TIDM0QUI
RNS Number : 6861Q
Lucara Diamond Corp
22 February 2023
February 21, 2023
NEWS RELEASE
2022 GUIDANCE ACHIEVED ACROSS ALL METRICS. SHAFT SINKING FOR
UNDERGROUND EXPANSION CONTINUES
VANCOUVER, February 21, 2023 /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, 2022.
FISCAL 2022 HIGHLIGHTS:
-- All key operational and financial metrics from the Company's
2022 Guidance were achieved, including 3.3 million tonnes of ore
and 1.5 million tonnes of waste mined, and 2.8 million tonnes of
ore processed.
-- Revenue for the year ended December 31, 2022 totalled $212.9
million, including $9.1 million through Clara.
-- A total of 327,028 carats were sold through the Company's
three sales channels, generating revenue of $165.4 million before
top-up payments of $38.4 million for the year ended December 31,
2022.
-- A strong U.S. dollar helped to mitigate increases in input
costs, resulting in an operating cash cost of $27.94 per tonne of
ore processed(1) for the year ended December 31, 2022.
-- Cash flow of $96.2 million from operating activities.
-- $35.7 million in sales transacted on Clara, with
approximately 40% of sales from third-party goods transacted,
reflecting a positive trend towards increased diversification of
supply and less reliance on Karowe production.
-- $106 million invested in the Karowe underground expansion
project ("UGP") during 2022 with a total project to-date investment
of $226.1 million. Several significant milestones were achieved in
2022 including:
o Substantial completion of surface civil works, including
headgear erection and winder installs on time and within
budget.
o Main shaft sink activities started in both the ventilation and
production shafts to depths below collar of 179 metres and 132
metres, respectively.
o Commencement of grouting programs in each shaft during
December.
o Completion and energization of the bulk power upgrade
consisting of a 29km, 132kV power line and the Letlhakane and
Karowe substations.
o Procurement of underground mobile equipment and the signing of
a contract for construction and supply of a bulk air cooler.
Eira Thomas, President & CEO commented: "The Karowe diamond
mine completed its tenth year of continuous operations and
successfully delivered on all of its' financial and operating
metrics, including safety, production, processing, sales and
revenues, with costs trending below guidance and continued access
to sufficient liquidity in support of our growth plans. For the
underground expansion project, we achieved a number of important
milestones, including the completion of all pre-sinking activities
on schedule and budget, the execution of a main shaft sinking
contract, the commencement of main shaft sinking and the completion
of a new power line on schedule and budget. Importantly, we
commenced our first grouting phase in the production shaft in
December which was successfully completed in February 2023,
confirming that our planned approach and methodology is effective.
The impact of delays and a slower than anticipated ramp up in shaft
sinking cycle times, together with experience gained from our first
grouting program will be incorporated into a refreshed schedule and
budget which is expected to be completed in the second quarter of
2023. As a final comment, the diamond market remained healthy and
stable in 2022, though price softening was observed in the latter
half of the year which impacted revenues year over year, achieving
the mid-range of guidance. Despite rising global economic
uncertainties, our outlook for 2023 and beyond remains optimistic
as global supply shortages continue to play out in the market."
REVIEW FOR THE YEARED DECEMBER 31, 2022
-- Operational highlights from the Karowe Mine for the year ended December 31, 2022 included:
o Ore and waste mined of 3.3 million tonnes (2021: 3.7) and 1.5
million tonnes (2021: 2.6), respectively.
o 2.8 million tonnes (2021: 2.8) of ore processed.
o 335,769 carats recovered (2021: 369,390) at a recovered grade
of 12.12 carats per hundred tonnes of direct milled ore (2021:
12.93).
o 795 Specials (diamonds greater than 10.8 carats) were
recovered during 2022, representing 7.2% weight percentage of total
carats recovered. A total of 34 diamonds greater than 100 carats
were recovered, including 9 diamonds greater than 200 carats.
o The twelve-month Total Recordable Injury Frequency Rate of
0.40 (2021: 0.1) at the end of Q4 2022 reflects a series of medical
treatment cases reported during the third and fourth quarters of
2022.
o The Karowe Mine has surpassed two years without a lost time
injury.
-- Financial highlights for the year ended December 31, 2022 included:
o Revenues of $212.9 million (2021: $230.1 million). The sales
agreement with HB for Karowe's +10.8 production accounted for 60%
(2021: 65%) of total revenues recognized in 2022.
o Adjusted EBITDA (1) of $86.7 million decreased from $102.5
million in 2021, attributed primarily to a decrease in
revenues.
o Net income increased to $40.4 million ($0.09 basic earnings
per share) from $23.8 million ($0.06 basic earnings per share) in
2021.
o Cash flow of $96.2 million (2021: $83.4 million) from
operating activities.
