Lucara’s Karowe diamond mine remains fully operational
Aerial view of Karowe open pitLucara Diamond Corp. has implemented a crisis management strategy in relation to COVID-19, to protect the health and well-being of its employees in Botswana, Karowe, and Canada.
Lucara’s 100% owned Karowe Diamond Mine, situated in north central Botswana remains fully operational, under new measures and guidelines implemented by the Government of Botswana (“GRB”) earlier this week.
These measures include increased travel restrictions, reduced staffing and increased social distancing pertaining to all aspects of its business. Employees who are able to work remotely are doing so.
As travel restrictions relating to COVID-19 are expected to remain in place for an unknown period of time, the Company’s ability to complete tenders in Botswana may be impacted.
As a temporary measure, the Government of Botswana has granted Lucara permission to hold diamond sales in Antwerp, Belgium if required.
Lucara completed its first of four planned diamond tenders for the year on March 5, and achieved sales prices within 1% of forecast, however, diamond prices have since deteriorated in response to weaker demand as COVID-19 has continued to spread globally.
Though Lucara’s next quarterly tender is not scheduled to take place until mid May 2020, the full impact of COVID-19 on Lucara’s operations and production outlook for 2020 remains highly uncertain, and as a result, the Company has taken the decision to suspend its 2020 guidance until further notice.
Key operational highlights to date:
- Lucara began the year with a strong balance sheet – cash positive, no debt, and an undrawn US$50mln working capital facility.
- Lucara is a low volume, high value diamond producer, with 70% of revenues generated from diamonds in excess of 10.8 carats. Diamond tenders are held quarterly.
- Lucara’s first quarterly diamond tender was completed March 5 achieving sales results within 1% of forecasted reserve prices; all proceeds from this tender have been received.
- Clara, Lucara’s web based digital sales platform for rough diamonds, which sells diamonds under 10.8 carats in size remains operational.
- Lucara has flexibility and optionality in its capital budget for 2020. Spending on the underground project is scheduled to ramp up in Q3 but Lucara has the ability to adjust the timing of these expenditures as they are not currently committed.
“Our main focus right now is on the safety and wellbeing of our workforce and the local communities in which we operate, particularly around our Karowe mine. The global diamond industry is experiencing the widespread impacts of COVID-19 throughout the value chain, manifested as fewer sales, weaker pricing and production curtailments at several mines.
“Though the Karowe diamond mine continues to operate according to plan, and the first quarter 2020 sale achieved results within expectations, the full impact of COVID-19 on our business remains uncertain.
“Lucara has worked swiftly to implement a crisis management plan to protect our people and assets, and continues to monitor this dynamic situation closely, day by day.
“Lucara began the year with a strong balance sheet, cash on hand, no long-term debt and flexibility in our 2020 capital spending program. Our longer-term outlook for the diamond market remains positive, based on improving supply-demand fundamentals that were beginning to manifest in late 2019, prior to the COVID-19 crisis taking hold.
“What’s more, diamond sales are continuing through Clara, our secure web based digital sales platform, which has the unique advantage of providing customers with a forum to buy rough diamonds without the requirement to travel.
“In this challenging and volatile time, the quality of our assets combined with the strength of our balance sheet and the fact that Lucara is not carrying any long-term debt, helps to position the Company to effectively manage the business through this crisis.”