Lucara Extends Supply Agreement With Belgian Firm
Lucara Diamond Corp. says it has entered into a 24-month extension of its definitive supply agreement with HB Antwerp (HB), in respect of all diamonds produced in excess of 10.8 carats in size from its 100% owned Karowe Diamond Mine in Botswana.
Large, high value diamonds in excess of 10.8 carats in size account for approximately 70% of the diamond producer’s annual revenues.
Lucara Diamond chief executive officer, Eira Thomas, said under the terms of the supply agreement with HB, which has been extended to December 2022, the purchase price paid for each +10.8 carat rough diamond is based on the estimated polished outcome.
She said this is determined through 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,” Thomas said.
“Not only have rough diamond prices experienced a positive re-bound over the past two quarters, 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.”
Thomas believes these early results warrant an extension of the arrangement for at least 24 months to determine if superior pricing and market stability for “our large, high value diamonds can be sustained for a longer term, creating better alignment between all participants and the establishment of a healthier, more efficient global diamond supply chain”.
Lucara’s Karowe Mine has become world-famous for discovering the 1,109 carat Lesedi La Rona and the 813 carat Constellation in 2015, before unearthing the 1,758 carat Sewelo in April 2019.
Lesedi La Rona was sold for $53million (P566 million at current rates) in 2017,while constellation became the highest ever-selling single rough diamond going for $63.1 million (P673 million) in 2016. Recently Karowe announced the discovery of unbroken 341 carat and 378 carat top white gem quality diamonds, within 12 days of each other.
Thomas added that, though the Karowe mine has remained fully operational throughout the COVID-19 pandemic, they 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.