FISCAL 2023 HIGHLIGHTS
- The recovery of a 1,080 carat Type IIA white gem quality diamond in
August 2023 , followed by a recovery of a 692 carat Type IIA diamond later in the month. The fourth +1000 carat stone recovered from theKarowe Mine . The Karowe Mine recorded record plant throughput of 2.8 million tonnes milled for the year.- In
January 2024 , the successful execution of an amended project financing debt package of$220 million to amend the repayment profile in line with the rebase schedule released inJuly 2023 for theKarowe Underground Project ("UGP"). - On
February 18, 2024 , the Company announced the signing of a new definitive sales agreement ("NDSA") withHB Trading BV ("HB") in respect of all qualifying diamonds produced in excess of 10.8 carats in size from theKarowe Mine . - Total revenue of
$177.4 million for 2023, in line with revised guidance. - Cash flow generated from operating activities of
$63.4 million for 2023. - 2023 operating cash cost of
$28.75 per tonne of ore processed(1). - Investment of
$101.3 million in the Karowe UGP in 2023. Significant sinking progress was made in both the production and the ventilation shafts during the second half of 2023.
The diamond market in general remains a volatile environment with market challenges coming from multiple areas. Lucara remains well positioned to meet these market challenges head on due to its unique high value production mix and its ability to provide provenance for its diamonds through its well-defined sales channels. Our sales strategy which focuses on gaining access to the upstream value chain from polished diamonds is well aligned to the strategies of the Government of the
(1) See "Non-IFRS Financial Performance Measures" |
REVIEW FOR THE YEAR ENDED
- Operational highlights from the
Karowe Mine for 2023 included:- Ore and waste mined of 2.7 million tonnes ("Mt") (2022: 3.3Mt) and 3.1 million tonnes (2022: 1.5Mt), respectively.
- 2.8 million tonnes (2022: 2.8Mt) of ore processed.
- A total of 395,134 carats recovered, including 18,509 carats from the processing of historic recovery tailings, (2022: 335,769 carats) at a recovered grade of 13.2 carats per hundred tonnes ("cpht") of direct milled ore (2022: 12.1 cpht).
- A total of 602 Specials (stones larger than 10.8 carats in size) were recovered, with 22 diamonds greater than 100 carats including five diamonds greater than 300 carats.
- Recovered Specials equated to 5.3% of the total recovered carats from ore processed during 2023 (2022 – 7.2%).
The Karowe Mine has operated continuously for over three years without a lost time injury.
- Financial highlights for 2023 included:
- Revenues of
$177.4 million (2022:$212.9 million ) achieved despite a weaker rough diamond market. Fourth quarter pricing stabilized in smaller goods and increases of 5% were observed compared to the third quarter of 2023, albeit approximately 19% below prices observed in the fourth quarter of 2022. Revenue reflects the weighting of Lucara's revenue towards larger goods where pricing was observed to be more stable. The performance further reflects the increased volume of material processed from the North and Centre lobes in the first half of the year. During 2023, 26% of the carats processed were recovered from the Centre Lobe, 3% from the North Lobe and 71% were recovered from South Lobe ore (2022: 100% South Lobe ore). In comparison to the revenue earned in 2022, current year revenues reflected a more diverse product mix with a return to Centre and North Lobe processing during the year. - Operating margins of 56% were achieved (2022: 63%). A strong operating margin continues to be achieved through cost reduction initiatives assisted by a strong
U.S. dollar. - Adjusted EBITDA(1) was
$54.4 million (2022:$86.7 million ), with the decrease attributable to the change in revenue. - Net loss was
$20.2 million (2022: net income of$40.4 million ), resulting in a loss per share of$0.04 (2022: earnings of$0.09 ). The change to a net loss is due to the decrease in revenue, an impairment of intangible assets, and a significant non-cash deferred tax expense as the investment in the underground expansion project continues. - The Company identified an impairment indicator for the Company's Clara sales platform and completed an impairment test based on the fair value less cost of disposal expected to be derived from the platform. An impairment was recognized on the intangible asset by
$11.2 million in Q4 2023. - Cash flow from operating activities was
$63.4 million (2022:$96.2 million ).
