Lucapa Diamond Company Shines: Exceptional Q1 2018 Performance Driven by High-Value Diamond Production

Lucapa Diamond Company Limited, a prominent player in the global diamond industry renowned for its focus on large and premium-value diamonds, recently released its robust operational update for the first quarter of 2018, ending March 31. The report underscored a significant period of growth and strategic advancement across its diverse portfolio of projects, particularly highlighting the continued exceptional performance of its flagship Lulo mine in Angola. With a clear strategy to expand high-value diamond production from multiple sources, Lucapa is consistently positioning itself at the forefront of the specialist diamond market.

During Q1 2018, Lucapa reported an impressive 10% increase in diamond recovery, reaching a total of 4,507 carats, a substantial rise from the 4,098 carats recovered in Q1 2017. This growth was not merely in volume but crucially in value, demonstrated by a remarkable 53% surge in the number of “Special” diamonds recovered, totaling 58 stones compared to 38 in the corresponding period of the previous year. These “Special” diamonds, typically defined as individual stones weighing 10.8 carats or more, are the cornerstone of Lucapa’s strategy, commanding premium prices and contributing disproportionately to revenue.

Lulo Mine: A Consistent Source of Extraordinary Diamonds

The Lulo Alluvial Mine, operated by Sociedade Mineira Do Lulo (SML) – a partnership between Lucapa, its local Angolan partner, and the Angolan government – continues to cement its reputation as a world-class producer of large and high-quality diamonds. Throughout Q1 2018, Lulo maintained its impressive track record of yielding exceptional stones, with the recovery of 58 diamonds individually exceeding 10.8 carats. This consistent production of significant diamonds underscores the unique geological endowment of the Lulo concession.

Milestone Discoveries at Lulo

A particular highlight of the quarter was the recovery of two more colossal diamonds weighing 116 carats and 103 carats, respectively. These discoveries brought the total number of +100 carat diamonds unearthed from the Lulo concession to a remarkable ten to date. Such a frequency of large diamond finds is exceedingly rare in the industry, distinguishing Lulo as a truly exceptional asset. Beyond these giants, the mine also yielded an 85-carat Type IIa D-colour gem, recognized as the most valuable premium-quality diamond recovered during the period. Type IIa diamonds are chemically pure and structurally perfect, making them among the rarest and most desirable diamonds globally. Additionally, a 43-carat yellow diamond was recovered, marking it as the largest coloured gem-quality diamond found at Lulo to date, further diversifying the mine’s output and demonstrating its potential for fancy colour stones.

Operational Performance Amidst Challenges

Despite experiencing extremely heavy rainfall during Angola’s wet season, which typically concludes in April, the Lulo mine demonstrated operational resilience. The diamond grade saw a significant improvement of 26%, reaching 7.3 carats per 100 cubic metres. While throughput was down by 13% due to these adverse weather conditions, the improved grade mitigated some of the impact on overall carat recovery. This highlights SML’s efficient processing capabilities and the rich nature of the alluvial deposits being mined. Lucapa’s commitment to continuous improvement and adapting to environmental challenges ensures sustained production of high-value diamonds.

Financial Performance and Strategic Outlook

Financially, Lucapa’s Q1 2018 performance reflected a strategic approach to diamond sales. The company sold 6,242 carats during the quarter, representing a substantial 39% increase over the 4,498 carats sold in Q1 2017. This led to revenues of US$10.8 million, marginally up from US$10.7 million in the prior year’s comparative period. While the average price per carat experienced a 27% decline to US$1,731 (down from US$2,370 in Q1 2017), this can be attributed to the specific mix of diamonds sold during the quarter, as larger and higher-value stones are often held for optimal market timing or sold in separate, bespoke tenders. The significant increase in sales volume demonstrates robust demand for Lucapa’s products and effective inventory management.

At the close of the quarter, SML reported a healthy cash balance of US$13.1 million, providing strong liquidity for ongoing operations and development initiatives. Furthermore, a closing diamond inventory of 3,047 carats positions the company well for future sales, allowing strategic flexibility to maximize returns on its valuable assets. Lucapa also confirmed that drilling of primary source kimberlite targets continued throughout the Angolan wet season, demonstrating its long-term vision to identify the hard-rock sources of Lulo’s prolific alluvial diamonds, potentially unlocking even greater value.

Expanding the Global Footprint: Mothae and Exploration Projects

Lucapa’s commitment to expanding its high-value diamond production extends beyond Lulo, with significant progress being made at its other key projects. The company’s multi-asset strategy is designed to create a diversified portfolio capable of consistently delivering premium diamonds to the global market.

Mothae Mine Development in Lesotho

In Lesotho, the development of the Mothae mine remains a top priority. Lucapa is constructing a new 150 tonnes per hour (tph) diamond plant, which is progressing on budget and on schedule for commissioning in the second half of 2018. A key feature of this new facility is the integration of advanced XRT large-diamond recovery technology. XRT (X-ray Transmission) technology is state-of-the-art for diamond sorting, especially effective in identifying and recovering large stones with higher efficiency and lower damage rates compared to traditional methods. This investment in cutting-edge technology at Mothae underscores Lucapa’s dedication to optimizing recovery and maximizing the value of its diamond assets. Mothae has historically produced large and high-quality diamonds, and the new plant is expected to significantly enhance its production capabilities, potentially making it another significant source of Special diamonds for Lucapa.

Strategic Exploration in Botswana and Australia

Beyond its advanced projects, Lucapa maintains an active exploration pipeline designed to fuel future growth. Exploration activities are underway at the F project area of the Orapa kimberlite field in Botswana. The Orapa kimberlite field is globally renowned for its prolific diamond production, and Lucapa’s presence there highlights its strategic focus on regions with proven diamond potential. Similarly, the Brookings project in Australia is subject to ongoing exploration. These early-stage exploration efforts are critical for identifying new kimberlite pipe targets, which could become the next generation of diamond mines for the company, ensuring a sustainable long-term supply of high-quality diamonds. The diversified exploration portfolio mitigates risk and provides multiple avenues for future resource expansion.

Lucapa’s Vision: Leading the Premium Diamond Market

Lucapa Diamond Company continues to reinforce its position as a distinctive and dynamic force in the premium diamond sector. The company’s unique strategy focuses on niche markets for large, high-value, and often rare coloured diamonds, which typically exhibit more stable demand and pricing compared to smaller, commodity-grade stones. By operating in highly prospective regions like Angola and Lesotho, and leveraging advanced recovery technologies, Lucapa is consistently demonstrating its ability to deliver exceptional results.

The successful Q1 2018 performance, marked by increased carat recovery, a surge in Special diamonds, and the discovery of multiple +100 carat stones, provides a strong foundation for the remainder of the year. With the Mothae plant on track for commissioning and ongoing exploration work across its global tenements, Lucapa is well-positioned for sustained growth. The company’s unwavering focus on operational excellence, coupled with its strategic pursuit of world-class diamond assets, ensures that it remains a compelling entity for investors and a reliable source of some of the world’s most coveted natural treasures.

Pic courtesy: Lucapa Diamond Company