Lucapa Diamond achieves debt-free status

Australia’s Lucapa Diamond (ASX: LOM) said on Tuesday it had fully repaid all interest-bearing loans that it borrowed from gold company Equigold and the Industrial Development Corp. of South Africa (IDC).

The company, which has a 40% stake in the prolific Lulo mine in Angola, paid this month the final instalment of US$1.3 million in principal and interest on the original US$15 million Equigold debt, which was raised in 2018.

Lucapa subsidiary Mothae Diamonds has also recently made its final interest payment of R7.3-million (US$391,000) to the IDC.

The diamond producer is now interest-bearing debt free, having repaid about A$30 million (US$20 million) in debt and interest over an 18-month period.

Other than its Lulo mine, which hosts the world’s highest dollar-per-carat alluvial diamonds, Lucapa also has a 70% stake in the Mothae mine in Lesotho and is developing the Merlin project in Australia.

The company is simultaneously exploring for diamonds in Australia, Angola, Botswana and Lesotho.

Shares of Australia’s Lucapa Diamond climbed more than 9% on the news, closing at A3.6¢ in Sydney on Tuesday, the highest since May 12. That left the company with a market capitalization of A$45.4 million (slightly over US$30 million).

Analysts have begun to note anecdotal evidence of tough diamond market conditions. Experts at capital markets specialist SP Angel, the situation is being partly fuelled by the fact the mid-stream and end markets seem to be “stuffed with mined diamonds which they are struggling to pass on.”

SP Angel believes the supply glut is being caused in part by the increased role of lab-grown diamonds (LGDs), of which the sale is more profitable for jewellers as they can reach margins of over 80%.

“Jewellers are pushing LGDs onto unsuspecting customers in place of natural mined diamonds due to much higher LGD margins,” it said.

The broker added that other factors pressing on the diamond market are rising economic uncertainty and interest rates, and the fact that Indian jewellers appear willing to continue buying Russian stones despite Western sanctions.