Manufacturing Partnership Boosts Lucapa Sales

RAPAPORT... Lucapa Diamond Company's cutting and polishing partnership with Graff subsidiary Safdico paid off in the second quarter, driving a sharp increase in sales amid a recovery in the rough market.Safdico, a manufacturer, has the right to purchase up to 60% of goods from Lucapa's Lulo deposit, with the miner receiving some of the proceeds from the polished sales.In the second quarter, the money Lucapa brought in from the deal came to AUD 3 million ($2.2 million), it said Thursday. This boosted revenue by $240 for each carat of the original rough that it sold.Safdico also buys 100% of rough from Lucapa's Mothae mine in Lesotho. The miner's revenue from the sale of polished from that site came to AUD 400,000 ($297,134), contributing an extra $57 per rough carat.Revenue from Lulo rose to $29.3 million for the three months ending June 30, compared with $2 million for the same period a year ago. Sales volume rose 96% to 6,543 carats, while the average price soared to $4,476 per carat versus $594 per carat last year. The increase reflected a favorable comparison to 2020, when coronavirus restrictions hampered sales. In addition, Lucapa sold seven large, high-quality and fancy-color diamonds during the period through a tender by Angola's state diamond trader, which accounted for revenue of AUD 28.3 million ($21.1 million).Production from Lulo skyrocketed 123% to 6,551 carats. During the three months, Lucapa recovered 204 stones weighing more than 4.8 carats, a 137% increase from the previous year. Those included 79 special-size stones - above 10.8 carats - the largest of which was a high-quality, 144-carat, D-color, type IIa diamond, which was the fifth-largest ever recovered from the deposit.Revenue from Mothae jumped 146% to $4.9 million in the second quarter. Sales volume climbed by the same amount to 9,765 carats, while the average price remained stable at $504 per carat. Lucapa produced 9,603 carats from the site. Some 163 of those diamonds were greater than 4.8 carats, and included a high-value 87-carat, type IIa stone. Last year, the deposit was on care and maintenance throughout the quarter due to Covid-19, and had no production for the period. Lucapa expects to produce between 40,400 carats and 42,600 carats from the two mines for the full year, yielding revenue of AUD 50 million to AUD 56 million ($37.2 million to $41.7 million), it said.During the period, Lucapa acquired the Merlin mine in Australia for AUD 8.5 million ($6.3 million). The site contains diamond resources totaling 4.4 million carats, the company noted."The quickly returning retail demand and low rough-diamond supplies have combined to fuel rising rough-diamond prices, which are now back to levels last seen in 2014," said Lucapa managing director Stephen Wetherall. "This has seen Lucapa exceed its financial target for the first six months of 2021 and places the company well on track to achieve the upper end of our market guidance."Image: Rough diamonds from the Lulo mine. (Lucapa Diamond Company)