- Revenues of
(1) See "Non-IFRS Financial Performance Measures" |
- During 2023, the Company invested
$101.3 million into the Karowe UGP, including capitalized borrowing costs:- Shaft sinking, lateral development and grouting programs were the focus in both the ventilation and production shafts in Q4 2023. At the end of 2023, the production and ventilation shafts were both at 348 metres below collar or 666 metres above sea level ("masl") and the process of establishing the first shaft stations and lateral connection between the two shafts (670 level) had commenced.
- During Q4 2023, the ventilation shaft sank 76 metres, the 718 slinging cubby was completed, the 670-level station catwalk was established and the lateral station development commenced. Total lateral development in Q4 2023 was 97 metres. During the quarter, development equipment, including a Kubota, a Sandvik DD321 boom jumbo drill and a Caterpillar R1300G 7-tonne load, haul, dump unit were mobilized at the 670-level for lateral development mining. Sinking and lateral development was in the Thlabala mudstones in dry conditions.
- Production shaft activities included sinking a total of 114 metres and establishing the 670-level station catwalk and initiating lateral development. A total of 30 metres of lateral development was completed.
- Commissioning of the temporary bulk air coolers at each shaft was completed and construction of the permanent bulk air coolers at the production shaft continued.
- Detailed engineering and fabrication of the permanent men and materials winder commenced during the quarter, representing the last major component for the permanent winders.
- Cash position and liquidity at
December 31, 2023 :- Cash and cash equivalents of
$13.3 million . - Working capital deficit (current assets less current liabilities) of
$16.6 million . - Cost overrun facility ("COF") of
$18.6 million . $90.0 million drawn on the$170.0 million Project Loan ("Project Loan") for the Karowe UGP.$35.0 million drawn on the$50.0 million working capital facility ("WCF").
- Cash and cash equivalents of
- On
January 9, 2024 , the Company announced that it had signed amended documentation in relation to the senior secured project financing debt package of$220.0 million (the "Facilities") executed inJuly 2021 (the "Rebase Amendments"). The project facility portion had been increased from$170.0 million to$190.0 million , while the working capital facility had been decreased from$50.0 million to$30.0 million . While the total quantum of the Facilities has not changed, the repayment profile has been extended in line with the rebase schedule released onJuly 17, 2023 , and the maturity of the WCF has been extended toJune 30, 2031 . - During 2023, the Company announced the appointment of
William Lamb as Chief Executive Officer, effectiveAugust 17, 2023 , andGlenn Kondo , as Chief Financial Officer, effectiveJanuary 1, 2024 .Eira Thomas andZara Boldt departed during 2023.
The long-term outlook for natural diamond prices remains positive, anchored on improving fundamentals around supply and demand as many of the world's largest mines reach their end of life. Currently, slower than anticipated economic growth in
Sales of lab-grown diamonds increased steadily through 2023 with many smaller retail outlets increasingly adopting these diamonds as a product. Lab-grown stones have established themselves in the marketplace and is expected to continue to take up increasing market share in the smaller to medium sized goods over time. The longer-term market fundamentals for natural diamonds remain positive, pointing to continued price growth as demand is expected to outstrip future supply, which is now declining globally.
2024 OUTLOOK
This section of the press release provides management's production and cost estimates for 2024. These are "forward-looking statements" and subject to the cautionary note regarding the risks associated with forward-looking statements. Diamond revenue guidance does not include revenue related to the sale of exceptional stones (an individual rough diamond which sells for more than
2024 | |
In millions of | Full Year |
Diamond revenue (millions) | |
Diamond sales (thousands of carats) | 345 to 375 |
Diamonds recovered (thousands of carats) | 345 to 375 |
Ore tonnes mined (millions) | 2.8 to 3.2 |
Waste tonnes mined (millions) | 0.8 to 1.4 |
Ore tonnes processed (millions) | 2.6 to 2.9 |
Total operating cash costs(1) including waste mined (per tonne processed) | $28.50 to |
Up to | |
Sustaining capital | Up to |
Average exchange rate – Botswana Pula per United States Dollar | 12.5 |
(1) Operating cash costs are a non-IFRS measure. See "Non-IFRS Financial Performance Measures". |
Karowe diamonds are sold through three separate and distinct sales channels, namely through the HB sales agreement, on the Clara digital sales platform and through quarterly tenders.
