Lucara revenues defy diamond downturn
Otlarongwa Kgweetsi | Monday August 26, 2024 06:00
Lucara directors said the resilient performance was helped by large, high-value stones recovered at Karowe Diamond Mine, while the company’s overall financial health was assisted by cost recovery initiatives and the strong dollar.
Every quarter, Lucara’s revenues ticked up to $41.3 million in the three months to June 30, from the sale of 76,387 carats, compared to $41.1 million in the three months to March 31, 2024, from 93,560 carats.
At the end of the second quarter, Lucara maintained its forecast revenue for the year at between $220 million and $250 million, the same threshold as at the end of the first quarter.
“This guidance reflected the natural variability in the resource production in both recovery and diamond quality and were it to continue, this may impact revenue guidance for 2024,” company directors stated in a second-quarter update recently. “The company had expected higher diamond recoveries and diamond quality during Q4 2023 and Q1 2024 and has seen diamond recoveries and quality improve in the second quarter of 2024.”
Lucara president and CEO William Lamb said the company’s ability to recover large, high-value stones at Karowe was providing useful resilience in a difficult period for the diamond market.
“Our Karowe mine's consistent delivery of large, high-quality diamonds provides a natural hedge against market volatility,” he said. “These exceptional stones, coupled with our innovative sales strategies, allow us to navigate current market conditions effectively.”
In the first half of the year, Karowe produced 15 diamonds over 100 carats, including two exceeding 300 carats.
Directors said looking forward, the long-term outlook for natural diamond prices remains positive due to improving supply and demand dynamics, as well as long-term reductions from major producing mines.
“However, the market for the smaller size stones remains soft as demand is impacted by a weak Asian market and laboratory-grown diamonds. “The longer-term market fundamentals for natural diamonds remain positive as demand is expected to outstrip future supply, which has been declining globally over the past few years,” directors stated.
The slowdown in the diamond market has been driven by factors such as uncertainties in the crucial United States market, a surge in the popularity of lab-growns, lower-than-expected recovery in China and the distaste for natural diamonds some consumers felt as sanctioned Russian stones continued trading in the market.
These factors have fuelled oversupply in both the retail and midstream markets, causing a slump that has been the worst in at least five years.