Lucara achieved revenues of $48.7 million or $512 per carat for its sales in Q1, 2019, yielding an operating margin of $343 per carat.
In Q1, 2019, Lucara held a blended tender in which diamonds recovered in the period December 2018 – February 2019 were sold.
The blended tender process decreases the inventory time to market of higher value diamonds.
A total of 95,057 carats were sold (Q1 2018: 63,317 carats) achieving a strong first quarter average price of $512 and with 50% more carats sold than Q1 2018.
Eira Thomas, President & CEO comments:
“Lucara’s focus on operational excellence has delivered another strong quarter, having met or exceeded guidance with respect to ore mined and processed as well as carats produced.
"Costs were significantly down quarter over quarter and the first sale of the year delivered revenues in excess of US$ 47 million, in line with expectations.
"In April, Lucara’s technologically advanced, XRT diamond recovery circuit delivered one of the largest diamonds in recorded history, the largest diamond recovered in Botswana, and the largest diamond to be mined at Karowe to date.
"The unbroken 1,758 carat diamond is a testament to the remarkable nature of the Karowe resource and the strong operating environment prevailing at the mine.”
Historically, Lucara has sold diamonds through both regular stone tenders (RSTs) and exceptional stone tenders (ESTs).
In September 2018, Lucara modified its tender sales to a blended tender process, combining the sale of exceptional stones with the balance of run of mine production into one sale.
This change was made to decrease the inventory time for large, high value diamonds and to generate a smoother revenue profile that better supports price guidance on a per sale basis.
Beginning in December 2018, certain stones from the Karowe production were offered for sale through the Clara platform. As the number of carats increases from better recovery in the smaller, lower value sizes, the average sales price per carat is reduced accordingly.
The significant increase in carats is due to continued strong performance in the plant which had a record quarter of production of 0.76 million tonnes and an improved mine call factor.
The plant also achieved record high availability during Q1 2019. The increase in the number of carats available for sale in the Q1 2019 tender follows commissioning of the sub-middles circuit in Q3 2017 and increased efficiency in diamond recovery in the smaller sizes and improved mill throughput.
The number of carats recovered in Q1 2019 (121,437 carats) processed from the mine was 60% higher than the number of carats recovered in Q1 2018 (75,698 carats).
Operating expenses increased from $14.6 million in Q1 2018 to $16.1 million in Q1 2019 due to a combination of higher volumes of ore mined and processed and an increase in the average cost per tonne mined.
Depletion and amortization expense increased from $5.1 million in Q1 2018 to $11.6 million in Q1 2019 due to the 50% higher volume of carats sold during the period.
Depletion and amortization expense has increased significantly as compared to prior periods for several reasons: an increasing number of fine diamonds recovered following improvements to the processing circuit implemented in late 2017, a larger mineral property balance from the waste stripping campaign between 2017 and 2018, and a corresponding increase in the rate of unit of production depletion from an update to the reserve base of the mine plan in Q3 2018.
Net income and earnings per share performance were as expected and reflect the stronger carat recoveries being achieved due to the investments in the plant as well as the transition to a blended sales tender process in 2019 creating a smoother revenue profile.