Q3 2023 HIGHLIGHTS
- Revenue for the quarter ended
September 30, 2023 totalled$56.9 million , a 14% increase from Q3 2022. - The Q3 2023 operating cash cost of
$28.62 per tonne of ore processed(1) was well below the expected annual operating cash cost range of$32.50 to$35.50 per tonne of ore processed. - All key operational metrics were achieved against plan, with 0.9 million tonnes of ore and 1.0 million tonnes of waste mined, 0.7 million tonnes of ore processed, and 98,311 carats recovered from direct milled ore.
- Cash flow generated from operating activities was
$15.9 million . - A 1,080 carat Type IIA white gem quality diamond was recovered from Karowe in August. The fourth +1,000 carat stone recovered from the
Karowe Mine . A 692 carat Type IIA diamond was also recovered later that month. - An investment of
$20.3 million in theKarowe Underground Project ("UGP") in Q3 2023 focused on sinking and grouting programs in the ventilation and production shafts. Grouting progressed well in both shafts during the quarter and sinking rates were significantly higher than in previous quarters. - Changes were made to 2023 guidance for revenue, diamond sales, ore and waste tonnes mined, and total operating cash costs per tonne processed.
REVIEW FOR THE QUARTER ENDED
- Operational highlights from the
Karowe Mine for Q3 2023 included:- Ore and waste mined of 0.9 million tonnes (Q3 2022: 0.9) and 1.0 million tonnes (Q3 2022: 0.5), respectively.
- 0.7 million tonnes (Q3 2022: 0.7) of ore processed.
- A total of 98,311 carats recovered (Q3 2022: 78,879) at a recovered grade of 13.6 carats per hundred tonnes ("cpht") of direct milled ore (Q3 2022: 11.4 cpht).
- A total of 189 Specials were recovered, with six diamonds greater than 100 carats including three diamonds greater than 300 carats in weight.
- Recovered Specials equated to 6.8% of the weight percentage of total recovered carats from ore processed during Q3 2023 (Q3 2022 – 7.1%).
The Karowe Mine has operated continuously for over two and a half years without a lost time injury.
- Financial highlights for the three months ended
September 30, 2023 , included:- Revenues of
$56.9 million (Q3 2022:$49.9 million ) were achieved despite a weaker rough diamond market. The strong performance reflects the weighting of Lucara's revenue to larger goods where pricing was observed to be stable. During Q3 2023, 16% of the carats processed were recovered from the Centre Lobe and 84% were recovered from South Lobe material (Q3 2022: 100% South Lobe ore). - Operating margins of 63% were achieved (Q3 2022: 48%). A strong operating margin continues to be achieved through cost reduction initiatives, a strong
U.S. dollar and despite price softness in the rough diamond market. - Karowe's +10.8 carat production, sold through HB, accounted for 67% (Q3 2022: 58%) of total revenues recognized in Q3 2023.
- Adjusted EBITDA(1) was
$21.9 million (Q3 2022:$13.8 million ), with the change attributed to an increase in revenues, partially offset by higher administrative expenses in the current quarter. - Net income was
$10.5 million (Q3 2022:$1.8 million ), resulting in earnings per share of$0.02 (Q3 2022:$0.00 ).
- Revenues of
- During Q3 2023, the Company invested
$20.3 million into the Karowe UGP:- Sinking and grouting programs were the focus in both the ventilation and production shafts in Q3 2023.
- The ventilation shaft reached 268.8 metres below collar, completed two grouting events, and advanced the shaft 55.7 metres in the reporting period. The ventilation shaft has completed sinking through the water-bearing sandstone units.
- The production shaft reached 227 metres below collar, included completion of two grouting campaigns and remedial grouting of previously dry sections of the shaft. By the end of September, the shaft was sinking through the bottom portion of the water-bearing sandstones. An advance of 32.5 metres was achieved in Q3 2023.
