Strong diamond demand boosts Lucara revenue, Petra sales

Petra Diamonds (LSE: PDL) and Lucara Diamond (TSX: LUC) added evidence today that the global market has returned to pre-pandemic levels after posting a sharp increase in sales and revenue respectively.

South Africa’s Petra said it had obtained US$110.5 million after selling about 80% of the volume of diamonds offered during its fourth tender cycle for its 2022 financial year ending June 30.

No exceptional stones were sold, and the remaining 20% of the auction’s volumes is scheduled to close on or around March 7, the company said.

Publishing its 2021 results, Canada’s Lucara showed a revenue increase of 84% to of US$230.1 million, which it attributed to strong diamond market fundamentals.

The miner said the global market for rough stones and diamond jewellery has reached a healthy balance. It also said it expected the positive trend to continue in years to come.

Dump trucks at the Williamson diamond mine. Credit: Petra Diamonds.

“2021 was a pivotal year for Lucara, having de-risked our future growth strategy with the sanction of the fully financed, Karowe underground expansion project, conservatively estimated to add $4 billion to future revenues and extend mine life to at least 2040,” president and chief executive officer Eira Thomas said in a statement.

The Vancouver-based company also said it processed 2.8-million tonnes of ore last year at its Karowe mine in Botswana – a record since the start of production in 2012.

Lucara also revised its revenue guidance for 2022 higher to between US$195 million and US$225 million, compared with the previously guided US$185 million to US$215 million.

The diamond market came to a standstill at the height of the Covid-19 pandemic, increasing worries that oversupply could hurt the sector for years. But surging purchases by intermediaries who cut, polish and trade stones all but wiped-out miners’ stockpiles, even as Alrosa and its closest competitor, Anglo American’s De Beers, hiked prices. 

A study commissioned by the Antwerp World Diamond Centre estimates that diamond jewellery demand will fully recover to pre-Covid levels between 2022 and 2024

The increase in demand won’t be uniform, a report by consulting group Bain shows, as it will depend lockdown policies, government support, and the extent to which retailers manage to shift sales online.