Lucara Diamond, which wholly-owns Karowe Mine in Botswana, is blowing its own trumpet for securing a rough diamond supply deal with the HB, which is expected to reduce price discounts and boost cash flow.
The miner said +10.8 carats diamonds, which represent about 70% of its revenue will be sold under the 2020 supply agreement with HB.
The balance of production will be sold through traditional tender either in person, such as at a sales meeting in Antwerp, Belgium, or through Clara, the company’s blockchain technology.
Lucara chief executive Eira Thomas was quoted by MiningMx as saying during an investment call following publication of the company’s second quarter results Tuesday that the current tender mechanism by which diamond miners sold rough stones to manufacturers was “broken”.
“There has been growing recognition that the sales process will have to evolve,” she said referring to a statement by Anglo American on July 30 that it would restructure De Beers partly due to Covid-19 pressures.
Under the sales agreement with HB, the purchase price paid for Lucara's +10.8 carat rough diamonds would be based on the estimated polished outcome, with a ‘true up’ paid on actual achieved polished sales thereafter, less a fee and the cost of manufacturing.
Thomas said as there is no ‘true-down’, HB’s pricing of their rough stones would contain a certain conservatism but bi-monthly settlements 60 days after the transfer of goods would help ‘smooth out’ cashflow.
Lucara has already received a deposit of $13.5 million as partial payment for +10.8 carat goods delivered to HB under the new sales agreement.
The diamond miner realised revenue of $41.6 million or $268 per carat for the six months ended June 30, 2020 from the sale of 155,158 carats mined at Karowe.
Lucara, however, recorded a net loss of $13.9 million for the second quarter 2020 resulting in a $0.04 loss per share for the quarter.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
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