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Lucara Diamond collaboration to realize in 2021

Recently Lucara Diamond had reported its results for the year and quarter ended 2020 and at the juncture they also commented on Diamond market. They said, the diamond industry begins 2021 with a healthier supply-demand balance than it has had at any stage in the past five years. This follows an incredibly challenging year in 2020, characterized by global travel restrictions, low sales volumes, pricing pressure and overall, difficult economic conditions for miners, manufacturers, retailers and consumers.

Since the end of last year, the market has seen healthy price improvements in the rough market, supported by a strong holiday sales period. Looking ahead, supply curtailments and a pickup in consumer demand are expected to support a continuation of a stable, positive price trend in both the rough and polished markets. 

Longer-term fundamentals are expected to remain strong, with the lack of new projects in the pipeline and the expected increase in demand from growth markets, particularly in China, due to rising wealth levels and consumerism. In 2021, the Company's revenue forecast incorporates an increase in the proportion of carats recovered from the higher value M/PK(S) and EM/PK(S) units within the South Lobe in accordance with the mine plan.

The assumptions for carats recovered and sold are consistent with achieved performance in recent years. The number of tonnes processed is also consistent with recent achievements, noting that actual tonnes processed in 2020 were lower than 2019 due to several multi-day shut-downs for upgrades within the XRT recovery circuit.

Waste tonnes that were deferred in 2020 as a cost saving measure are expected to be caught up in 2022 and 2023. The estimated processing cost per tonne processed is lower than previous years, reflecting a combination of strong operating performance in the plant and insourcing of the process plant contract in 2020.

The proposed underground expansion at the Karowe Mine has an estimated capital cost of $514 million and a five year development period. An investment decision, subject to receipt of all required authorizations and the arrangement of financing, is expected in H2 2021.

The year one capital spend on the expansion program is expected to be $105 million. Until financing can be arranged and an investment decision is made, a limited amount of funding has been approved for H1 2021, based on the Company's ability to fund the initial capital expenditures from operating cash flow.

Similar to the 2020 program, the 2021 program will focus on early works, including detailed engineering and design work, with the objective of mitigating key risks related to the development schedule. Lucara Botswana's progressive tax rate computation allows for the immediate deduction of operating costs, including capital expenditures, in the year in which they are incurred.

Based on 2021 revenue guidance of $180 million to $210 million and assuming the underground development expenditures are incurred, the expected tax rate will be 0% for 2021. Changes to the timing and amount of capital expenditures may result in a rate of up to 25% for 2021.

Sustaining capital and project expenditures are expected to be up to $21.0 million in 2021, including expenditures associated with further upgrades to the XRT recovery circuit to create redundancy in the Large Diamond Recovery circuit and implementation of body scanning technology (to enhance security) which had originally been planned for 2020 but was delayed whilst regulatory approval was pending (required approvals were received in Q4 2020).

Proceeds from two unique collaboration agreements with Louis Vuitton and HB, both entered into in 2020, are expected to be realized in 2021. The objective of the collaboration agreements is to create a high jewellery collection from the historic 1,758 carat "Sewelô", the largest diamond ever mined in Botswana, and the 549 carat "Sethunya".

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