Karowe delivers for Lucara

Lucara Diamond (LUC-T) has discovered several spectacular diamonds — including four rare blue gems — since it started full production at its Karowe mine, in Botswana, last August.

Lucara has so far sold a 4.77-carat blue stone for $1.6 million ($341,416 per carat) and a 9.46-carat blue stone for $4.5 million. A 239.2-carat diamond (one of the largest ever found in the Orapa district) recovered in March from the central kimberlite domain, along with a 124-carat stone and a 71.1-carat stone, will be sold in May.

While production for the year came to 303,000 carats from 1.4 million tonnes of ore, 12% over guidance, the company couldn’t quite manage a swing to profitability.

With revenues of US$41.8 million last year, the nascent miner still saw a loss of $7.5 million in 2012, compared with a loss of US$18.7 million in 2011.

The company sold 216,000 carats of diamonds for $55 million or an average of US$253 per carat. (Only US$41.8 million was reported as revenue with $12.8 million credited against capitalized plant and equipment.)

Operating expenses were US$92 per carat and the average grade at Karowe was 22 carats per hundred tonnes.

The company expects to produce and sell 400,000 carats of diamonds this year.

BMO analyst Ed Sterck has a target price of $1 and an outperform rating on Lucara, noting that although realized diamond prices at Karowe disappointed the market last year, the large diamonds recently recovered should provide a revenue boost and may allow the company to reduce debt. Sterck conservatively estimates total revenue from the 239.2, 124 and 71.1-carat stones at US$12.5 million.

After a trial mining program was completed at Mothae in September, the project has been placed on care and maintenance while Lucara weighs its development options. More than 600,000 dry tonnes yielding an average grade of 3.88 carats per hundred tonnes were processed during the trial. A final sale of 2,102 caratas of Mothae diamonds in February 2013 brought in US$918,828 or US$437 per carat.

The stock recently traded at 64¢ in a 52-week range of 49¢-$1.11. Lucara has 376.3 million shares outstanding.