For the three months ended March 31, 2024, the Company recorded revenue of $23.2 million from the HB arrangements (inclusive of top-up payments of $4.9 million), as compared to revenue of $24.5 million (inclusive of top-up payments of $6.6 million) for the three months ended March 31, 2023.
The volume of carats delivered to HB was lower in the first quarter of 2024 than planned. The volume recognized as revenue in Q1 2024 was impacted by the timing of goods delivered as well as the number of stones greater than +10.8 carats recovered in the period.
The plant performance remained strong with a 97% recovery factor achieved in Q1 2024; however, the weight percentage of recovered specials was lower than plan.
Recovered Specials for the quarter equated to 5.1% by weight of total recovered carats from ore processed during Q1 2024, with 89% of carats recovered coming from the South Lobe, 7% recovered from the Centre Lobe, and 4% recovered from mixed ore (Q1 2023: 4.0%; 64% Centre and North, 36% South Lobe ore).
Natural variability in the quality profile of the +10.8ct stones in any production period or fiscal quarter results in fluctuations in recorded revenue and associated top-ups.
The average price of goods delivered in the first quarter of 2024 remained strong and is directly comparable to the value delivered in the first quarter of 2023. Top-ups in the first quarter continue to be received from goods delivered in prior periods under the November 2022 diamond sales agreement with HB.
As a result of these factors, revenue to HB was consistent at 57% of total revenue recognized in the first quarter of 2024 (Q1 2023: 57%). The product mix in Q1 2024 was predominantly from the South Lobe ore body, with some contribution from the Centre Lobe.
The Company had expected higher diamond recoveries and diamond quality during Q4 2023 and Q1 2024. This decrease in both recovery and diamond quality contributed to the Company’s additional working capital facility draw during the quarter. Under the HB agreement payment for diamonds delivered under a value of $2.0 million is 60 days and for diamonds of value greater than $2.0 million is 120 days.
The Company has seen diamond recoveries and quality improve during Q2 2024, however due to the payment terms of the HB agreement these funds will not be received until Q3 2024 which has strained cash flows during Q2. As a result, the Company drew $25.0 million from the project loan to fund its underground development.
The large stone diamond market fundamentals continued to support healthy prices from the multi-year highs observed at the peak in Q1 2022, despite an overall softening of demand in the market.