Lucara’s revenue continues to drop
Lucara Diamond Corp has expressed doubt about its ability to continue as a going concern*.
The shock revelation comes amidst yet another drop in diamond sales, with an increased reliance on limited funding sources raising pressure on the company’s cash flow and working capital.
In the first quarter of 2025, revenue dropped to P413.4 million from P538.9 million a year earlier, driven by lower carat sales and a shift to lower-grade ore as heavy rainfall disrupted mining at the Karowe Diamond mine open pit.
The company sold 72,871 carats in the period, down from 93,560 carats in the first three months of 2024.
Breaking down the numbers further, Lucara recovered 93,716 carats between January and March, including six stones over 100 carats and a 1,476 carat non-gem diamond, which was sold on tender for just over P15 million.
The Canadian-based entity has now revised its full-year revenue guidance to between P2.05 billion and P2.2 billion, down from prior expectations, maintaining that the outlook prompted a re-evaluation of its liquidity position and the company’s ability to fund ongoing operations and the underground expansion of Karowe Mine in Letlhakane.
The recovery of 139 specials (stones greater than 10.8 carat) accounted for 5.6 percent of the carats recovered from direct ore feed.
Lucara’s project financing has been fully drawn, with continued progress on the underground project dependent on cash flow from existing operations, access to the Cost Overrun Reserve Account (CORA), and additional debt or equity financing.
On April 3rd, lenders approved a draw of up to P382 million from CORA after the company’s largest shareholder, Nemesia, agreed to extend its shareholder standby undertaking until project completion.
Under the terms of the standby facility, Nemesia has committed up to P860 million, including P382 million for CORA replenishment and P478 million to support any project funding shortfall.
Lucara is exploring options to raise additional financing but admitted that future efforts may not succeed or may fall short of the required amounts.
“The underground project at Karowe is progressing, with advancements in shaft connecting lateral development during the quarter. Surface infrastructure construction progressed as planned. We anticipate reaching shaft bottom in the coming months, though we remain mindful of the complexity inherent in such major development projects,” confirmed President and CEO William Lamb in the company’s quarterly report.
Warning of more tough times ahead, Lamb said the transition from open pit to underground operations would bring a difficult two-year period.
“As we navigate the transition from open pit to underground operations, shareholders are reminded that 2026 and 2027 will present significant challenges, with production relying primarily on lower-value stockpile material. This interim period will require careful management of resources and expectations until the underground project begins contributing to our production profile.” he said.
Karowe’s Open pit mining is expected to continue to provide mill feed until the end of the year. Stockpiled material from working stockpiles and life-of-mine stockpiles is expected to provide mill feed through 2027 when underground development ore is scheduled to start offsetting stockpiles with high-grade ore from the underground development with full scale underground production is planned for H1 2028.
“Lucara remains focused on prudently managing this crucial transition phase while continuing our commitment to recovering high-quality diamonds, though we recognise the path ahead involves navigating considerable operational and financial adjustments before we can realise the full potential of our underground resources,” concluded Lamb.
*In accounting, “going concern” refers to the assumption that a business will continue operating for the foreseeable future and will meet its financial obligations when they become due. This means that the business is not expected to be liquidated or forced into bankruptcy within the next 12 months or the accounting period. The concept is a fundamental assumption in accounting, as it allows for the use of historical costs and valuation methods that assume a business will continue.