-- Cash position and liquidity at December 31, 2022:
o Cash and cash equivalents of $26.4 million.
o $65.0 million drawn from the $170.0 million project finance
facility for the Karowe UGP.
o $15.0 million drawn from the $50.0 million working capital
facility.
o After year-end, the Company drew $25.0 million from the
project finance facility and $8.0 million from the working capital
facility.
DIAMOND MARKET
2022 began on a solid trajectory following a banner year for
diamond prices in 2021. Prices began to soften in the second half
of the year in response to increasing global economic and
geopolitical uncertainties and resulted in weaker achieved holiday
sales results in the US compared to the previous year. Despite this
pull back, the market remained stable and price improvement along
with increasing market depth has been observed in early 2023. A
cautious economic outlook combined with the uncertainty caused by
geopolitical events, including the ongoing conflict in Ukraine and
continuing implications of the COVID-19 pandemic (specifically in
China where the demand for diamonds has not yet recovered) remain a
risk to diamond pricing trends in the short term with demand from
the US a critical driver on prices of both rough and polished
diamonds. The longer-term market fundamentals remain unchanged and
positive, pointing to strong price growth over the next few years
as demand is expected to outstrip future supply.
2023 OUTLOOK
This section of the press release provides management's
production and cost estimates for 2023. These are "forward-looking
statements" and subject to the cautionary note regarding the risks
associated with forward-looking statements. No changes were made to
the Company's 2023 Guidance released in December 2022. Diamond
revenue guidance does not include revenue related to the sale of
exceptional stones (an individual rough diamond which sells for
more than $10 million), or the Sethunya.
Karowe Diamond Mine Full Year -
2023
In millions of U.S. dollars unless otherwise
noted
------------------------------------------------------ -----------------
Diamond revenue (millions) $200 to $230
Diamond sales (thousands of carats) 385 to 415
Diamonds recovered (thousands of carats) 395 to 425
Ore tonnes mined (millions) 1.9 to 2.3
Waste tonnes mined (millions) 2.2 to 2.8
Ore tonnes processed (millions) 2.6 to 2.9
Total operating cash costs(1) including waste $32.50 to $35.50
mined(2) (per tonne processed)
Botswana general & administrative expenses including $3.50 to $4.50
marketing costs (per tonne processed)
Tax rate(3) 0%
Average exchange rate - USD/Pula 12.0
------------------------------------------------------ -----------------
(1) Operating cash costs are a non-IFRS measure. See "Non-IFRS
Financial Performance Measures".
(2) Includes ore and waste mined cash costs of $7.00 to $8.00
(per tonne mined) and processing cash costs of $12.00 to $13.00
(per tonne processed).
(3) The Company is subject to a variable tax rate in Botswana
based on a profit and revenue ratio which increases as profit as a
percentage of revenue increases. The lowest variable tax rate is
22% while the highest variable tax rate is 55% (only if taxable
income were equal to revenue). Capital expenditures are deductible
when incurred. With planned capital expenditures of up to $105
million for the UGP, a tax rate of 0% is forecast for 2023. Should
capital expenditures vary from plan, the Company could be subject
to current tax.
DIAMOND SALES
Karowe diamonds are sold through three separate and distinct
sales channels: through the HB sales agreement, on the Clara
digital sales platform and through quarterly tenders.
HB SALES AGREEMENT FOR +10.8 CARAT DIAMOND PRODUCTION FROM
KAROWE
For the three months ended December 31, 2022, the Company
recorded revenue of $24.1 million from the HB agreement (inclusive
of top-up payments of $3.6 million), as compared to revenue of
$31.2 million in Q4 2021 (inclusive of top-up payments of $7.9
million). The decrease in revenue in Q4 2022 versus the comparative
quarter can be attributed primarily to the number of high value
diamonds delivered to HB earlier in 2021 for which the value of
top-ups was, as expected, higher. Top-up values will typically
increase as the more valuable stones move through production and
become available for sale. A lower number of carats was delivered
to HB in Q4 2021 (1,895 carats) compared to Q4 2022 (2,812 carats),
however, the initial value of the shipments was comparable owing to
the value of stones delivered in Q4 2021.
