Lucara Diamond Corp. will sell all its rough diamonds over 10.8 carats through a manufacturing partnership with HB Group that will provide the miner with regular income during the market slowdown.
HB, founded by Antwerp-based diamantaire Oded Mansori, will purchase any special-size rough produced from Lucara’s Karowe mine in Botswana through the end of the year, the mining company said Wednesday.
The price of the rough will be based on an estimate of the polished outcome, which the companies will determine using diamond scanning and planning technology. Once HB has made a sale, it will adjust the price that Lucara receives based on the actual selling price of the polished. HB will also subtract a fee and manufacturing costs.
The deal comes after HB partnered with luxury retailer Louis Vuitton in January to cut and polish the 1,758-carat Sewelô diamond, which Lucara recovered at Karowe in April 2019.
“Building on the partnership established for the manufacturing of the Sewelô earlier this year, Lucara is pleased to have now secured a broader supply agreement with HB,” said Lucara CEO Eira Thomas. “This agreement will deliver regular revenues on superior pricing terms to those currently being achieved at tender.”
The income will allow Lucara to proceed with the expansion of Karowe to underground mining, which is set to extend the life span of the deposit to 2040. In May, the company reduced its budget for the project so it could fund other expenses while sales were weak, having previously planned to spend $53 million his year.
The company chose not to tender any of its inventory above 10.8 carats since early March because of market uncertainty, with the category usually accounting for 70% of revenues. Despite the situation, Karowe has remained operational during that period.
“It is our strong view that the success of our industry in these very uncertain times requires better alignment between producers, manufacturers and retailers to establish a healthier, more efficient global diamond supply chain,” Thomas added.