Shareholders of Lucara Diamond Corp. will miss their quarterly dividends after the company announced its board had decided to direct the funds towards the development of underground mine at Karowe. The underground expansion at Karowe mine is expected to double the mine life, and generate significant revenue and cashflow out to 2040, extending benefits to the company, its employees, shareholders, communities surrounding the mine, and Botswana.
Lucara president and chief executive officer, Eira Thomas had following the announcement of the results of a positive underground Feasibility Study (FS) hinted that a significant portion of the cost to expand the mine underground can be funded from cash flow, and the investment is expected to be paid back in under 3 years.
“With the announcement of a positive feasibility study for development of an underground mine at Lucara’s 100% owned Karowe Diamond Mine, Lucara’s Board of Directors has determined that it is in the best interest of the Company and its shareholders to suspend the quarterly dividend payment of C$0.025 per share, effective immediately,” Lucara said in a During Q3 2019 update.
“The feasibility study demonstrates the potential to extend the mine life at Karowe to 2040 while generating significant economic benefits for the Company, its shareholders, and employees, the communities surrounding the mine and the country of Botswana. In anticipation of a decision to proceed with construction of an underground mine at Karowe, the Board of Directors are of the view that it would be prudent to re-direct the Company’s available cash so that those funds can be available for early works including detailed engineering, procurement initiatives and project financing.”
During Q3 2019, revenue recognised totalled $45.3 million (Q3 2018: $45.7 million) or $390 per carat (Q3 2018: $450 per carat) from the sale of 116,200 carats (Q3 2018: 101,600 carats). Better recoveries in smaller, lower value diamonds resulted in a 14% increase in the number of carats sold. While still profitable, the smaller goods impact the average price per carat sold.
The company recorded a net loss of $4.0 million for Q3 2019 resulting in a $0.01 loss per share for the quarter. This compares to net income of $5.1 million for Q3 2018 and earnings per share of $0.01. An increase in operating expenses and depletion and amortisation (a non-cash expense) had the most significant impact on the current quarter’s results.
“Lucara continues to deliver solid results and strong margins on the back of strong operational performance at Karowe in Q3. With operating margins at Karowe approaching 60%, and no long-term debt, Lucara is well positioned to continue to weather the difficult diamond pricing environment that has prevailed since the beginning of the year,” said Thomas.