At December 31, 2022 a number of higher value and more
technically complex stones that take longer to manufacture had not
fully completed the manufacturing and sales process. These stones
were delivered to HB in 2021 and 2022. As these stones finish the
manufacturing process, the Company may record additional revenue in
the form of "top-up" payments when these diamonds are sold.
Despite the overall decrease in revenue recognized in Q4 2022,
diamond market fundamentals continued to support healthy prices as
steady demand and some inventory shortages were reported. Natural
variability in the quality profile of the +10.8ct production in any
production period or fiscal quarter results in fluctuations in
recorded revenue and associated top-ups between periods is
expected. During Q4 2022, 8.2% weight percentage of Specials of
total carats recovered was consistent with the Karowe resource
model. As more North and Centre lobe material is expected to be
processed in 2023, while higher grade, the weight percentage of
Specials is expected to decrease.
CLARA SALES PLATFORM
Clara, Lucara's 100% owned proprietary, secure, web-based
digital sales platform, continues to gain scale and interest.
Interest in Clara continues to grow as the benefits of purchasing
rough diamonds in an innovative way become evident. Trial sales
with a third-party producer continued through Q4 2022, with
encouraging results and positive margin earned. Transaction volumes
were supplemented with other secondary market supply, which
included diamonds purchased by the Company and re-sold through
Clara. Karowe goods transacted through Clara represented
approximately 60% of the total sales volume transacted during 2022.
The Company intends to continue to seek additional supply in 2023,
both from third-party producers and the secondary market.
During Q4 2022, the sales volume transacted was $6.6 million (Q4
2021: $7.7 million), as fewer sales were held within the
period.
QUARTERLY TER
The Q4 2022 tender reflected a good performance in rough diamond
pricing across all tendered size classes, although lower than what
was achieved in the first two quarterly tenders of 2022 and higher
than the price achieved in September as concerns of a global
economic slowdown became more prominent against a backdrop of high
inflation, interest rate increases and uncertainty in supply
chains. A total of 76,264 carats were sold in the December 2022
tender, generating revenues of $12.2 million (Q4 2022 tender: $19.0
million for 97,211 carats).
KAROWE UNDERGROUND EXPANSION UPDATE
The Karowe UGP is expected to extend the mine life to at least
2040, with initial underground carat production predominantly from
the highest value EM/PK(S) unit and is forecast to contribute
approximately $4 billion in additional revenues, using conservative
diamond prices. The updated estimated capital cost for the Karowe
UGP is $547 million (including contingency) and reflects expected
pricing changes following execution of the main sink contract in Q2
2022. Mine ramp up is expected in 2026 with full production from
the Karowe UGP expected in H2 2026. The Company is using a
combination of cash flow from operations and project debt for the
investment in the Karowe UGP, which is fully financed.
During the three months ended December 31, 2022, a total of
$22.3 million was spent on the Karowe UGP development, primarily in
relation to ongoing construction activities and procurement of long
lead items, including:
-- Main sinking in the production and ventilation shafts:
o Cover grouting began in the production and ventilation shafts
in December 2022 in response to expected water inflows from the
sandstones. Planned methodology, which includes the use of chemical
grouting, has been effective. Experiences gained from this first
grouting event, which was subsequently completed in February in the
production shaft and remains ongoing in the ventilation shaft, will
inform future anticipated cover grouting events as the shafts
progress to depth.
o Main sinking activities continued to ramp up in Q4, however,
equipment and operational challenges continued to negatively impact
planned cycle times. Cycle time is the period it takes to complete
a series of activities within the sinking process to achieve the
next planned vertical advance. Active interventions and mitigations
implemented in Q4 including equipment and personnel changes as well
as shift and rotation schedule optimization along with the roll-out
of a behavioural-based safety training program are helping to
resolve these issues.
o The Company intends to assess the impact of the incurred
delays against the effectiveness of the operational changes
implemented in Q4 2022 combined with recent grouting experiences to
refresh estimates around planned sinking rates and overall project
schedule and budget, before the end of Q2, 2023.
-- The 29 km, 132kV bulk power supply powerline, including the
Letlhakane and Karowe substations, was energized and handed over to
the Botswana Power Corporation at the end of December 2022.
-- The 11kV transmission line to the project site was
commissioned in mid-January 2023. This represents a significant
milestone for the Karowe UGP as it is now fully powered through
grid-supplied electricity. Back-up power will continue to be
provided by diesel generators.
-- Procurement of shaft station underground mobile equipment
progressed with equipment deliveries expected to commence in Q1
2023.
-- The underground mine bulk air cooler and shaft cooling tender was awarded.
