Lucara Announces Q1 2020 Results
Lucara 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 equivalents of $27.4 million, an increase of $16.2 million from December 31, 2019. The Company maintained draws totalling $19.0 million on the working capital facility from Q1 2020. A balance of $31.0 million is available to be drawn for working capital, if 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 Karowe Mine in Q1 and delivered results consistent with the 2020 plan and budget:
Ore and waste mined of 0.9 million tonnes and 1.2 million tonnes respectively
0.64 million tonnes of ore processed resulting in 91,536 carats recovered, achieving a recovered grade of 14.3 carats per hundred tonnes
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
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 aaa replica designer handbags ,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 per tonne processed in Q1 2020 was positively impacted by a favourable foreign exchange rate and the benefits of cost optimization efforts undertaken in the second half of 2019, offset by a 16% decrease in tonnes processed as compared to replica louis vuitton bags from china 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). 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”) replica louis vuitton , a diamond manufacturer from Antwerp, to manufacture its historic, record setting, 1 aaa replica designer handbags ,758 carat Sewel diamond recovered from the Karowe Mine in Botswana in April 2019. Lucara will receive an upfront non material payment for the Sewel 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 Botswana on community based initiatives undertaken by Lucara.
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 come 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.”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 replica designer handbags Government of Botswana in late March 2020. These measures designate mining as an essential service in Botswana and include increased travel restrictions, reduced overall staffing 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 5th, and achieved sales prices within Perfect Quality Louis Vuitton Replica 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 1:1 replica handbags for 2020 remains highly uncertain, and as a result, high quality replica handbags china 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 replica louis vuitton to ramp up in Q3, funded entirely from cash flow, under a budget of $53 million. Given the present uncertainty related to our cheap replica handbags 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 assets. 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 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 Sewel diamond recovered in April 2019. Sewel, which means “rare find” in Setswana, cheap louis vuitton bags from china uk is the second, +1,000 carat diamond recovered from Karowe in four years and fake louis bag the largest ever recovered in replica louis vuitton bags 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 Sewel will only be revealed once polished. The purpose of this unprecedented collaboration between a miner, a cutting edge manufacturer and a large luxury brand will be the planning, cutting and polishing of a collection of diamonds from Sewel.
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 been 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 operating expense per carat sold from $169/carat in the three months ended March 31, fake designer bags 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 Interest, Tax, Depletion and Amortization (“Adjusted EBITDA”) (Non IFRS measure), net income and earnings per share when comparing results from each quarter.