- In
September 2023 , Lucara terminated the definitive sales agreement executed with HB inNovember 2022 (for all +10.8 carat diamonds recovered from Karowe) due to HB's material breach of its financial commitments. - During Q3 2023, the Company announced management changes with the return of
William Lamb as President and CEO, replacingEira Thomas .Zara Boldt , Chief Financial Officer and Corporate Secretary and Dr.John Armstrong , VP, Technical Services, announced their departures with plans to step down in Q4 2023.Jennifer Harmer has been promoted to VP, Finance, effectiveNovember 8, 2023 . - Cash position and liquidity at
September 30, 2023 :- Cash and cash equivalents of
$16.8 million . - Cost overrun facility of
$18.4 million . $90.0 million drawn on the$170.0 million Project Loan for the Karowe UGP, with no draws on the facility during the third quarter.- The outstanding balance on the working capital facility ("WCF") was maintained at
$35.0 million through Q3 2023.
- Cash and cash equivalents of
(1) See "Non-IFRS Financial Performance Measures" |
The Company is not permitted to make further draws from the WCF or the Project Loan until various amendments to the terms of these loan agreements are negotiated with the Company's Lenders (the "Rebase Amendments"). As part of the Rebase Amendments, the Lenders have granted certain waivers and extensions to the Company.
The Company has near-term commitments under the Facilities, including the maturity date of the WCF and the requirement to fund a cost overrun facility. Due to these near-term commitments, there is doubt regarding the Company's ability to meet its commitments and discharge its obligations in the normal course of business. While Management believes the Company will be able to resolve the noted items through its ongoing engagement with its Lenders, there can be no assurance that those efforts will be successful. See further details in the section "Liquidity and Capital Resources" and refer to Note 1 of the condensed interim consolidated financial statements for the three and nine months ended
On
The longer-term outlook for natural diamond prices remains positive, anchored on improving fundamentals around supply and demand as many of the world's largest mines reach their natural end of life over the next decade. A slow recovery of economic growth in
Sales of lab-grown diamonds increased beginning in late 2022. Intense competition combined with improvements in technology continue to drive prices of lab grown diamonds down. Signs are emerging of financial instability of producers of lab-grown diamonds. This further differentiates this market segment from the natural diamond market and highlights the unique nature and inherent rarity of natural diamonds. The longer-term market fundamentals for natural diamonds remain unchanged and positive, pointing to strong price growth over the next few years as demand is expected to outstrip future supply, which is now declining globally.
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. Diamond revenue guidance does not include revenue related to the sale of exceptional stones (an individual rough diamond which sells for more than
Changes were made to the Company's 2023 Guidance for revenue, diamond sales, ore and waste tonnes mined, and total operating cash costs per tonne processed which was released in
Revisions to diamond revenue guidance reflect changes to the sales mechanism for the rough diamonds larger than 10.8 carats in size following the termination of the Company's agreement with HB, combined with global rough diamond market impacts. Revenue is expected to be lower than initial guidance as the Company looks at the timing of sales of its goods greater than 10.8 carats in size.
Initial 2023 | Revised 2023 | |
In millions of | Full Year | Full Year |
Diamond revenue (millions) |
| |
Diamond sales (thousands of carats) | 385 to 415 | 365 to 385
|
Diamonds recovered (thousands of carats) | 395 to 425 | 395 to 405 |
Ore tonnes mined (millions) | 1.9 to 2.3 | 2.4 to 2.6
|
Waste tonnes mined (millions) | 2.2 to 2.8 | 2.8 to 3.1 |
Ore tonnes processed (millions) | 2.6 to 2.9 | 2.6 to 2.9 |
Total operating cash costs(1) including waste mined(2) (per tonne processed) | $28.00 to |
(1) Operating cash costs are a non-IFRS measure. See "Non-IFRS Financial Performance Measures". |
(2) Includes ore and waste mined cash costs of |
Tonnes mined have been adjusted to reflect the acceleration of mining in the open pit which has been implemented to access high value ore from the south lobe earlier in the mine plan as well as to optimize costs. Following the expected completion of processing of the ex-pit material, in Q1 2026, the plant will transition to processing stockpiled material until the delivery of ore from the underground expansion project begins in Q1 2028.
