The longer-term outlook for ND prices!

Aug 21, 2023

Recently Lucara Diamond Corp expressed about the perspective of diamond market at the report of its results for the quarter ended June 30, 2023. Lucara Diamond said, the longer-term outlook for natural diamond (ND) prices remains positive, anchored on improving fundamentals around supply and demand as many of the world’s largest mines reach their natural end of life over the next decade.

Following on the record high diamond prices achieved in early 2022, a softer diamond market emerged in the latter half of 2022 which has persisted into the second quarter of 2023, the result of global economic concerns combined with geopolitical uncertainty, including the ongoing conflict in Ukraine.

Prices continued to show signs of stabilization, however, as China continues to open-up post-Covid. Sales of lab-grown diamonds increased during the period. Intense competition combined with improvements in technology continue to drive prices of lab grown diamonds down.

This further differentiates this market segment from the natural diamond market and highlights the unique nature and inherent rarity of natural diamonds. The longer-term market fundamentals remain unchanged and positive, pointing to strong price growth over the next few years as demand is expected to outstrip future supply, which is now declining globally.

HB sales agreement for +10.8 carat diamond production from Karowe, for the three months ended June 30, 2023, the Company recorded revenue of $25.8 million from the HB agreement (inclusive of top-up payments of $5.1 million), as compared to revenue of $32.4 million (inclusive of top-up payments of $13.1 million). Lower revenue in Q2 2023 is reflective of an ore mix which included Centre Lobe material.

The decrease in revenue in Q2 2023 versus the comparative quarter can be attributed primarily to the number of high value diamonds delivered to HB in preceding quarters which were sold in the current period. Top-up values will typically increase as the more valuable stones move through production and are sold. The lower top-ups recognized in Q2 2023 reflect the value of the stones delivered, consistent with the change in product mix during H1 2023.

Recovered Specials equated to 6.6% of the weight percentage of total recovered carats from ore processed during Q2 2023 with 12% of the carats recovered from the Centre Lobe and 88% recovered from South Lobe material (Q2 2022: 100% South Lobe ore). Natural variability in the quality profile of the +10.8ct production in any production period or fiscal quarter results in fluctuations in recorded revenue and associated top-ups.  This result is consistent with the resource model and expected.

Despite the overall decrease in revenue recognized in Q2 2023, diamond market fundamentals continued to support healthy prices from the multi-year highs observed at the peak in Q1 2022.


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