Activities for the Karowe UGP in Q1 2023 are expected to include
the following:
-- Sinking and grouting within both the ventilation and production shafts.
-- Procurement of underground equipment, including dewatering
pumps and underground crush and convey systems.
-- Development of a request for proposal for the underground lateral development work.
-- Continuation of detailed design and engineering of the
underground mine infrastructure and layout.
-- Transition of the temporary power supply to a back-up power configuration; and,
-- Stage two of the bulk power supply upgrade to connect all
mine power requirements to the new Karowe Substation and 132kV
power line.
FINANCIAL HIGHLIGHTS
Three months ended December 31, Year ended December
31,
In millions of U.S. 2022 2021 2022 2021
dollars,
except carats or
otherwise noted
-------------------------- --- ------------------------- -------- -------------------- --------
Revenues $ 42.5 57.9 $ 212.9 230.1
Operating expenses (18.5) (22.3) (79.3) (80.3)
Net income for the period 7.1 1.7 40.4 23.8
Earnings per share (basic and
diluted) 0.02 0.00 0.09 0.06
Operating cash flow per
share(1) 0.03 0.05 0.19 0.24
Cash on hand 26.4 27.0 26.4 27.0
Amounts drawn on working
capital
facility 15.0 23.0 15.0 23.0
Amounts drawn on project
finance
facility 65.0 25.0 65.0 25.0
Karowe Revenue 40.1 56.5 203.8 227.9
Average price per carat sold
($/carat)(2) 450 473 506 536
Carats sold 81,264 102,791 327,028 380,493
QUARTERLY RESULTS OF OPERATIONS - KAROWE MINE, BOTSWANA
UNIT Q4-22 Q3-22 Q2-22 Q1-22 Q4-21
Sales
Revenues from the sale of
Karowe diamonds US$M 40.1 46.5 50.0 67.2 56.5
Karowe carats sold Carats 81,264 99,301 66,167 80,295 102,791
Average price per carat
- excluding top-ups(1) US$ 450 377 557 690 436
Production
Tonnes mined (ore) Tonnes 484,705 920,410 1,091,192 811,947 610,072
Tonnes mined (waste) Tonnes 199,385 453,860 357,764 482,104 276,263
Tonnes processed Tonnes 690,946 693,398 719,207 666,488 705,877
cpht
Average grade processed(2) (*) 12.5 11.4 12.0 12.6 12.8
Carats recovered Carats 86,655 78,879 86,317 83,917 90,634
Costs
Operating expense per Karowe
carat sold(3) US$ 193 227 221 212 200
Margin (mining operations)
per Karowe carat sold US$ 257 150 336 478 236
Operating cost per tonne
of ore processed(4) US$ 26.20 29.33 28.78 27.80 29.74
Capital Expenditures
Sustaining capital expenditures US$M 9.9 4.0 4.1 0.8 9.1
Underground expansion project(5) US$M 22.3 23.9 29.1 31.1 21.8
--------------------------------- ------- ------- ------- --------- ------- -------
CONFERENCE CALL
The Company will host a conference call and webcast to discuss
the results on Wednesday, February 22, 2023 at 7:00am Pacific,
10:00am Eastern, 3:00pm UK, 4:00pm CET.
To join the conference call without operator assistance, you may
register and enter your phone number at
https://event.mymeetingroom.com/Public/ClickToJoin/ZW5jPW92VGJmMTVyM05HanZYeFVVVjBPcXRzaHl1NW5jVGVodEtGUTJ0WFZJNjVmaUR6bDhWTmdndz09
to receive an instant automated call back.
Conference ID:
9120717 / Lucara Diamond
Dial-In Numbers:
Toll-Free Participant Dial-In North America (+1) 888 204 4368
UK Toll free 0800 358 6377
Local Vancouver (+1) 604 449 6082
Local Toronto (+1) 647 794 4605
Webcast:
To view the live webcast presentation, please log on using this
direct link: https://app.webinar.net/b9gawOPn86p
The presentation slideshow will also be available in PDF format
for download from the Lucara website ( Link to presentation ).
Conference Replay:
A replay of the telephone conference will be available two hours
after the completion of the call until
March 1, 2023.
Replay number (Toll Free North America) (+1) 888 203 1112
Replay number (Local) (+1) 647 436 0148
The pass code for the replay is: 9120717#.
