansion program is
expected to be $105 million. Until financing can be arranged and an investmen t decision is made, a limited
amount of funding has been approved for H1 2021, based on the Company’s ability to fund the initial capital
expenditures from operating cash flow. Similar to the 2020 program, the 2021 program will focus on early
works, including detailed engineering and design work, with the objective of mitigating key risks related to the
development 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 2021 revenue guidance of $180
million to $210 million and assuming the underground development expenditures are incurred, the expected
tax rate will be 0% for 2021. Changes to the timing and amount of capital expenditures may result in a rate of
up to 25% for 2021.
Sustaining capital and project expenditures are expected to be up to $21.0 million in 2021, including
expenditures associated with further upgrades to the XRT recovery circuit to create redundancy in the L arge
Diamond Recovery circuit and implementation of body scanning technology (to enhance security) which had
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originally been planned for 2020 but was delayed whilst regulatory approval was pending (required approvals
were received in Q4 2020).
Proceeds from two unique collaboration agreements with Louis Vuitton and HB, both entered into in 2020, are
expected to be realized in 2021. The objective of the collaboration agreements is to create a high jewellery
collection from the historic 1 ,758 carat “Sewelô”, the largest diamond ever mined in Botswana, and the 549
carat “Sethunya”.
CONFERENCE CALL
The Company will host a conference call and webcast to discuss the results on Tuesday, February 23, 2021 at
7:00 a.m. Pacific, 10:00 a.m. Eastern, 3:00 p.m. UK, 4:00 p.m. CET. 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:
55915704 / Lucara Diamond
Dial-In Numbers:
Toll-Free Participant Dial-In North America (+1) 888 390 0546
UK Toll free 0 800 652 2435
All Other 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=1429054&tp_key=0487cf5667
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,
2021.
Replay number (Toll Free North America) (+1) 888 390 0541
Replay number (International) (+1) 416 764 8677
The pass code for the replay is: 915704 #.
On behalf of the Board,
Eira Thomas
President and Chief Executive Officer
Follow Lucara Diamond on Facebook, Twitter, Instagram, and LinkedIn
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For further information, please contact:
Investor Relations & Communications
+1 604 674 0272| [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.
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 February 22, 2021 at 2:15pm Pacific Time.
NON-IFRS MEASURES
This news release refers to certain financial measures, such as 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 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 fourth 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, o r 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.