SALES FOR +10.8 CARAT DIAMOND PRODUCTION FROM KAROWE
Karowe's large, high value diamonds have historically accounted for approximately 60% to 70% of Lucara's annual revenues. In
For the three months ended
CLARA SALES PLATFORM
During Q4 2023, the sales volume transacted was
QUARTERLY TENDER
A total of 108,137 carats were sold in the
SUBSEQUENT EVENT
On
KAROWE UNDERGROUND EXPANSION UPDATE
The Karowe UGP is designed to access the highest value portion of the Karowe orebody, with initial underground carat production predominantly from the highest value eastern magmatic/pyroclastic kimberlite (south) ("EM/PK(S)") unit. The underground expansion is expected to extend mine life to at least 2040.
On
The updated schedule incorporates a 28% increase in the duration of construction, extending the anticipated commencement of production from the underground from H2 2026 to H1 2028. The revised forecast of costs at completion is
During the year ended
- Main sinking in the production and ventilation shafts:
- The ventilation shaft reached 348 metres below collar, with a planned final depth of 731 metres. The shaft is currently 61 metres or approximately 26 days ahead of the
July 2023 schedule update (combined vertical and lateral metres). - The production shaft reached 348 metres below collar, with a planned final depth of 765 metres. The production shaft is 11 metres or approximately 24 days behind the
July 2023 schedule update (combined vertical and lateral) mainly due to an unscheduled grouting event in Q3 2024. The production shaft is not on the project schedule critical path. - At the end of 2023, both shaft bottoms were at 348 metres below collar (666 masl) having completed the first shaft stations at the 670-level and engaged in the start of 670-level lateral development.
- During Q4 2023, the ventilation shaft sank 76 metres, completed the 718 slinging cubby and established the 670-level station, catwalk and was engaged in level development. Total lateral developed in Q4 2023 was 97 metres. During the quarter, a Kubota, Sandvik DD321 two boom jumbo drill and a Caterpillar RG1300G 7-tonne LHD were slung down in the ventilation shaft to the 670-level for lateral development mining.
- Production shaft activities included sinking a total of 114 metres and establishing the 670-level station, catwalk and initiating lateral development. A total of 30 metres of lateral development was completed.
- Commissioning of the temporary bulk air coolers at each shaft was completed and construction of the permanent bulk air coolers at the production shaft continued.
- Detailed engineering and fabrication of the permanent men and materials winder commenced during the quarter, representing the last major component for the permanent winders.
- Both shafts have completed sinking through the water-bearing Ntane and Mosolotane sandstones. Sinking and lateral development during the fourth quarter took place in the Thalbala mudstone in dry conditions.
- The ventilation shaft reached 348 metres below collar, with a planned final depth of 731 metres. The shaft is currently 61 metres or approximately 26 days ahead of the
- Contract for fabrication of the permanent men and materials winder was signed during the quarter, representing the last major component for the permanent winders.
- Mining engineering advanced with a focus on supporting shaft sinking, underground infrastructure engineering and finalizing level plans.
- The impact of implementing a behavioural-based safety training program, Safe Start®, in Q4 2022 has been evident in 2023. During 2023, the UGP achieved a twelve-month rolling Total Recordable Injury Frequency Rate of 0.19. Project to date Total Recordable Injury Frequency Rate at
December 31, 2023 was 0.55.
The capital cost for the underground expansion in 2024 is expected to be up to
- Resumption of sinking within the ventilation and production shafts.
- Completion of mining and construction activities on the 670 level station, including connection of the two shafts and establishment of electrical substation, sump and de-watering pumps and ventilation doors.
- Planned grouting events at the base of the Tlapana carbonaceous shale and top of Mea formation is expected during the period in the production shaft.
- Procurement of underground equipment, including dewatering pumps, underground crush and convey systems and the permanent stage winder.
- Commissioning of the permanent bulk air cooler system.
- Preparation of tender documents for the underground lateral development work; and,
- Continuation of detailed design and engineering of the underground mine infrastructure and layout.
