Lucara Diamond Corp (LUC.TO) has had an excellent 2014 as it recorded $266M in revenue from the sale of in excess of 400,000 carats. In excess of half of the revenue was generated through so-called exceptional stones tenders which emphasizes the quality of the diamonds at the Karowe mine in Botswana as those tenders resulted in a sales price of in excess of $30,000 per carat.
Lucara expects to produce 400-420,000 carats in 2015 for a total revenue of $230-240M. As Lucara is expecting to process 2.3-2.5 million tonnes of ore at a cost of $33-36/t, we are aiming for an EBITDA of approximately $150M this year which would result in another year with a very strong positive free cash flow. As Lucara’s capital expenditures will drop sharply after completing the plant optimization and as the company wants to divest the lower-grade Mothae project, it will be in a position to increase its cash position quite rapidly and we wouldn’t be surprised to see another special dividend coming our way in 2015.
Lucara currently pays a normal dividend of C$0.04 per year (for a yield of approximately 2.2%) but also paid a special dividend in 2014 bringing the total yield to in excess of 4%. 2015 seems to be quite promising as well, and Lucara Diamond is turning into a real cash cow.
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Disclosure: The author holds a long position in Lucara Diamond. Please see our disclaimer for current positions.
