Lucara Diamond (LUC.TO) was able to remove the bad after-taste after a relatively disappointing exceptional stone tender which didn’t bring in quite as much cash as we had been hoping for. In just 48 hours, the company recovered no less than three exceptionally exceptional diamonds (yes, that’s a double exceptional).
The South Lobe of its Karowe project remains very important for the company which is breaking even on its ‘normal’ diamonds but is generating the bulk of its cash flow on these exceptional stone tenders. In a very short time frame, the South Lobe operations recovered a 1,111 carat diamond, as well as a 813 carat stone and a 374 carat stone. Just to give you an idea of how exceptional this is, the 1,111 carat stone is the largest ever found in Botswana and the second largest ever found in the entire world, whilst the 813 carat stone is the sixth largest diamond in the history of the world.
We don’t expect the exceptional stone tender for these diamonds to be held this year but we would be hoping for a new tender in Q1 2016. It’s difficult to guesstimate the value of these diamonds but taking the recent (weak) stone tender and the rarity of these stones into consideration, we expect these three diamonds to result in a revenue of $85-110M. However, the price is what a fool wants to pay for it, and we wouldn’t be surprised to see a higher price for the 1,111 carat diamond as there might always be someone willing to pay a premium for the ‘second largest diamond that has ever been recovered’.
Lucara Diamond Corp remains on track to generate a substantial amount of cash flow in 2015 and as these three stones will very likely be sold in 2016, its FY 2016 will start pretty strong.
Click here to go to Lucara’s websiteThe author holds a long position in Lucara Diamond. Please read the disclaimer
