Lucapa to Divest Stake in Mothae Diamond Mine After Mixed Q1 Results

Lucapa Diamond Company (ASX:LOM) has announced a strategic decision to divest its 70 percent stake in the Mothae mine in Lesotho as part of a broader plan to streamline its operations and focus on core assets.

The Tuesday (May 15) decision comes after the release of the company's first quarter production and sales report at the end of April. In it, Lucapa outlines both achievements and challenges across its diamond operations.

In Q1, the company’s Lulo mine in Angola sold 8,746 carats, generating US$9.4 million in revenue.

While there were no exceptional diamond tenders during the quarter, a tender in early Q2 attracted US$10.5 million for three high-quality Lulo diamonds, significantly bolstering the company's financials.

A cutting and polishing partnership added an additional US$0.2 million in margins for Lulo.

Heavy rainfall and flooding in Angola was an obstacle at Lulo in Q1, and it forced the company to mine in lower-grade areas, leading to a 20 percent decrease in carats recovered compared to Q1 2023. Even so, the alluvial plant processed 171,000 cubic meters of material, an 11 percent increase year-on-year, thanks to stockpiled resources.

Meanwhile, Mothae produced US$3.7 million in revenue in Q1 from the sale of 7,662 carats, plus US$0.2 million from polished diamond margins. Although the asset saw a 13 percent year-on-year increase in carats recovered and a 16 percent rise in tonnes processed, the lower frequency of high-value diamonds impacted overall revenue.

The largest gem-quality stone recovered from Mothae was a 35 carat yellow diamond, but a 65 carat Type IIa diamond was found post-quarter. The company said at the time that it would be monitoring the mine closely.

In Tuesday's release, Lucapa Chairman Stuart Brown explained the decision to divest from Mothae.

“On review, it is clear the Company should streamline the portfolio to focus on our core assets in Africa and Australia. The Company’s collaboration with the Lesotho Government on the Mothae Diamond Mine has been rewarding and our management have worked exceptionally well to optimise the plant to recover large diamonds. We expect there will be significant interest from those within the diamond industry and on a wider scale," he said.

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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.