Lucapa’s Lulo reaches new monthly, daily alluvial diamond recovery records

Lucapa Diamond’s 40%-owned Lulo alluvial mine in Angola has reached a new monthly carat record for July 2020 of 3,462 carats almost immediately followed by a new daily carat record of 463 carats achieved in early August 2020.

Today

GIA to report specific color and clarity grades for LGDs

The Gemological Institute of America (GIA) will report specific 4Cs color and clarity grades on its new digital reports for laboratory-grown diamonds (LGDs), replacing the currently used descriptive terms and grade ranges, as per a press...

Today

ABN Amro quits trade and commodity financing

Dutch bank ABN Amro announced today that its investment bank will end all trade and commodity financing operations. The Bank’s focus turns solely to Northwest Europe and clearing activities to reduce risks, according to media reports.

Yesterday

Lucara lauds diamond supply deal with HB as it calls industry sales chain ‘broken’

Lucara Diamond, which wholly-owns Karowe Mine in Botswana, is blowing its own trumpet for securing a rough diamond supply deal with the HB, which is expected to reduce price discounts and boost cash flow.

Yesterday

AWDC and IDI to host second online diamond trade show in September

The 'virus-free' trade show co-organized by the Antwerp World Diamond Center (AWDC) and the Israeli Diamond Institute (IDI) will take place from 14 to 17 September on the Virtual Diamond Boutique trading platform.

Yesterday

African diamond firms on COVID-19 response, recent developments

01 june 2020

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Image credit: Gerd Altmann (Pixabay)

Rough & Polished recently contacted several diamond producers and exploration companies with operations in Africa to establish how their operations were affected by the Covid-19 pandemic and what they are doing to alleviate the impact. We also sought to establish when they will likely resume their operations. Furthermore, we elicited their comments on efforts to temporarily suspend rough imports in India. Petra Diamonds, Lucapa Diamond, De Beers and Botswana Diamonds gave us their comments. Although, Lucara Diamond was yet to respond at the time of writing this article, we managed to extract some information in their first quarter 2020 report, which addressed some of our questions.

Below are responses from the diamond companies:   

Petra Diamonds - Marianna Bowes (Spokesperson)

Petra remains focused on taking all actions necessary to support the measures to limit the outbreak of COVID-19 in the countries in which the company operates and to decrease the threat to our employees, contractors and other local stakeholders.

South Africa

On 16 April 2020 the Minister of Minerals and Energy in South Africa announced that mining companies that have been restricted to care and maintenance or scaled down activities are now able to ramp up to a 50% labour capacity during the period of the nationwide lockdown. All of the Company’s South African operations have now ramped up to this level. In addition, on 23 April 2020, President Ramaphosa announced a phased, risk-based approach to lifting restrictions starting from 1 May 2020 – the address to the nation can be accessed here. Details on the impact of this on the Company are still being discussed with the Department of Mineral Resources and Energy (DMRE).

Prior to ramping up production, companies were required to demonstrate that they have Standard Operating Procedures (SOPs) in place that comply with the Mineral Council South Africa’s COVID-19 guidelines. In addition, the DMRE has applied a number of conditions to the increase in capacity, relating to health screening and testing, the provision of quarantine facilities for employees who have tested positive for COVID-19, as well as arrangements for transporting employees from their homes to their respective areas of operations. These conditions and the announcement referenced above can be found on the DMRE website.

Prior to ramping up, Petra therefore adopted SOPs and measures that are in compliance with both the directive and the conditions referred to above, in consultation with the representative labour unions and mine-based DMRE officials.

Tanzania

As announced in the Market Update on 9 April 2020, the Williamson mine has been placed on care and maintenance, with only essential services being carried out in order to protect the mine’s assets and resources.

Group Production Guidance

FY 2020 production guidance of 3.8 million carats remains suspended until the Company is in a better position to quantify the full impact of this ongoing period of reduced production capacity.

Lucapa Diamond – Stephen Wetherall (Managing Director)

  • Lucapa suspended Mothae operations on 25 March 2020;

  • Reduced Lulo operations to essential services on 1 April 2020;

  • Resumed activities at Lulo to approximately 50% capacity on 1 May 2020.

The challenging diamond environment in 2019 had been successfully navigated by the group and we were seeing a much better pricing environment towards the end of the year and early into 2020. However, the impact of the pandemic and preventative actions implemented by many Governments towards the end of Q1 20 has been significant for the sector, resulting in the suspension of activities at both mines. We and our partners have not yet taken any decisions in respect of recommencement of activities at the Mothae mine yet, but we continue to monitor Government measures, health guidance and the market closely.

India

With respect to the talk of the Indian ban on diamonds, I am not sure that it is needed now or right. Time has moved on from when it was originally talked about and the larger producers are or have already stopped or reduced their production and amending usually strict requirements for clients to purchase goods. It would make no logical sense to put a ban over the top of actions already being taken by these larger commercial producers to stem supply and reduce adverse impacts on the sector. It is important to note that, many producer countries rely heavily on the diamond mining sector and they too are suffering severely from the impact of COVID-19 - it is important for the diamond sector to open up as soon as it can so that those countries can start to rebuild their economies.