In 2023, capital costs expectations for the underground expansion remain at
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.
Karowe's large, high value diamonds have historically accounted for approximately 60% to 70% of Lucara's annual revenues. In
For the three months ended
A decrease in top-up payments in Q3 2023 versus the comparative quarter can be attributed primarily to the number of high value diamonds delivered to HB in preceding quarters which were sold during the comparative period. Top-up values will typically increase as the more valuable stones move through production and are sold. The lower top-ups recognized in Q3 2023 reflect the value of the stones delivered earlier in the year, consistent with the change in product mix during H1 2023.
Recovered Specials equated to 6.8% of the weight percentage of total recovered carats from ore processed during Q3 2023, with 84% of carats recovered coming from the South Lobe and 16% recovered from the Centre Lobe (Q3 2022: 7.1%; 100% South Lobe ore). 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. This result is consistent with the resource model and expected.
The large stone diamond market fundamentals continued to support healthy prices from the multi-year highs observed at the peak in Q1 2022, despite an overall softening of demand in the market.
During Q3 2023, the sales volume transacted was
A total of 106,148 carats were sold in the
The Karowe UGP is designed to access the highest value portion of the Karowe orebody, with initial underground carat production predominantly from the highest value eastern magmatic/pyroclastic kimberlite (south) ("EM/PK(S)") unit. The underground expansion is expected to extend mine life to at least 2040 and is forecast to contribute approximately
On
The updated schedule incorporates a 28% increase in the duration of construction, extending the anticipated commencement of production from the underground from H2 2026 to H1 2028. The revised forecast of costs at completion is
During the three months ended
- Main sinking in the production and ventilation shafts:
- The ventilation shaft reached 268.8 metres below collar, with a planned final depth of 731 metres. The shaft is currently 22 metres ahead of the July schedule update. The production shaft reached 227 metres below collar, with a planned final depth of 765 metres.
- In response to water inflows from the sandstones, cover grouting continued as a primary activity in both shafts. Backwall grouting programs were completed in the production shaft and ventilation shaft as remedial work in areas of the shaft that were previously dry.
- Civil works related to construction of the temporary and permanent bulk air cooler contractor started in September and detailed engineering was completed for these units.
- Contract for fabrication of the permanent men and materials winder was signed during the quarter, representing the last major component for the permanent winders.
- Mining engineering advanced with a focus on supporting shaft sinking, underground infrastructure engineering and finalizing level plans.
- The impact of implementing a behavioural-based safety training program in Q4 2022 has been evident in 2023. Year-to-date, the UGP achieved a nine-month period with no reportable incidents delivering a nine-month rolling Total Recordable Injury Frequency Rate of zero.
The capital cost estimate for the underground expansion in 2023 is
- Sinking within the ventilation and production shafts is expected to continue.
- Excavation of the 718 level station in the ventilation shaft and sinking to the 670 level station and start of station development
- Planned grouting events to the base of the Mosolotane sandstone/mudstone transition are expected to be completed early in Q4 2023 for the production shaft.
- Thereafter, further grouting is not anticipated to be required until sinking reaches the granite basement lithologies in late 2024. Grouting in the granite lithologies is expected to be localized, rather than formational in nature.
- Procurement of underground equipment, including dewatering pumps, underground crush and convey systems and the permanent stage winder.
- Construction and commissioning of the temporary bulk air cooler and construction of the permanent of the bulk air cooler system.
- Preparation of tender documents for a request for proposal for the underground lateral development work; and,
- Continuation of detailed design and engineering of the underground mine infrastructure and layout.
