LUCARA Diamonds announced on Monday it had sold its digital diamond sales channel as it focussed on the commissioning of Karowe mine’s expansion project.
William Lamb, president and CEO of Lucara said the ambition of the sales channel, dubbed ‘Clara’, to have other diamond producers supply to it was “unattainable” while it was owned by a pure-play miner such as itself.
Clara, founded nine years ago, will be sold to its original backer – a group led by the HRA Group of Companies and Eira Thomas, Lucara’s former CEO.
Clara will be sold for $3m in cash and 13.4 million in Lucara shares which, at the diamond miner’s current share price, is worth about C$5.9m (U$4.3m).
Clara accounted for about 12% of diamond revenue in Lucara’s first quarter this year (May) with the majority of the firm’s diamond sales earned through an agreement with HB Group, a cutter and polisher. Of $4.9m in sales to Clara in the quarter, only 33% were third party stones with the balance from Karowe, Lucara’s mine in Botswana.
However, Lucara will retain a 3% net profit interest on Clara’s net earnings. It has also agreed to supply Clara with diamonds for five years in the one carat to 15 carat category size it customarily sells. There is an option to terminate the sales agreement after the second anniversary or as otherwise mutually agreed between the parties, Lucara said.
Far more important to Lucara is the successful commissioning of the Karowe expansion, scheduled for the first half of its 2028 financial year. Initially estimated at just over $500m in capital expenditure, the project cost was increased 25% to $683m in 2023 amid an 18 month delay in its commissioning schedule.
The delay put severe pressure on Lucara’s balance sheet which was worsened by a steep decline in diamond prices from which the market has not yet recovered. Thomas resigned her position as the company was recapitalised.
As at June 30, some $336.3m had been spent on the expansion and a further $69.7m in capital commitments had been made, according to Lucara in its second quarter results.
Karowe yields some of the largest diamonds globally. In September, a 1,094 carat diamond was recovered from the mine less than a month after the company announced the recovery of a 2,492 carat diamond – the largest since the 3,106 carat Cullinan diamond was discovered in 1905.
