Amid uncertain times for the diamond industry, Canada’s Lucara Diamond Corp has managed to seal a supply agreement with a group in Antwerp, Belgium, that will secure regular cash flow, using a unique pricing mechanism.

Under the agreement, the company will sell all the 10.8-plus-carat diamonds from the Karowe mine, in Botswana, to HB Group until the end of the year.

Lucara explains that the purchase price will be based on the estimated polished outcome, determined through state-of-the art scanning and polishing technology, with a true up paid on actual achieved polished sales thereafter, less a fee and the cost of manufacturing.

“It is our strong view that the success of our industry in these very uncertain times requires better alignment between producers, manufacturers, and retailers to establish a healthier, more efficient global diamond supply chain. We are excited to be working with HB to support this new paradigm,” says Lucara CEO Eira Thomas.

Large, high value diamonds larger than 10.8 ct in size from Karowe account for about 70% of Lucara's yearly revenues. Although the mine has remained fully operational throughout the Covid-19 pandemic, the company made a deliberate decision not to tender any of its 10.8-plus-carat inventory after early March, amid the uncertainty caused by the global crisis.

With jewellery stores closed, cutters and polishers not at work and global travel grinding to a halt, the diamond industry has essentially come to a standstill during the pandemic. Diamond majors De Beers and Alrosa have reported depressed sales for the second quarter.

Lucara believes the new agreement will result in superior pricing than those currently being achieved at tender.

The revenue will also position Lucara to move forward with key underground expansion activities for Karowe in 2020. The miner is investing $514-million in expanding the operation.

Lucara earlier this year suspended its production guidance for 2020, which had been put at between 370 000 ct and 420 000 ct. Sales for the year were estimated at between 350 000 ct and 390 000 ct.