FINANCIAL HIGHLIGHTS – Q3 2023
Three months ended | Nine months ended | |||||
In millions of noted | 2023 | 2022 | 2023 | 2022 | ||
Revenues | $ | 56.9 | $ 49.9 | $ 140.8 | $ 170.5 | |
Operating expenses | (21.3) | (25.8) | (56.3) | (60.8) | ||
Net income for the period | 10.5 | 1.8 | 16.5 | 33.3 | ||
Earnings per share (basic and diluted) | 0.02 | 0.00 | 0.04 | 0.07 | ||
Operating cash flow per share(1) | 0.04 | 0.03 | 0.11 | 0.17 | ||
Cash on hand | 16.8 | 34.8 | 16.8 | 34.8 | ||
Cost overrun facility (restricted cash) | 18.4 | - | 18.4 | - | ||
Amounts drawn on working capital facility(2) | 35.0 | - | 35.0 | - | ||
Amounts drawn on project finance facility | 90.0 | 65.0 | 90.0 | 65.0 | ||
Karowe Revenue | 56.2 | 46.5 | 136.1 | 163.7 | ||
Carats sold | 111,673 | 99,301 | 267,764 | 245,763 |
(1) | Operating cash flow per share before working capital adjustments is a non-IFRS measure. See "Use of Non-IFRS Performance Measures" below. |
(2) | Excludes amounts drawn from the Clara revolving credit facility. |
QUARTERLY RESULTS OF OPERATIONS – KAROWE MINE,
UNIT | Q3-23 | Q2-23 | Q1-23 | Q4-22 | Q3-22 | |
Sales | ||||||
Revenues from the sale of Karowe diamonds | US$M | 56.2 | 38.6 | 41.3 | 40.1 | 46.5 |
Karowe carats sold | Carats | 111,673 | 72,717 | 83,374 | 81,264 | 99,301 |
Production | ||||||
Tonnes mined (ore) | Tonnes | 869,188 | 682,636 | 541,400 | 484,705 | 920,410 |
Tonnes mined (waste) | Tonnes | 954,226 | 907,051 | 761,295 | 199,385 | 453,860 |
Tonnes processed | Tonnes | 724,640 | 720,345 | 700,678 | 690,946 | 693,398 |
Average grade processed(1) | cpht (*) | 13.6 | 12.6 | 12.8 | 12.5 | 11.4 |
Carats recovered(1) | Carats | 98,311 | 90,497 | 89,640 | 86,655 | 78,879 |
Costs | ||||||
Operating cost per tonne of ore processed(2) | US$ | 28.62 | 27.97 | 26.65 | 26.20 | 29.33 |
Capital Expenditures | ||||||
Sustaining capital expenditures | US$M | 3.2 | 2.4 | 0.8 | 9.9 | 4.0 |
Underground expansion project(3) | US$M | 20.3 | 22.5 | 30.5 | 22.3 | 23.9 |
(*) carats per hundred tonnes | |
(1) | Average grade processed is from direct milling carats and excludes carats recovered from re-processing historic recovery tailings from previous milling. |
(2) | Operating cost per tonne of ore processed is a non-IFRS measure. See "Use of Non-IFRS Performance Measures" below. |
(3) | Excludes qualifying borrowing cost capitalized in each quarter. |
The Company will host a conference call and webcast to discuss the results on
Conference ID:
42548403 /
Dial-In Numbers:
(+1) 888 390 0605 | |
0800 652 2435 | |
Local | (+1) 416 764 8609 |
Webcast:
To view the live webcast presentation, please log on using this direct link: https://app.webinar.net/X7Z2M2wLaxW
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
Replay number ( | (+1) 888 390 0541 |
Replay number (Local) | (+1) 416 764 8677 |
On behalf of the Board,
President and Chief Executive Officer
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Lucara is a leading independent producer of large exceptional quality Type IIa diamonds from its 100% owned
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
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 quarter ended
Certain of the statements made herein contain certain "forward-looking information" and "forward-looking statements" as defined in applicable securities laws. Generally, any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance and often (but not always) using forward-looking terminology such as "expects", "is expected", "anticipates", "believes", "plans", "projects", "estimates", "budgets", "scheduled", "forecasts", "assumes", "intends", "strategy", "goals", "objectives", "potential", "possible" or variations thereof or stating that certain actions, events, conditions or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements.