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:
Hannah Reynish Investor Relations & Communications
+1 604 674 0272| info@lucaradiamond.com
Sweden Robert Eriksson, Investor Relations & Public
Relations
+46 701 112615 | reriksson@rive6.ch
UK Public Relations Charles Vivian / Jos Simson, Tavistock
+44 778 855 4035 | lucara@tavistock.co.uk
ABOUT LUCARA
Lucara is a leading independent producer of large exceptional
quality Type IIa diamonds from its 100% owned Karowe Diamond Mine
in Botswana. The Karowe Mine has been in production since 2012 and
is the focus of the Company's operations and development
activities. Clara Diamond Solutions Limited Partnership ("Clara"),
a wholly-owned subsidiary of Lucara, has developed 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. Lucara has an
experienced board and management team with extensive diamond
development and operations expertise. Lucara and its subsidiaries
operate transparently and in accordance with international best
practices in the areas of sustainability, health and safety,
environment, and community relations. Lucara has adopted the IFC
Performance Standards and the World Bank Group's Environmental,
Health and Safety Guidelines for Mining (2007). Accordingly, the
development of the Karowe underground expansion project ("UGP")
adheres to the Equator Principles. Lucara is committed to upholding
high standards while striving to deliver long-term economic
benefits to Botswana and the communities in which the Company
operates.
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 21, 2023 at 2:00pm Pacific Time.
NON-IFRS FINANCIAL PERFORMANCE MEASURES
This news release refers to certain financial measures, such as
adjusted EBITDA, adjusted operating earnings, operating cash flow
per share, 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 year ended December
31, 2022 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, forward-looking information and forward-looking
statements in this news release may include, but are not limited
to, information or statements with respect to the equity and
project debt financings, the intended use of proceeds, the
Company's ability to comply with the terms of the facilities which
are required to construct the Karowe UGP, that expected cash flow
from operations, combined with external financing will be
sufficient to complete construction of the Karowe UGP, the
potential impacts of COVID-19, economic and geopolitical risks,
including potential impacts from the Russian military invasion of
Ukraine, expectations regarding longer-term market fundamentals and
price growth, the disclosure under "2023 Outlook", expectations
regarding top-up payments, processing expectations, expectations
that the Karowe UGP will extend mine life, forecasts of additional
revenues, estimated capital costs, production and cost estimates,
tax rates, expectations regarding the activities for the Karowe UGP
in Q1 2023, that the estimated timelines to achieve mine ramp up
and full production from the Karowe UGP can be achieved, the
economic potential of a mineralized area, the size and tonnage of a
mineralized area, anticipated sample grades or bulk sample diamond
content, future production activity, the future price and demand
for, and supply of, diamonds, future forecasts of revenue and
variable consideration in determining revenue, estimation of
mineral resources, exploration and development plans, cost and
timing of the development of deposits and estimated future
production, currency exchange rates, success of exploration,
requirements for and availability of additional capital, capital
expenditures, operating costs, the completion of transactions the
profitability of Clara and the Clara Platform, and the scaling of
the digital platform for the sale of rough diamonds owned by Clara,
the Company's intent to continue to seek additional supply, both
from third-party producers and the secondary market, the benefits
to the Company of diamond supply agreements with HB and the ability
to generate better prices from the sale of the Company's +10.8
carat production as a polished stone.
There can be no assurance that such forward looking statements
will prove to be accurate, as the Company's results and future
events could differ materially from those anticipated in this
forward-looking information as a result of those factors discussed
in or referred to under the heading "COVID-19 Global Pandemic,
Economic and Geopolitical Risks" in the Company's most recent
MD&A and under the heading "Risks and Uncertainties" in the
Company's most recent Annual Information Form, both available at
http://www.sedar.com, as well as changes in general business and
economic conditions, the ability to continue as a going concern,
changes in interest and foreign currency rates, changes in
inflation, the supply and demand for, deliveries of and the level
and volatility of prices of rough diamonds, costs of power and
diesel, impacts of potential disruptions to supply chains, acts of
foreign governments and the outcome of legal proceedings,
inaccurate geological and recoverability assumptions (including
with respect to the size, grade and recoverability of mineral
reserves and resources), and unanticipated operational difficulties
(including failure of plant, equipment or processes to operate in
accordance with specifications or expectations, cost escalations,
unavailability of materials and equipment, government action or
delays in the receipt of government approvals, industrial
disturbances or other job actions, adverse weather conditions, and
unanticipated
events relating to health safety and environmental matters).
Accordingly, readers are cautioned not to place undue reliance
on these forward-looking statements which speak only as of the date
the statements were made, and the Company does not assume any
obligations to update or revise them to reflect new events or
circumstances, except as required by law.
This information is provided by RNS, the news service of the
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END
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