Lucara’s next generation growth project, Clara, is set to disrupt the diamond supply chain
Lucara Diamond Corp. (TSX: LUC) is a new diamond producer. Its key asset is the Karowe Mine in Botswana. The 100 per cent owned Karowe Mine is a newly constructed state-of-the-art mine, which was fully commissioned in Q2 2012. The Karowe Mine is a large-scale asset with tonnage and throughput upside and production has consistently included large, Type IIA stones. Lucara is a member of the Lundin Group of Companies and is listed on the TSX Exchange, Nasdaq Stockholm, and the Botswana Stock Exchange under the symbol “LUC”.
Natasha Frakes:
Hi, I’m Natasha Frakes, and you’re watching Market One Minute. Joining us is Eira Thomas, CEO and Director of Lucara Diamond. Eira, thank you so much for being here.
Eira Thomas:
Thank you very much for having me.
Natasha Frakes:
Tell us a little bit about what’s been going on with Lucara lately.
Eira Thomas:
Well, we’ve had some big news in the last ten days. Firstly, we announced the acquisition of Clara Diamond Solutions, which is a new growth opportunity for Lucara. The second big news is that I’ve stepped into the role of CEO, as William has decided to retire.
Natasha Frakes:
Can you tell us about the Clara platform and how it works?
Eira Thomas:
Today, all diamond producers basically sell their diamonds in batches, or assortments of diamonds, and what happens after the initial customers buy their assortments is there’s only a certain amount of that production that qualifies for manufacturing in their own facilities.
So there ends up being a significant amount of rough diamonds that are then traded in secondary and tertiary markets. We see amount of value erosion in each stage of the process. It’s basically a push system. With Clara, we now have technology today, which allows us to transform the current sales paradigm from a push system to a pull system. What this is going to allow us to do is to sell individual rough diamonds, as they are produced, in real-time from a diamond mine, directly to the integrated manufactures and all other participants in the value chain.
Natasha Frakes:
Why does Lucara think that this technology will be used for diamond sales?
Eira Thomas:
Well, the way that we’ve been selling diamonds throughout the industry hasn’t changed in over a hundred years. Recent technological advances allow us now to think about selling diamonds differently. So, we do believe that there is a better way to sell diamonds, and we think that the change to the current supply chain paradigm is ripe for disruption and we think that change is inevitable.
Natasha Frakes:
So, how long will it take for Clara to roll out?
Eira Thomas:
Our plan is to commercialize Clara over the next six months. We will be using diamonds from the Karowe Diamond mine to do that, and our aim is to have diamonds flowing through the platform starting in August of 2018.
Natasha Frakes:
Will we continue to see regular and exceptional stone tenders?
Eira Thomas:
Absolutely. We expect to have regular and exceptional large stone tenders.
In fact, with Clara, we’re really targeting a very specific part of the production pipeline. We’re focused on better colors and qualities in the one karat to fifteen karat size range, and we will therefore be continuing to sell diamonds that fall outside of those size and quality ranges in the traditional fashion.
Natasha Frakes:
Lucara has known to be innovative in its approach to selling diamonds in the past. How do you think Clara will be received?
Eira Thomas:
You know what? We think that when we’re able to demonstrate to our peer producing companies, as well as the manufacturing companies and the integrated retailer jewelers, that there is value to be unlocked by selling diamonds through Clara. We think that will encourage people to take a look at Clara, and we’re expecting longer terms and broad adoption.
Natasha Frakes:
How do you expect to persuade your competitors to use Clara?
Eira Thomas:
I think at the end of the day, Clara is a valued proposition for both producers and manufacturers, and we expect everyone to achieve higher prices and margins by selling through Clara. All the test work that we’ve done to date, we’ve demonstrated that we can unlock 18–23 per cent of incremental value through the Clara platform to producers and manufacturers alike.
Natasha Frakes:
Well, we’ll be looking forward to seeing how this all works out. Thank you so much for being here.
Eira Thomas:
Thank you very much.
This story was provided by Market One Media Group for commercial purposes.