The Lucara Diamond

Author: Priscilla RhoadesWednesday, February 17, 2016

The Lucara Diamond

Categories: From Around the Web, From the Pick & Shovel Gazette, News Release

Rate this article:
2.5

By Priscilla Rhoades

 

At 1:29 a.m. on Monday, Nov. 16, 2015, Lucara Diamond Corp. Chief Executive Officer William Lamb received an urgent call from Africa that would change his life. Paul Day, the company’s Chief Operating Officer, had history-making news.

“Congratulations!” Day said. “You are the CEO of the first company in 100 years to recover a diamond over 1,000 carats.”

Lamb was dumbfounded. 

“I am truly at a loss for words,” he managed to say.

A diamond nearly as big as a tennis ball had been discovered in the Vancouver-based corporation’s Botswana mine. The 1,111-carat gem-quality stone is rivaled in size only by the Cullinan, a 3,106-carat diamond found in 1905 near Pretoria, South Africa. Today the Cullinan sparkles in the Crown Jewels of Britain as the Great and Lesser Stars of Africa. There is no telling what actual or symbolic crown may one day be adorned by the Lucara diamond, also known as the Karowe AK6.

On-site at the Karowe Mine in Botswana, General Manager Gerald Ndlovu held the diamond in his hand and thought, “Nobody alive today has held anything this big, in terms of diamonds.” Later he told a reporter, “I knew right then that we had our bragging rights.”

On Nov. 19, Lucara pulled up two more exceptional diamonds from its Karowe Mine: a 374-carat stone and an 813-carat white diamond. The 813-carat stone is the sixth largest diamond ever found in the history of mining. Financial analysts were stunned. “To get two of the largest gem-quality diamonds ever mined to come out of the same deposit in probably a 48-hour period is pretty unfathomable,” commented Ken Armstrong, CEO of North Arrow Minerals.

Lamb is expected to ask at least $60 million for the Karowe AK6. “A lot of people will use $60,000 a carat as the basis,” Lamb said. “On top of that, you have to look at the size of the final polished diamond as well as the historical context. That’s going to play into it, too.”

Lamb has already turned down an offer of more than $40 million by an undisclosed buyer. And the Natural History Museum in London has approached Lamb about displaying the gem in one of its galleries. So far the diamond is staying put.

The eventual buyer will most likely be an “ultra-ultra high-net-worth diamond collector,” observed Martin Potts, a mining analyst at FinnCap Ltd. in London. Someone, perhaps, like Hong Kong billionaire Joseph Lau who recently paid $48.4 million for a 12-carat blue diamond, a gift for his seven-year-old daughter.

The Lucara is a Type IIa stone, which means that it is a truly extraordinary find. In the $80 billion diamond industry, Type IIa diamonds are prized for their clarity, purity, and rarity, and make up less than two percent of the diamonds in the world. Measuring approximately 2 1/2 x 2 x 1 3/4 inches, the Lucara is too big to fit in the company’s scanner and is scheduled to be taken to the so-called Diamond District of Antwerp, Belgium where it is hoped a larger scanner will be able to render a three-dimensional image of the stone. According to Maurice Mason, a mining analyst at London’s Stifel Nicolaus Europe Ltd., computerized scanning technology will enable Lucara to decide on the most profitable way to cut the stone into smaller pieces.

The diamond was recovered at the south lobe of the Lucara’s Karowe Mine in central Botswana. Ironically, the diamond was nearly missed. Recently, Lamb’s background in mining as a process engineer inspired him to upgrade Lucara’s processing plant to include a new Large Diamond Recovery circuit (LDR), utilizing X-Ray Transmissive technology (XRT). LDR allows Lucara to process harder ore while improving recovery rates of exceptional diamonds. The plant is now able to catch gems as large as 1,800 carats. Lucara is considering an investment in an expansion of capacity to go up to 3,000 carats.

The Karowe Mine is a hard rock, open-pit mine with a planned depth of 324 miles. The mine is based on the AK6 kimberlite pipe, which is part of the Orapa Kimberlite Field (OKF) on the northern edge of the Central Basin Kalahari Karoo in Botswana. Diamonds are found in kimberlite pipes; that is, carrot-shaped formations of igneous rock that has cooled from its original state as magma and been forced upward by volcanic eruptions to the Earth’s surface. Just below the Earth’s surface is bedrock, which in the case of the OKF is covered by a thin veneer of wind-blown Kalahari sand. This is the challenging environment in which Lucara searches for diamonds.  

The purchase of the Karowe Mine was concluded in October 2010 and with it an estimated $2.2 billion worth of unearthed diamonds. In production since 2012, the Karowe Mine has consistently delivered a stream of exceptional stones. 

After the discovery of the Karowe AK6 Diamond was announced in 2015, shares of Lucara stock (TSK: LUC) went up 30 percent. Since 2014, Lucara has consistently paid its shareholders a dividend, following Lamb’s philosophy of giving back to investors. “I believe that the standard process for a business is: identify something which can make money; go out and get the money to build it; do what you’ve said; and when you start to make money, give the money back,” Lamb said. 

Lamb has led Lucara into its current corporate position as an impressively profitable company with operating margins that are higher than most of its competitors. At present, Lucara is responsible for finding between 40 and 50 percent of the world’s diamonds in the 100-plus carat range.  

Previous Lucara sales have brought the company $6.37 and $4.54 million for two white diamonds and $4.5 million for a blue diamond. Lucara estimates that it has pumped more than $200 million into the local Botswana economy from its operations in the region. Lamb is well aware that 65 percent of the world’s diamonds to date have been found in Africa.

Lamb sees the future market for diamonds continuing to grow, with buyers specifically in Asia and India, while the supply declines. “The ability to meet that demand is going to put pressure on the price of diamonds,” Lamb told Haywood Securities Investment Banker Kevin Campbell. 

“You don’t often hear people talk about diamonds as a store of value in the same way that they talk about gold,” Campbell noted. 

Lamb agreed, adding, “How do we get people to understand that diamonds are a store of wealth?” 

Lamb believes the answers lies in educating buyers about the value and potential for appreciation in diamonds. Just as gold is a good investment so, it seems, are diamonds. And who knows? Perhaps one day, $60 million for a 1,111-carat diamond may seem like a bargain.

In January 2016, Lucara announced that it would hold a “naming contest” for diamond, with a prize of 25,000 pounds (a little more than $36,000 US) The contest, open only to citizens of Botswana, received more than 11,000 entries. The winning name has not yet been announced.

 

Priscilla Rhoades is a freelance writer based in Asheville, N.C. She can be reached at priscillawrite@charter.net


Number of views (4924)/Comments (0)

Tags:
Total Comments:

Post a Comment

Failed to load comments...