Lucara recovers 253 special diamonds at Karowe in Q2

TSX-listed Lucara Diamonds’ Karowe mine, in Botswana, delivered 253 diamonds larger than 10.8 ct during the second quarter, ended June 30, representing 10.5% of the total recovered carats.

This is also the highest number of specials recovered, by quarter, since production started at Karowe.

“The Karowe mine continued to perform well in the second quarter, underpinned by the continued, consistent recovery of specials,” Lucara president and CEO Eira Thomas commented on Friday. 

The mine processed a total of 700 000 t and 4.4-million tonnes of ore and waste, respectively, during the quarter under review.

Lucara and mining contractor Aveng Moolmans had, during the second quarter, continued to work to find a solution to the equipment availability issues and difficulties with waste mining production experienced during the first quarter.

Following extensive discussions in May and June, both parties executed an addendum to the existing mining contract to provide for an amicable termination of the mining contract as of December 31.

The addendum provides for a transition period of up to six months to allow for a new mining contractor, Trollope Mining Services, to gradually assume responsibility for both ore and waste mining from Aveng Moolmans, with all mining activities to be the responsibility of Trollope as of January 1, 2019.

In the first quarter, ore mined volumes and carats recovered were as expected, the company said, but noted that waste mining had been lower than forecast.

Performance improved considerably during the second quarter and continued through the month of July, the first full month of transition between Aveng Moolmans and Trollope.

Given the improved performance realised during the second quarter, waste mining is still expected to be within guidance of between 13-million and 16-million tonnes for the full year.  

Meanwhile, sales revenue for the quarter reached $64.5-million, but excludes $3.9-million of proceeds received in July related to the company's June tender.

The operating cash cost for the six months ended June 30 was $37.53/t processed compared to the full year forecast cash cost of between $38/t and $42/t  processed. 

Karowe's year to date operating cash cost was $37.53/t processed, compared with the full-year guidance of between $38/t and $42/t  processed.

The second quarter’s earnings before interest, taxes, depreciation and amortisation reflects lower revenues, which Lucara said are attributable to a smaller volume and lower average price of diamonds sold, compared with the second quarter of 2017.

Net income for the three months ended June 30, 2018 was $19.7-million, at $0.05 a share, compared with net income of $32.2-million, at $0.08 a share, in the comparative quarter of 2017.

As at June 30, 2018, the company had cash and cash equivalents of $49.6-million, with the $50-million credit facility remaining undrawn on June 30, 2018.

Meanwhile, during 2018, efforts to fully gain access to the Cut 2 South lobe ore will require a large volume of waste to be mined, which will impact on operating cash costs. The strip ratio is forecast to be between 5 and 6 in 2018, and is expected to decrease in the fourth quarter.

A more significant decrease in the stripping ratio is forecast in 2019, between about 2.9 and 3.1, followed by a forecast stripping ratio of 2 from 2020 onwards.

The decrease in waste mining is expected to add to free cash flow once the Cut 2 push back is complete between late 2018 and early 2019, Lucara explained. The average strip ratio during the six months ended June 30, 2018 was 6.31 and capitalised production stripping costs totalled $13.8-million.

Sustaining capital expenditures for the year are forecast to be up to $11-million, which includes final expenditures for the sub-middles X-ray technology project audit facility, completed during the three months ending March 31. 

As at June 30, a total of $7-million had been incurred. 

A budget of up to $3-million was approved for the completion of a prefeasibility study (PFS) of the Karowe AK06 underground development.  In support of this study, geotechnical and hydrogeological drilling under a budget of $26-million has been initiated and as at June 30, a total of $6.3-million had been incurred.