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Lucara Diamond Corp declares special dividend on strong 2014 performance

Lucara Diamond Corp declares special dividend on strong 2014 performance

Photo by Bloomberg

20th February 2015

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Southern Africa-focused precious gem producer Lucara Diamond Corp has rewarded shareholders with a special dividend after it reported strong 2014 earnings.

The Vancouver-based miner, which operates its flagship Karowe mine, in Botswana, reported headline earnings a share of $0.24 for the year ended December 31, up 41% from 2013, and $0.05 a share for the fourth quarter, which was below Bay Street analyst expectations of earning about $0.07 a share.

Lucara noted that its strong earnings had resulted in a return on capital employed of 63% during 2014, up from 37% in 2013, following increased sales from an exceptional stone tender and the company’s operating and capital cost discipline.

“Our focus on return on capital is driving the right behaviours and at an average return on capital of 50% over the past two years we have built a strong balance sheet, while rewarding shareholders with the payment of our first dividend during 2014. We are pleased that the continued recovery of exceptional diamonds at Karowe during the year allowed us to increase our return to shareholders with our special dividend,” president and CEO William Lamb said on Thursday.

During the year, the company recorded total sales of 412 136 ct for gross proceeds of $265.5-million at an average price of $644/ct. The increase in revenues of 47%, or $85-million, when compared with the previous year was the result of higher prices received for the Karowe diamonds and a larger number of carats being sold in the large exceptional stones tenders, which contributed $135.6-million to revenues.

The exceptional stone sales resulted in an average price of $32 471/ct in 2014, compared with $24 290/ct in 2013, with the other tenders achieving an average of  $318/ct, compared with $249/ct in 2013.

The exceptional stone sales and the company's focus on cost control also boosted its earnings before interest, taxes, depreciation and amortisation, which rose to $173.4-million over $102.9-million in the previous year.

The cost of ore treated of $28/t was below guidance of $31/t to $33/t.

In 2014, the company paid a special dividend of C$0.04 a share in addition to its regular dividend of C$0.04 a share. The total dividend paid in 2014 by the company of $27-million was equivalent to a dividend yield of 3.7% based on the TSX closing price on December 31 and a dividend cover of 3.4% using adjusted net income.

"We are very pleased that our second full year of operations saw us deliver on our major commitments to our shareholders through operational delivery, which resulted in us selling over 412 000 ct for $266-million at an operating margin in excess of 80%,” Lamb explained.

The Karowe mine recovered 815 special stones larger than 10.8 ct in 2014 compared with 732 special stones in 2013. This included 27 stones greater than 100 ct and four stones larger than 200 ct. The plant optimisation programme at Karowe was advancing to plan and the plant was expected to be commissioned during the second quarter, within the $55-million budget.

Lucara ended the year with $100.8-million cash in the bank compared with a cash balance of $49.4-million at the end of 2013. The company’s strong operating cash flows more than financed the Karowe plant optimisation expenditure of $35-million and its dividend payment.

The company also had an undrawn credit facility with Scotiabank of $50-million.

Lucara in December announced that it would sell its Mothae project, in Lesotho, where the company had completed a trial mining programme.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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