Lucara Diamond has entered into a 24-month extension of its definitive supply agreement with HB Antwerp of all diamonds produced more than 10.8 carats in size from its wholly-owned Karowe diamond mine in Botswana.
Under the terms of this novel supply agreement with HB, extended to December 2022, the purchase price paid for each +10.8 carat rough diamond is based on the estimated polished outcome, determined through the state of the art scanning and planning technology, with a true-up paid on actual achieved polished sales thereafter, less a fee and the cost of manufacturing.
"The decision to sell our +10.8 carat rough diamonds under a committed supply agreement with HB beginning in July of 2020 has helped support prices for this critical segment of our production amidst pricing uncertainty caused by the ongoing global pandemic," said Lucara chief executive Eira Thomas.
"Not only have rough diamond prices experienced a positive re-bound over the past two quarters, [but] Lucara is also beginning to see the benefits of this strategy in accessing a broader marketplace and delivering regular cash flow based on final polished sales."
She said these early results warrant an extension of the arrangement for at least 24 months to determine if superior pricing and market stability for their large, high-value diamonds can be sustained long term.
Large, high-value diamonds over 10.8 carats in size account for approximately 70% of Lucara's annual revenues.
Lucara made a deliberate decision not to tender any of its +10.8 carat inventory after early March 2020 amidst the uncertainty caused by the global crisis.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
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