Lucara Diamond (LUC:TSX), announced this morning that its Board has approved a $0.02 per share semi-annual cash dividend. This move is the first for the Lundin Group of Companies and highlights the stability of the Karowe mine’s diamond production. The $0.02 dividend is to be declared in May with payment in June. The Board also approved the possibility of a special dividend based on revenues generated from exceptional stone tenders.
Given the performances of their tenders to-date, this is a very real possibility, and one that shareholders should look forward to. Becoming a dividend payer will open the Lucara story up to a whole other group of investors. One of the largest segments of the market; the yield investor.
William Lamb, President and CEO, commented: “The intention of the board to declare a maiden dividend payment is a significant step forward for Lucara. The adoption of a dividend policy demonstrates our confidence in our business, recognizes the quality and cash flow generation of the company’s asset and our commitment to our shareholders. With Karowe’s operational performance and cash flow generation ability we believe that Lucara is well positioned to provide a return to our shareholders while continuing to seek growth opportunities.”
As part of the release this morning, Lucara announced their first exceptional stone tender of 2014. This will be comprised of 20 individual diamonds with a combined weight of 1,191.71 carats. This tender is expected to close April 10, 2014. The largest stone in this tender is 167.08 carats and the smallest is 16.32 carats.
Lucara’s last tender of 14 stones, totaling 1,128 carats were sold at an average of $20,280 per carat bringing in $22.9 million. At that per carat price, this first tender of 2014 could bring in nearly $25 million.
The company is in the construction stages of its expansion to the processing facilities at Karowe. Given the frequency of such large, exceptional quality diamonds that were unanticipated during the original design, the company has decided to spend up to $50 million to improve the recoveries of these large stones.
The initial process plant design at Karowe did not specifically allow for the effective recovery of these stones. The company was able to make temporary modifications, but is now underway with a permanent solution which should allow for the better recovery of large stones. This is expected to be completed by year-end.
Lucara is guiding production of between 400-420,000 carats this year at an average all-in cash cost of between $31-$33 per tonne.