FINANCIAL HIGHLIGHTS – Q4 2023
Three months ended | Year ended | |||||
In millions of | 2023 | 2022 | 2023 | 2022 | ||
Revenues | $ | 36.5 | 42.5 | $ | 177.4 | 212.9 |
Operating expenses | (22.3) | (18.5) | (78.6) | (79.3) | ||
Net income for the period | (36.7) | 7.1 | (20.2) | 40.4 | ||
Earnings per share (basic and diluted) | (0.07) | 0.02 | (0.04) | 0.09 | ||
Operating cash flow per share(1) | 0.00 | 0.03 | 0.11 | 0.19 | ||
Cash on hand | 13.3 | 26.4 | 13.3 | 26.4 | ||
Cost overrun facility (restricted cash) | 18.6 | - | 18.6 | - | ||
Amounts drawn on working capital facility(2) | 35.0 | 15.0 | 35.0 | 15.0 | ||
Amounts drawn on project finance facility | 90.0 | 65.0 | 90.0 | 65.0 | ||
Karowe Revenue | 36.3 | 40.1 | 172.4 | 203.8 | ||
Carats sold | 111,523 | 81,264 | 379,287 | 327,028 |
(1) | Operating cash flow per share before working capital adjustments is a non-IFRS measure. See "Use of Non-IFRS Performance Measures" below. |
(2) | Excludes amounts drawn from the Clara revolving credit facility. |
QUARTERLY RESULTS OF OPERATIONS – KAROWE MINE,
UNIT | Q4-23 | Q3-23 | Q2-23 | Q1-23 | Q4-22 | |
Sales | ||||||
Revenues from the sale of Karowe diamonds | US$M | 36.3 | 56.2 | 38.6 | 41.3 | 40.1 |
Karowe carats sold | Carats | 111,523 | 111,673 | 72,717 | 83,374 | 81,264 |
Production | ||||||
Tonnes mined (ore) | Tonnes | 607,101 | 869,188 | 682,636 | 541,400 | 484,705 |
Tonnes mined (waste) | Tonnes | 456,880 | 954,226 | 907,051 | 761,295 | 199,385 |
Tonnes processed | Tonnes | 703,472 | 724,640 | 720,345 | 700,678 | 690,946 |
Average grade processed(1) | cpht (*) | 14.0 | 13.6 | 12.6 | 12.8 | 12.5 |
Carats recovered(1) | Carats | 98,177 | 98,311 | 90,497 | 89,640 | 86,655 |
Costs | ||||||
Operating cost per tonne of ore processed(2) | US$ | 31.96 | 28.62 | 27.97 | 26.65 | 26.20 |
Capital Expenditures | ||||||
Sustaining capital expenditures | US$M | 8.0 | 3.2 | 2.4 | 0.8 | 9.9 |
Underground expansion project(3) | US$M | 28.0 | 20.3 | 22.5 | 30.5 | 22.3 |
(*) carats per hundred tonnes | |
(1) | Average grade processed is from direct milling carats and excludes carats recovered from re-processing historic recovery tailings from previous milling. |
(2) | Operating cost per tonne of ore processed is a non-IFRS measure. See "Use of Non-IFRS Performance Measures" below. |
(3) | Includes qualifying borrowing cost capitalized in each quarter. |
CONFERENCE CALL
The Company will host a conference call and webcast to discuss the results on
Conference ID:
26126065 /
Dial-In Numbers:
Toll-Free Participant Dial-In North America (+1) 888 390 0605
Local Toronto (+1) 416 764 8609
Webcast:
To view the live webcast presentation, please log on using this direct link: https://app.webinar.net/lrAM9b291Zz The presentation slideshow will also be available in PDF format for download from the Lucara website (Link to presentation).
Conference Replay:
A replay of the telephone conference will be available two hours after the completion of the call until
Replay number (
Replay number (Local) (+1) 416 764 8677
On behalf of the Board,
President and Chief Executive Officer
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ABOUT LUCARA
Lucara is a leading independent producer of large exceptional quality Type IIa diamonds from its 100% owned
The information is information that Lucara is obliged to make public pursuant to the EU Market Abuse Regulation and the Swedish Securities Markets Act. This information was submitted for publication, through the agency of the contact person set out above, on
NON-IFRS FINANCIAL PERFORMANCE MEASURES
This news release refers to certain financial measures, such as adjusted EBITDA, adjusted operating earnings, operating cash flow per share, operating margin per carat sold and operating cost per tonne of ore processed, which are not measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS. These measures may differ from those made by other corporations and accordingly may not be comparable to such measures as reported by other corporations. These measures have been derived from the Company's financial statements, and applied on a consistent basis, because the Company believes they are of assistance in the understanding of the results of operations and financial position. Please refer to the Company's MD&A for the year ended
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain of the statements made herein contain certain "forward-looking information" and "forward-looking statements" as defined in applicable securities laws. Generally, any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance and often (but not always) using forward-looking terminology such as "expects", "is expected", "anticipates", "believes", "plans", "projects", "estimates", "budgets", "scheduled", "forecasts", "assumes", "intends", "strategy", "goals", "objectives", "potential", "possible" or variations thereof or stating that certain actions, events, conditions or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements.
