Lucapa Starting To Sparkle As Diamond Production Ramps Up

Lucapa starting to sparkle as diamond production ramps up and gem prices show tentative signs of recovery

A diamond being the ultimate item of discretsionary expenditure, there should be no surprise that diamond prices have been down in the dumps.

Fears of global economic recession overlain with the threat of trade wars is not exactly conducive to buoyant demand and pricing for the sparklers.

It is why the few listed diamond producers that exist around the world have being doing it tough on the share price front.

Having said that, our only listed (pure) diamond producer, Lucapa (LOM), has just sent out a pretty strong signal that the worst may be over for diamond pricing, or for the high-end quality stones it produces from its African mines, at any rate.

The day after reporting record quarterly production, Lucapa has followed up with a sales report from the Lulo alluvial mine in Angola (40% Lucapa) and the new Mothae kimberlite mine in Lesotho (70% Lucapa).

The latest sales (100% basis) totalled $US10.4 million ($A15.5m), taking sales to date for 2019 to $US45.9m ($A65.7m) on a 100% basis.

Lulo’s average price was $US1,087 a carat, making the year to date average price $US2,155 a carat. That implies price weakness but importantly, the figures did not include a 46 carat pink diamond which is getting some special value-added treatment in Antwerp before being sold.

It was at Mothae where the idea that the diamond market might be turning comes from. Its average price was $US831/ct, which was up nicely from the year-to-date average of $US610/ct, albeit with the help of a single stone that fetched more than $US1m.

If the diamond market is in fact turning, Lucapa is in a particularly sweet spot because it is also ramping up production at both of its mines, targeting combined annualised production of 60,000 carats (100% basis). Keep in mind these are not your garden variety carats, but very high-value carats.

Plus, success for Stavely and Alkane spark renewed interest in Eastern States exploration, talk suggests European Cobalt may be heading for Aussie gold and Meteoric poised to deliver eagerly- awaited assays on its Brazilian gold play. Read more +

Barry Fitzgerald

About Barry Fitzgerald

Barry Fitzgerald has covered the resources industry for 30 years. His column highlights the issues, opportunities and challenges for small and mid-cap resources stocks - most recently penned his column for The Australian newspaper and before that, The Age.

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