Lucara finds 1,111-carat diamond in Botswana

Lucara Diamond (TSX: LUC) recently made history by unearthing the world’s second-largest diamond from its flagship Karowe diamond mine in Botswana.

The find — a 1,111-carat gem-quality, Type IIa diamond — is the largest diamond recovered on record in more than 100 years, following the 3,106-carat Cullinan diamond, discovered in 1905 in South Africa.

“The news is not just exciting for us, it seems to be exceptionally exciting for both the investment community as well as the diamond sector in general,” CEO William Lamb said on a conference call.

Emphasizing the rarity of the discovery, Lamb notes in the past 100 years, there has been 4 to 5 billion carats discovered, with no diamond surpassing 1,000 carats. “This is truly significant if you look at the probability and statistical numbers associated with this recovery.”

Putting a price tag on the 1,111-carat diamond is “really not possible” as it is almost twice the size of any other gem-quality stone previously sold through a public company, Lamb reveals.

The debt-free company, which ended September with a cash position of US$123 million, is in no hurry to sell the diamond. It still needs to analyze the stone, before deciding how to best market and sell it to maximize value.  

Despite the perceived weakness in rough diamond prices, the appetite for large stones remains strong. A high-quality 300-carat stone that would fetch up to US$60,000 to US$65,000 per carat two to three years ago, would sell for the same price today, Lamb says.

“I’m already getting emails that say, ‘Is the stone for sale?’ which is a great thing to see because it just shows there is definitely demand for this type of stone.”

A day after announcing the discovery, the company reported finding two more large white diamonds from its Karowe mine, weighing 813 carats and 374 carats before cleaning. “The 813-carat diamond actually sits at number six on the list of the largest gem-quality stones ever recovered,” Lamb comments.

All three stones are from Karowe’s South Lobe and were recovered through the newly installed large diamond recovery XRT machines that can retrieve stones up to 90 mm. The 1,111-carat diamond measures 65 mm by 56 mm by 40 mm in size.

BMO analyst Ed Sterck concedes it is difficult to estimate the value of the “extraordinary diamond” considering the valuation depends on the stone’s colour, clarity, cut and polish.

In July, Lucara sold a 341.9-carat Type IIa diamond for US$20.6 million or roughly US$60,000 a carat in its first special tender of the year. In 2010, Petra Diamonds (LON: PDL) sold a 507-carat white diamond for US$35 million or US$69,000 a carat.

“The bigger the diamond, the more it is worth per carat,” comments Salman Partners analyst Raymond Goldie. “Big stones can pay the rent for months (or maybe years, in Karowe’s case).”

Lucara closed Nov. 23 at $2.15, after gaining 49¢ or 30% on the discoveries in the previous week.