In particular, forward-looking information and forward-looking statements may include, but are not limited to, information or statements with respect to the Company's ability to continue as a going concern, the project schedule and capital costs for the Karowe UGP, the diamond sales, projection and outlook disclosure under "2024 Outlook", the Company's ability to fund the COF, the impact of supply and demand of rough or polished diamonds, expectations regarding top-up values, estimated capital costs, the timing, scope and cost of additional grouting events at the Karowe UGP, the Company's ability to comply with the terms of the Facilities which are required to construct the Karowe UGP, including future funding requirements to the COF, that expected cash flow from operations, combined with external financing will be sufficient to complete construction of the Karowe UGP, that the estimated timelines to achieve mine ramp up and full production from the Karowe UGP can be achieved, that sufficient stockpiled ore will be available to generate revenue prior to the achievement of commercial production of the Karowe underground mine, the economic potential of a mineralized area, the size and tonnage of a mineralized area, anticipated sample grades or bulk sample diamond content, expectations that the Karowe UGP will extend mine life, forecasts of additional revenues, future production activity, that depletion and amortization expense on assets will be affected by both the volume of carats recovered in any given period and the reserves that are expected to be recovered, the future price and demand for, and supply of, diamonds, expectations regarding the scheduling of activities for the Karowe UGP in 2024, future forecasts of revenue and variable consideration in determining revenue, the impact of the termination of the HB sales agreement on the Company's projected revenue and sales channels, estimation of mineral resources, exploration and development plans, cost and timing of the development of deposits and estimated future production, interest rates, including expectations regarding the impact of market interest rates on future cash flows and the fair value of derivative financial instructions, currency exchange rates, rates of inflation, credit risk, price risk, requirements for and availability of additional capital, capital expenditures, operating costs, timing of completion of technical reports and studies, production and cost estimates, tax rates, timing of drill programs, government regulation of operations, environmental risks and ability to comply with all environmental regulations, reclamation expenses, title matters including disputes or claims, limitations on insurance coverage, the profitability of Clara and the Clara Platform, and the scaling of the digital platform for the sale of rough diamonds owned by Clara, the expected use of the Clara Facility, that the Company intends to continue to seek additional supply, both from third-party producers and the secondary market for Clara, and the potential impacts of COVID-19, economic and geopolitical risks, including potential impacts from the Russian military invasion of
Forward-looking information and statements are based on the opinions and estimates of management as of the date such statements are made, and they are subject to several known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievement expressed or implied by such forward-looking statements. The Company believes that expectations reflected in this forward-looking information are reasonable, but no assurance can be given that these expectations will prove to be correct. Certain risks which could impact the Company are discussed under the heading "Risks and Uncertainties" in the Company's most recently filed Annual MD&A and, in the Company's most recent Annual Information Form available at http://www.sedar.com (the "AIF").
The foregoing is not exhaustive of the factors that may affect any of our forward-looking statements. Forward-looking statements are statements about the future and are inherently uncertain, and our actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties, and other factors, including, without limitation, those referred to in this news release.
Although the Company has attempted to identify important factors that could cause actual actions, events, or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. The forward-looking statements contained in this news release are based on the beliefs, expectations, and opinions of management as of the date of this disclosure. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers and investors should not place undue reliance on forward-looking statements. Forward-looking information and statements are made as of the date of this disclosure and accordingly are subject to change after such date. Except as required by law, the Company disclaims any obligation to revise any forward-looking information and statements to reflect events or circumstances after the date of such information and statements. All forward-looking information and statements contained or incorporated by reference in this news release are qualified by the foregoing cautionary statements.
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