Canadian junior miner, Lucara Diamond Corp has reported a significant decline in revenue for the first quarter of 2023, attributing the decrease to a 45 percent fall in revenue from its HB sales channel.
HB Antwerp—a Belgium diamond trader sells Karowe rough diamonds that weigh 10.8 carats and above, in a 10-year deal penned last year following a 24 months’ pilot arrangement.
Lucara’s revenue for the first 3 months of the year 2023 totalled $42.8 million a 37 percent drop from $68.2 million recorded in the same quarter last year, reflecting a planned change in product mix beginning in early 2023, “combined with the continuation of weaker diamond prices when compared to the strong diamond pricing observed in Q1 202” the company said.
Karowe’s +10.8 production, sold through HB, accounted for 57% (Q1 2022: 66%) of total revenues recognized in Q1 2023.
For the three months ended March 31, 2023, the Company recorded revenue of $24.5 million from the HB agreement (inclusive of top-up payments of $6.6 million), as compared to revenue of $45.2 million (inclusive of top-up payments of $11.7 million) recorded in the first quarter of 2022.
Lucara said the revenue achieved in Q1 2023 is comparable to the $24.1 million earned from the HB agreement (inclusive of top-up payments of $3.6 million) in Q4 2022.
The company explained that the decrease in revenue in Q1 2023 versus the comparative quarter can be attributed primarily to the number of high value diamonds delivered to HB in 2022 and the value of diamonds delivered earlier in 2021 for which top-up revenue was received in the period.
“Top-up values will typically increase as the more valuable stones move through production and become available for sale” Lucara said adding that adjusting for the sale of Sewelô, a lower number of carats from production were delivered to HB in Q1 2023 compared to Q1 2022.
According to Lucara, the lower initial value of the shipments was reflective of the value in the stones delivered consistent with the change in product mix noting that the result is consistent with the resource model and expected.
At March 31, 2023, a number of higher value and more technically complex stones that take longer to manufacture had not fully completed the manufacturing and sales process. As these stones finish the manufacturing process, Lucara says it may record additional revenue in the form of “top-up” payments when these diamonds are sold.
Despite the overall decrease in revenue recognized in Q1 2023, diamond market fundamentals continued to support healthy prices as the number of polished stones sold by HB has improved from Q4 2022, the company said.
Natural variability in the quality profile of the +10.8ct production in any production period or fiscal quarter results in fluctuations in recorded revenue and associated top-ups.
Lucara says during Q1 2023, 4% weight percentage of Specials of total carats recovered was consistent with the Karowe resource model.