Lucapa’s Leadership Shift and Market Challenges Shadow Production and Exploration Gains

Production Gains at Lulo

Lucapa Diamond Company has reported a notable improvement in diamond production at its flagship Lulo alluvial mine in Angola during the fourth quarter of 2024. The company recovered 8,012 carats, a 5% increase compared to the same period last year, driven by mining in higher-grade floodplain areas following the completion of the second river diversion for the year. This operational milestone contributed to a 10% uplift in grade to 5.1 carats per hundred cubic meters.

Significantly, the number of special-sized diamonds exceeding 10.8 carats surged by 43% to 77 stones, underscoring the mine’s ability to produce high-value gems. Most of these large stones remain in inventory, poised for sale in the first quarter of 2025, which could positively impact upcoming revenue streams.

Exploration and Restart Plans at Merlin

Meanwhile, Lucapa has advanced its Merlin Diamond Project in Australia with the commencement of a modern airborne electromagnetic survey, the first in 25 years. The preliminary results have revealed two large conductive base metals targets within Proterozoic sediments, opening a new chapter for the project beyond diamonds. These targets, measuring approximately 2.5 km by 1 km and 0.75 km by 0.5 km respectively, suggest potential for base metals mineralisation that could diversify the project’s value proposition.

Lucapa also announced a low-capital, two-phase restart plan for Merlin, aiming to resume diamond production within the year. Phase 1 involves excavator dredging of five existing open pits with a funding requirement of A$15 million, while Phase 2 plans vertical pit mining over 27 months. The project forecasts a robust pre-tax NPV of A$40 million and an IRR of 75%, reflecting strong economic potential if executed successfully.

Capital Raise and Leadership Transition

To support exploration at Merlin and strengthen working capital, Lucapa launched a capital raise comprising a two-tranche placement and a share purchase plan, collectively raising approximately A$2.67 million. The company also converted accrued director and management fees into equity, demonstrating internal confidence in the growth strategy.

On the corporate front, the company underwent a leadership change with Managing Director and CEO Nick Selby stepping down for health reasons. Alex Kidman, formerly Group Operations Manager, has assumed the role, bringing operational continuity and fresh leadership as Lucapa navigates its next growth phase.

Market Context and Outlook

The diamond market remains challenging, with rough diamond prices down 80% year-on-year in Q4 due to the absence of exceptionally large stones sold in the prior period. Industry-wide production fell below 100 million carats in 2024 for the first time since 1989, reflecting supply constraints. Retail demand showed regional variability, with strong sales growth in India contrasting with softer conditions in China.

Lucapa’s strategy to hold larger stones for sale in 2025, combined with its exploration success and capital initiatives, positions it to capitalize on a stabilizing diamond market and emerging base metals opportunities at Merlin. The company’s diversified asset base across Angola and Australia offers a compelling growth platform amid evolving market dynamics.