Lucapa posts full-year loss amid volatile market conditions

29th February 2024

By: Sabrina Jardim

Creamer Media Online Writer


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In 2023, the global diamond market experienced a downturn and volatility and although the large, high-quality diamonds recovered from both its Lulo and Mothae operations achieved decent prices at sale, the smaller, lower-quality goods were under price pressure, diamond miner Lucapa Diamond Company reports.

The company adds that inflation, combined with disappointing prices for lower-quality goods also impacted on margins at the Lulo alluvial mine, in Angola, and the Mothae kimberlite mine, in Lesotho.

At Mothae, the yearly price per carat achieved was lower than guidance; however, at a group level, the company achieved all of its guidance metrics, with Lulo diamonds attracting higher prices per carat.

Although some stability has returned to the diamond market this year, Lucapa says there can be no guarantee that prices will continue to increase throughout this year.

The group reported a loss after tax of $17.2-million for the year after recognising a noncash impairment charge of $13.4-million in respect of the Mothae diamond mine’s property, plant and equipment and a $3.5-million unrealised foreign exchange loss on the intergroup loan from Lucapa to Mothae owing to the weakening of the South African rand against the dollar.

The Mothae diamond mine, in Lesotho, recorded earnings before interest, taxes, depreciation and amortisation (Ebitda) of $2.9-million for 2023, compared with a loss of $1.1-million in 2022, owing to an improved operational performance during the first half of the year following plant modifications in the first quarter.

Rough diamond revenue per carat sold for the full-year was $775, down from the $940 achieved for the first half of 2023. Operating costs were well controlled and the Ebitda per carat sold was $90 versus a loss of $35 for 2022.

The impairment charge for Mothae has been estimated following the decrease in the value of diamond recoveries in the fourth quarter and the resulting uncertainties regarding the impact on future cash flows. The company and mine management are currently exploring options to restore cash operating margins.

Meanwhile, Lulo achieved Ebitda of $23.6-million for 2023, down from $35.2-million in 2022. On a per carat sold basis, rough diamond revenue was $2 700, compared with $2 450 in 2022.

The mine’s Ebitda per carat sold decreased to $825, from $1 082 the year before.

Operating costs also increased to higher stripping and processing volumes but were within target for the year.

Lucapa states that Lulo continued to perform well, with the previous year’s capital investment continuing to deliver efficiencies at the alluvial mine, while Mothae achieved record volumes processed and carats recovered following plant upgrades the year prior.

However, in the fourth quarter of the year, the quality of the diamonds recovered dropped significantly. Few high-quality large Type IIa diamonds were recovered and this challenged the year’s overall performance. A review is under way to determine why the diamonds being recovered are below expectations.

Meanwhile, following the advancement of a feasibility study at the Merlin project, in Australia, during the year, the decision was taken to focus the study on a low-cost, smaller-scale pathway to development. The outcome of the study is expected this year.

Geochemical and heavy mineral samples were also taken from the Brooking project, in Australia, during a 2023 drilling campaign. The results will be interpreted and are expected to be released in the second quarter of this year.

Further, preparations have been made for the commencement of exploration drilling at the Orapa Area F project, in Botswana, to commence in the first quarter of this year.

Lucapa states that the ultimate profitability of the company’s operations will be dependent on the market price and marketability of diamonds. “There is a risk that a profitable market may not exist for the sale of diamonds produced by the company,” it warns.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online




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