Questions swirl as Lucara CEO exits

Mbongeni Mguni | Monday August 28, 2023 06:00

Thomas left office on August 14 after five years at the helm and was replaced by her predecessor, William Lamb, who occupied the top seat between May 2011 and February 2018.

Her departure has stoked shareholder debate as the high-flying miner enters an uncertain period after it recently ran into delays in its planned underground project at Karowe, where expected costs have now been updated by 25% to $683 million. Lucara said production from the new underground ore would now be accessed two years later than originally forecast, blaming the delays and additional costs on longer than expected “grouting” work. Grouting involves the filling of underground voids and sealing water inflows to improve stability and support for operations.

At the time of announcing the delays, Lucara said the main shareholder remained supportive of both the underground project and Karowe mine, adding that the project economics remained strong with capital due to be paid back in less than three years.

Three weeks later in a second-quarter results announcement, Lucara again affirmed shareholder support for the underground project but added that a lean financial period and uncertainty were approaching.

Lucara sealed a $50 million (P676m) working capital facility with lenders in July 2021, as well as a $170 million (P2.3 billion) loan for the underground project. Lucara has drawn $35 million from the working capital facility, which matures on September 1. Under the terms of its funding, the miner also has to place $52.9 million in a cost overrun facility before September 5. Negotiations are ongoing with lenders to postpone the deadlines.

“The company has near-term commitments under its facilities, including the maturity date of the working capital facility on September 1, 2023, and the requirement to fund a cost overrun facility. “Due to these near-term commitments, there is concern regarding the company's ability to meet its commitments and discharge its obligations in the normal course of business. “While management believes the company will be able to resolve the noted items through its ongoing engagement with its lenders, there can be no assurance that those efforts will be successful,” the company stated.

Thomas' departure also comes as shareholders grow increasingly unsettled about the company’s flagging share price, which by Wednesday was down 18% in Lucara’s home market of Canada and down 11.5% on the Botswana Stock Exchange. Lucara’s shares have resisted the run of strong revenues posted by the miner over the years as well as world-beating discoveries such as Lesedi la Rona, the Constellation, and Sewelo.

Since listing on the BSE in 2011, Lucara has shed a net 28.5%, while in Canada, the miner has lost 19% in the value of its share price since listing in 2009. Shareholders are reportedly noting that Lucara’s strongest performance coincided with Lamb’s tenure between 2011 and 2018, where the company peaked at 3.91 Canadian dollars, compared to Wednesday’s 40 cents.

Lucara officials, speaking through their local associates, said Thomas would continue to play a role at the company, although no final placement has been decided.

“The options are currently being explored and will be announced in due course,” the officials told BusinessWeek.

The company sidestepped questions on why Thomas has exited the miner, preferring to point out Lamb’s expertise in mining project developments.

“William's prior experience is ideally suited to advancing the company's key underground project to a successful completion.”