Lucara Diamond Corp., a prominent name in the global diamond mining industry, has taken a significant step forward by establishing a new, innovative diamond sales agreement with HB Group, a distinguished entity based in Antwerp, Belgium. This landmark agreement, stretching over a decade, marks a pivotal moment for Lucara, emphasizing its strategic foresight in the ever-evolving diamond market. The agreement pertains exclusively to the sale of all qualifying diamonds, specifically those over 10.8 carats, extracted from Lucara’s wholly-owned Karowe Diamond Mine in Botswana, a site renowned for its exceptional quality and size of diamonds.
Under the innovative terms of this 10-year New Diamond Sales Agreement (NDSA) with HB, Lucara is set to receive a purchase price for its +10.8 carat rough diamonds that is determined through a collaborative and technologically advanced process. This process leverages state-of-the-art scanning and planning technology, alongside external benchmarks and a comprehensive database of Lucara’s special stone sales spanning over a decade. A notable aspect of this agreement is the provision for a sales value uplift (top-up) to Lucara, calculated based on the actual polished sales, after deducting a fixed margin payable to HB. This pricing mechanism promises to offer Lucara regular cash flow from this critical segment of their production, potentially at rates more favorable than those typically seen in conventional diamond industry tender processes.
The anticipated benefits of the NDSA for Lucara are manifold, promising not only a steady cash flow in support of the ongoing development of the Karowe Underground Project but also significant potential for revenue upside, particularly for large and complex rough diamonds. This aspect of the agreement aligns with historical performance, offering a premium on diamond sales that benefits all stakeholders involved with the Karowe Mine. Moreover, this agreement aligns seamlessly with the Government of Botswana’s strategic initiatives to diversify downstream and partake in the upsides of polished diamond revenue, further embedding Lucara within the national economic fabric of Botswana.
Additional advantages include streamlined processes for diamond evaluation, sales reporting, and payment mechanisms, alongside the creation of an efficient and restructured supply chain. This supply chain is poised to meet the demands of high-value brands, ensuring that Lucara and HB Group are at the forefront of supplying large and high-quality diamonds to the global market.
The implementation of the NDSA is pending approval from the company’s project lenders. Once approved, the terms of the agreement will retroactively take effect from December 1, 2023. In anticipation of this approval, Lucara has continued its operations and the advancement of the Karowe Underground Project by supplying qualifying rough diamonds to HB.
William Lamb, President & CEO of Lucara, expressed his enthusiasm for the renewed partnership with HB Antwerp, highlighting it as a strategic and forward-looking decision amidst the dynamic changes within the diamond industry. This partnership is seen as a testament to Lucara’s commitment to maintaining stability and sustainability in its operations, leveraging both historical insights and a nuanced understanding of the diamond market’s future. Lamb’s statement encapsulates Lucara’s dedication to excellence and premium value delivery, reflecting the company’s ambition to sustain its legacy in the diamond industry.
This agreement not only underscores Lucara’s innovative approach to diamond sales but also illustrates a broader trend in the industry towards more collaborative and value-driven partnerships. It represents a strategic alignment with Botswana’s economic diversification efforts and sets a new standard for the valuation and sale of rough diamonds on the global stage. As Lucara and HB Group embark on this decade-long journey, their collaboration is poised to redefine the diamond supply chain, promising enhanced value for stakeholders and a brighter future for diamond mining in Botswana.