In particular, forward-looking information and forward-looking statements may include, but are not limited to, information or statements with respect to the Company's ability to continue as a going concern, the project schedule and capital costs for the Karowe UGP, the diamond sales, projection and outlook disclosure under "2023 Outlook", the Company's ability to successfully agree the Rebase Amendments with its Lenders, the Company's ability to receive a deferral of the deadline to fill the COF, the impact of supply and demand of rough or polished diamonds, expectations regarding top-up values, estimated capital costs, the timing, scope and cost of additional grouting events at the Karowe UGP, the Company's ability to comply with the terms of the Facilities which are required to construct the Karowe UGP, including future funding requirements to the COF, that expected cash flow from operations, combined with external financing will be sufficient to complete construction of the Karowe UGP, that the estimated timelines to achieve mine ramp up and full production from the Karowe UGP can be achieved, that sufficient stockpiled ore will be available to generate revenue prior to the achievement of commercial production of the Karowe underground mine, the economic potential of a mineralized area, the size and tonnage of a mineralized area, anticipated sample grades or bulk sample diamond content, expectations that the Karowe UGP will extend mine life, forecasts of additional revenues, future production activity, that depletion and amortization expense on assets will be affected by both the volume of carats recovered in any given period and the reserves that are expected to be recovered, the future price and demand for, and supply of, diamonds, expectations regarding the scheduling of activities for the Karowe UGP in 2023, future forecasts of revenue and variable consideration in determining revenue, the impact of the termination of the HB sales agreement on the Company's projected revenue and sales channels, estimation of mineral resources, exploration and development plans, cost and timing of the development of deposits and estimated future production, interest rates, including expectations regarding the impact of market interest rates on future cash flows and the fair value of derivative financial instructions, currency exchange rates, rates of inflation, success of exploration, credit risk, price risk, requirements for and availability of additional capital, capital expenditures, operating costs, timing of completion of technical reports and studies, production and cost estimates, tax rates, timing of drill programs, government regulation of operations, environmental risks and ability to comply with all environmental regulations, reclamation expenses, title matters including disputes or claims, limitations on insurance coverage, the profitability of Clara and the Clara Platform, and the scaling of the digital platform for the sale of rough diamonds owned by Clara, expectations regarding the Clara platform's growth, the expected use of the Clara Facility, that the Company intends to continue to seek additional supply, both from third-party producers and the secondary market for Clara, and the potential impacts of COVID-19, economic and geopolitical risks, including potential impacts from the Russian military invasion of
Forward-looking information and statements are based on the opinions and estimates of management as of the date such statements are made, and they are subject to several 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 correct. Certain risks which could impact the Company are discussed under the heading "Risks and Uncertainties" in the Company's most recently filed Interim MD&A and, in the Company's most recent Annual Information Form available at http://www.sedar.com (the "AIF").
The foregoing is not exhaustive of the factors that may affect any of our forward-looking statements. Forward-looking statements are statements about the future and are inherently uncertain, and our actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties, and other factors, including, without limitation, those referred to in this news release.
Although the Company has attempted to identify important factors that could cause actual actions, events, or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. The forward-looking statements contained in this news release are based on the beliefs, expectations, and opinions of management as of the date of this disclosure. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers and investors should not place undue reliance on forward-looking statements. Forward-looking information and statements are made as of the date of this disclosure and accordingly are subject to change after such date. Except as required by law, the Company disclaims any obligation to revise any forward-looking information and statements to reflect events or circumstances after the date of such information and statements. All forward-looking information and statements contained or incorporated by reference in this news release are qualified by the foregoing cautionary statements.
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