Lucara Diamond Corp. and HB Antwerp have extended their agreement, announced last year, which will require HB to buy all the 10.8 ct. rough diamonds from the Karowe mine in Botswana for another two years.
The original deal, which was—and remains—atypical for the diamond industry, began in July 2020 and was due to expire at the end of last year.
Karowe has produced an unusual amount of high-value diamonds, and those stones account for approximately 70% of Lucara Diamond’s annual revenue.
The deal says that the purchase price paid for each 10.8 ct. rough diamond will be based on the stone’s estimated polished outcome, minus a fee for manufacturing. If the final polished sale exceeds the estimate, Lucara could earn extra, though it does not lose if the polished outcome falls short.
“More than a supply agreement, this deal structurally embeds a more transparent and sustainable way of working in the diamond value chain,” said Oded Mansori, CEO of HB Antwerp, in a statement. “For the first time, different partners of the supply chain are fully aligned, sharing complete data and information throughout the process from mine to consumer.”
Mansori said the collaboration “has proven itself through the volatile and uncertain reality of 2020.”
In the same statement, Lucara CEO Eira Thomas said the agreement “has helped support prices for this critical segment of our production amidst pricing uncertainty caused by the ongoing global pandemic.… [W]e are creating better alignment between all participants and establish[ing] a healthier, more efficient global diamond supply chain.”
Speaking to JCK last year, Thomas said that because Lucara’s final fee is “tied to polished prices,” both companies are “incentivized to maximize the value of the polished,” adding, “These stones will achieve more in terms of revenues than if we tried to sell them just as rough.”
Top: A 378 ct. piece of rough diamond found at the Karowe mine in Botswana (photo courtesy of Lucara Diamond Corp.)
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