Lundin’s Lucara has First Exceptional Stone Tender of 2014 Next Week and it’s Expected to be the Best Yet

POSTED ON March 21, 2014 BY Travis McPherson
CATEGORY Companies, Lucara Diamond, Stories,

Lot 401 is expected to fetch more than $6.4 million (Source: Lucara Diamond)

From March 25th to March 28th in Gaborone, Botswana Lucara Diamond (LUC:TSX) will begin their first exceptional stone tender of 2014 which is expected to be the best sale of diamonds yet. The company has a number of large and rare stones on the block in this tender with the largest, Lot 401 expected to generate more than last year's highest of $6.4 million (more than $38,000/carat). Lot 401 is a 167.08 carat stone. The company says that the stones they are seeing from production are higher quality and superior to those they saw in last year's exceptional stone tenders.

Client viewings will take place in Gaborone and then Antwerp with the sale expected to close April 10th.

On top of these exceptional stone tenders, which the company expects to conduct twice this year, Lucara will also do eight regular stone tenders throughout the year. They expect to produce 420,000 carats this year from their Karowe mine. Last year, they beat expectations and produced 438,000 carats and generated $181 million in revenue (~$413/carat).

Lucara announced last year that they were experiencing an odd problem. Due to the fact that they were seeing such large diamonds coming from their Karowe mine, some of the stones were being discarded because the plant was not designed to handle their size.

They are remedying this by spending ~$50 million this year in plant upgrades which they expect to be completed by the end of 2014. This should enhance the mine's profitability by enabling it to effectively process ultra-large stones.

In May, Lucara will be the first Lundin Group Company to issue a dividend to shareholders. They announced earlier this year, that they would disperse a $0.02 semi-annual dividend to shareholders.

William Lamb, President and CEO of Lucara said that this action of installing a dividend policy shows how predictable and sustainable the cash flows from the Karowe mine are expected to be.

As a result, Lucara should see an influx in new investors with the initiation of a dividend given that a large portion of the institutional market have investment mandates which demand that they only invest in companies that offer yield.

Shares of Lucara continue to trade near all-time highs:

LUC data by YCharts

Read: Lucara Announces Dividend Policy and Exceptional Stone Tender

Travis McPherson

trav@ceo.ca

Travis McPherson

trav@ceo.ca

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