Lucara Diamond Corp (OTCMKTS: LUCRF), a diamond mining company, engages in the acquisition, exploration, development, and operation of diamond properties in Africa. Its principal property is 100% owned Karowe mine that is located in Botswana.
On March 2, 2018, Lucara Diamond Corp. announced that it has closed its acquisition of Clara Diamond Solutions Corp. (“Clara“). The Acquisition remains subject to final approval by the Toronto Stock Exchange. As up-front consideration for the acquisition, Lucara issued 13.1 million shares to the former shareholders of Clara. Further staged equity payments totaling 13.4 million shares become payable upon the achievement of performance milestones related to total revenues (revenues from rough diamonds bought and sold) generated through the platform. Lucara has also agreed to a profit sharing mechanism whereby the founders and facilitators of the Clara technology, and management of Clara, will retain 13.33% and 6.67%, respectively, of the annual EBITDA generated by the platform, to a maximum of US$25 million per year, for 10 years.
Clara Diamond Solutions Corp., uses cloud and blockchain technologies to modernize the existing diamond supply chain, driving efficiencies and ensuring diamond provenance from mine to finger.
Lucara Diamond Corp reached a new 52-week low during mid-day trading on March 2nd, Friday. The stock traded as low as C$2.11. Lucara Diamond (LUC) reached the new 1-Year Low at $2.11
On Feb. 25, 2018, William Lamb retired as Lucara’s Chief Executive Officer and stepping down from the Board of Directors. Eira Thomas, a founder and director of the Company will be assuming the role of CEO. In addition, Catherine McLeod Seltzer, also a Lucara Co-Founder, will be joining the Board of Directors. Under Mr. Lamb’s leadership, the Company’s flagship Karowe mine has evolved into one of the world’s highest margin diamond mines and the foremost producer of large, Type IIA diamonds in excess of 10.8 carats, including the historic 1,109 carat Lesedi La Rona (second largest gem diamond ever recovered) and the 813 carat Constellation (sold for a record US$63.1 million).
On Feb. 20, 2018, Lucara Diamond Corp. declared its first 2018 quarterly dividend of CDN 2.5 cents per share to be payable on April 12, 2018 to the shareholders of record at the close of business on March 23, 2018.
About the company:
Lucara is a leading independent producer of large exceptional quality Type IIa diamonds from its 100% owned Karowe Mine in Botswana. The Company has an experienced board and management team with diamond development and operations expertise. The company was formerly known as Bannockburn Resources Limited and changed its name to Lucara Diamond Corp. in August 2007. Lucara Diamond Corp. was incorporated in 1981 and is headquartered in Vancouver, Canada.
The Company’s principal property is 100% owned Karowe mine that is located in Botswana. The Company is a diamond mining company focused in Africa. The Company’s business consists of the acquisition, exploration, development and operation of diamond properties. The Company’s head office is in Vancouver, BC, Canada and its common shares trade on the Toronto Stock Exchange, the Nasdaq Stockholm Exchange in Sweden and the Botswana Stock Exchange under the symbol “LUC”. The principal assets of the Company and the focus of the Company’s operations, development and exploration activities reside in Botswana.
During Q4 2017 the Company successfully transitioned to a new processing contractor at the Karowe mine. The transition has increased capabilities on the operation of Karowe’s new circuits.
The diamond revenue model is substantially improved and is based on actual production sales figures from 2012 and 2013. The key reason behind the improved revenue model is that the occurrence of very large diamonds suspected from the earlier work, have been confirmed during mining, and the value of these stones can now be included in the Mineral Resource estimate for the mine.
A trade-off study on the capital cost, plant efficiencies and size-revenue curve, indicated that the optimum bottom size cut-off for the project is 1.25 mm, and this is currently the bottom screen size cut-off in the Karowe plant. Mineral Reserves were estimated for the AK6 pipe, and active stockpile materials. There are no specific grade control programs. Generally, all kimberlitic material within the optimal pit is considered to be economic and will either be processed directly or stockpiled for possible future processing.
Market is cautious – supply and demand fundamentals remain unbalanced. Retail sales in China appear to be improving, specifically in the smaller goods. The historical long‐term price trend is positive; short‐term prices are stabilizing.
Annual rough‐diamond production has been stable since 2010 at approx. 130 million carats (70% gem quality)
Source: LUCRF Website
Analysts Rating and Target price
Among 3 analysts covering Lucara Diamond 2 have Buy rating, 0 Sell and 1 Hold.
– downgraded by BMO Capital Markets to “Market Perform” on, February 25.
– Scotia Capital maintained the “Sector Perform” On Friday, February 17.
– Royal Bank of Canada upgraded Lucara Diamond from a “sector perform” rating to an “outperform” rating and raised their price objective from C$2.70 to C$3.00 on November 8th, 2017.
Q4 and FYE 2017 Financial position:
- Revenues and operating margins: The Company achieved revenues of $220.8 million during the year (2016: $295.5 million) including the sale of the 1,109 carat Lesedi La Rona (“LLR”) for $53.0 million ($47,777 per carat). The 2017 average price was $847 per carat (including the sale of the LLR) compared to 2016 average sales price of $824 per carat (including the sale of 813 carat Constellation diamond for $63.1 million). Excluding the sale of the LLR the average sales price for 2017 was $647 per carat which was in line with the 2016 average sales price of $649 excluding the sale of the 813 carat Constellation diamond.
- Net income: Full year net income was $65.1 million (2016: $70.7 million). The $5.6 million decrease is primarily due to lower sales and higher waste stripping costs incurred in 2017.
- Karowe’s operating cash cost: Karowe’s total annual operating cash cost was $34.6 per ton processed (2016: $26.5 per ton processed) compared to forecast of $36-$30 per ton processed.
- Net Cash Position: The Company’s 2017 year-end cash balance was $61.1 million (2016: $53.3 million). The increase in cash during the year is primarily due to the sale of the LLR which was partially offset by the Company’s capital expenditures of $34.2 million for the Mega Diamond Recovery (‘MDR’) and Sub-middles XRT capital projects, stripping costs of $32.9 million of which $24.8 million was capitalized and dividend payments of $29.4 million. The Company’s $50 million credit facility remains undrawn.
- Earnings and Basic Earnings Per Share: Earnings for 2017 were $65.1 million (2016: $70.7 million) and basic earnings per share were $0.17 for the year ended December 31, 2017 (2016: $0.19).
- Dividends: The Company paid its quarterly dividend of CA$0.025 per share on December 14, 2017 for a cumulative dividend of CA$0.10 per share in 2017 or a total of $29.4 million cash dividend to our shareholders.
Stock Influences and Risk Factors:
- The Company’s expenditures remain well controlled with mining and processing cost per ton and all site costs within forecast.
- The average diamond prices have decreased by up to 10% in certain size and quality fractions in 2017. But the quality Karowe’s south lobe diamonds was well accepted in a market.
- The Company is planning on completing drill programs at AK13, AK24 and LDD programs would be based on positive microdiamond results from the core drilling and geophysical surveys in the vicinity of AK11 and AK24.
- The operations of the Company are speculative due to the high-risk nature of its business which includes acquisition, financing, exploration, development and operation of diamond properties.
- The company has market cap of $650 million.
- The USD/Pula budgeted foreign exchange rate for 2018 is 9.8.
- Total dividend of US$195.5 Million (CDN$250 Million), paid since commencement of the Company’s dividend policy in 2014, is greater than the equity capital raised since inception
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