A blanket ban on imports to India has an impact on many countries as India sees ~85% of global diamond production enter its borders. I think the ban would be short-sighted. Diamond producer countries and important markets (like India) need to dialogue and find a balanced position to re-commencing supply and rebuilding the pipeline. It too is not in India’s best interests long term for its sector to restart or the risk is that alternate competitor channels start to gain momentum elsewhere. Every stakeholder in the sector needs to work together – a blanket ban is not the answer.

Looking at it from our Company’s perspective only, I am less concerned re a ban being implemented in India, as we are a low volume high-value niche producer. Most of our higher value product (>75% of our mine’s value) does not usually find its way to India as those diamonds are being cut in other centres. In addition, our much publicised strategy of partnering with strong high-end diamantaires in a win-win long-term partnership should stand our mines and demand for our product in good stead as we emerge from this pandemic and re-commence production.

De Beers – David Johnson (Spokesperson)

All of our upstream operations have now either returned to work or will do so in the near future, although they are all operating at reduced levels. De Beers Group recently published revised production guidance for 2020, noting that we will reduce production by seven million carats (from 32-34 million carats down to 25-27 million carats). This will remain subject to continuous review.

At this stage it’s not possible to say precisely [when we will fully resume our operations] as there remain several variables that could affect the situation. We will continue to monitor the situation closely and respond as appropriate, with an ongoing focus on taking responsible, long-term decisions.

We remain focused on providing flexibility for our customers during this challenging period, just as we have done during previous challenging periods. We recognise that our customers are also dealing with an extraordinary and unprecedented situation, so providing maximum flexibility in purchasing arrangements has been a key part of our approach.

India

While we understand that the current situation is challenging for all parts of the value chain, and that there is a desire to protect people from its impacts, we see this as a shared challenge that requires shared solutions. Keeping global supply chains functioning is vital, especially at a time like this, and preventing businesses from purchasing in the event that they have demand would be counterproductive. Meanwhile, there are many people in communities around our operations that rely on diamond revenue to support their health and wellbeing, just as there are in other parts of the world. We believe it is important for the industry to be able to function normally to ensure all those who rely on it can be supported as well as possible. Bruce Cleaver (De Beers CEO) recently issued an open letter that addressed this topic.

Botswana Diamonds –James Campbell (Managing Director)

Much of our diamond exploration is arranged around campaigns, rather than ongoing operations. We have therefore re-arranged our exploration activities to resume once allowed by the authorities in the countries in which we work.

In South Africa, we are not allowed to travel across provincial borders under the current stage of the lock down and therefore exploration activities can only resume once this particular regulation has been lifted. Equally, no international travel is allowed and therefore the same applies to our operations in Botswana and Zimbabwe.

Lucara Diamond (Q1 results)

In March 2020, the Company implemented a crisis management strategy in relation to COVID-19, to protect the health and well-being of its employees in Botswana and Canada and to protect the financial well-being of the business. The Karowe Mine remains fully operational, under new measures and guidelines implemented by the Government of Botswana in late March 2020. These measures designate mining as an essential service in Botswana and include increased travel restrictions, reduced overall staffing levels and increased and appropriate social distancing. Employees who are able to work remotely are doing so. As travel restrictions relating to COVID-19 are expected to remain in place for an unknown period, the Company's ability to complete tenders in Botswana is expected to be impacted. As a temporary measure, the Government of Botswana has granted Lucara permission to hold diamond sales in Antwerp, Belgium if required.

Lucara completed the first of four planned diamond tenders for the year on March 5th, and achieved sales prices within 1% of forecast, however, diamond prices have since deteriorated in response to weaker demand as COVID-19 has continued to spread globally. The full impact of COVID-19 on Lucara's operations and production outlook for 2020 remains highly uncertain, and as a result, the Company has suspended its 2020 guidance until further notice.

Lucara's second quarter tender, originally scheduled for mid-May 2020, has been postponed and will be re-scheduled to a more appropriate date in the near-term, as market conditions are evaluated. The Clara digital sales platform, which allows for buyers to place orders without physically viewing the goods and to purchase only the diamonds they need on a stone by stone basis, continues to hold sales.   Travel restrictions in Botswana, South Africa, India and Europe have caused disruptions during April preventing some deliveries from taking place.

Lucara's planned capital spending program for 2020 is largely focused on the initiation of our Karowe underground expansion project and was previously designed to ramp up in Q3, funded entirely from cash-flow, under a budget of $53 million. Given the present uncertainty related to our 2020 revenue forecast, this program is being re-scoped and reduced to focus on critical-path items through the remainder of the year. The underground expansion program has an estimated capital cost of $514 million and a five-year period of development. The Company expects to finance part of the capital cost with debt and the balance from cash flow generated by operations. In light of the uncertainty resulting from the COVID-19 pandemic, the Company is also reviewing its original estimates and assumptions for the quantum and timing of cash flows expected from the current operations against the anticipated financing requirement for the underground expansion program.

The Company's $50 million revolving term working capital facility with the Bank of Nova Scotia has been extended by one year to May 5, 2021. The Bank of Nova Scotia has first ranking security by way of a charge over the Company's Karowe assets and a guarantee by the Company's subsidiaries, which hold the Karowe assets. As part of the extension, and until Lucara obtains greater clarity on its cash flow projections in the short-term, Lucara has agreed to limit capital expenditures related to the underground expansion project. The extension of this facility provides an important source of liquidity to Lucara during a period of significant uncertainty in global markets.

Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished