Lucara extends supply agreement with HB to support prices
The decision to sell +10.8 carat rough diamonds under a committed supply agreement with HB beginning in July of 2020 has helped support prices for this critical segment of Lucara’s production amidst pricing uncertainty caused by the ongoing global pandemic
Lucara Diamond Corp. has announced that it has entered into a 24-month extension of its definitive supply agreement with HB Antwerp, in respect of all diamonds produced in excess of 10.8 carats in size from its 100 percent owned Karowe Diamond Mine in Botswana.
Under the terms of this novel supply agreement with HB, extended to December 2022, the purchase price paid for each +10.8 carat rough diamond is based on the estimated polished outcome, determined through state of the art scanning and planning technology, with a true up paid on actual achieved polished sales thereafter, less a fee and the cost of manufacturing, the company says.
Eira Thomas, CEO says the decision to sell +10.8 carat rough diamonds under a committed supply agreement with HB beginning in July of 2020 has helped support prices for this critical segment of Lucara’s production amidst pricing uncertainty caused by the ongoing global pandemic.
“Not only have rough diamond prices experienced a positive re-bound over the past two quarters, Lucara is also beginning to see the benefits of this strategy in accessing a broader marketplace and delivering regular cash flow based on final polished sales,” she says adding that “we believe these early results warrant an extension of the arrangement for at least 24 months to determine if superior pricing and market stability for our large, high value diamonds can be sustained longer term, creating better alignment between all participants and the establishment of a healthier, more efficient global diamond supply chain”.
Large, high value diamonds in excess of 10.8 carats in size account for approximately 70 percent of Lucara's annual revenues. Though the Karowe mine has remained fully operational throughout the Covid-19 pandemic, Lucara says it made a deliberate decision not to tender any of its +10.8 carat inventory after early March 2020 amidst the uncertainty caused by the global crisis.
- Regular cash flow for Lucara using polished pricing mechanism;
- Potential revenue upside, particularly suited for Lucara's large, exceptional diamonds;
- Increased tax revenue and additional beneficiation opportunities for the Government of Botswana; and
- A streamlined supply chain that achieves alignment between Lucara and HB to maximize the value of each +10.8 carat diamond produced at Karowe
Oded Mansori, CEO HB Antwerp said: “More than a supply agreement, this collaboration structurally embeds a new transparent and sustainable way of working in the diamond value chain. For the first time, different partners of the value chain are fully aligned, sharing data and information throughout the process from mine to consumer.”