Lucara Diamond Corp. (LUC) Earnings Call Transcript & Summary

Good morning, good day, wherever you are. Welcome to this Lucara Diamond Virtual Town Hall Meeting. Very happy to have so many of you with us today. And this is the second virtual town hall meeting we're doing. And I think most of you know that we used to do this in-person in Stockholm back in the days when that was possible, pre-pandemic, and hopefully, we can do this again. But on the other hand, we can gather a larger audience when we do them virtually. My name is Robert Eriksson. I work with Investor Relations, Media Contact, Corporate Communication for the Lundin Group and for Lucara. I'm joined today also by my colleague, Ayesha Hira, who's the Vice President, Corporate Development for Lucara. And I think the Lucara story is still very exciting, as we're going to hear tonight some really exciting expansion plans into the future. So without further ado, I would like to hand over. But before I do that, I wanted to say that the questions will be answered at the end of the presentation. And you can submit your questions through the Q&A function, which you will find at the bottom of your screen. [Operator Instructions] And we'll make sure that all your questions get answered at the end of the presentation. And with that, I would like to hand over to Lucara Diamond's CEO, Eira Thomas.

Thank you very much, Robert, and welcome, everyone. I'm really pleased to be providing you with a good update on Lucara today. I think it's actually a great time to be revisiting our story. We are experiencing a very buoyant diamond market right now, and we think the fundamentals are the best they've been in more than 5 years. So it's a great time to be revisiting the sector. And of course, Lucara, despite the challenges of the pandemic, has had a very busy and productive year in 2020, and we're looking forward to some exciting developments in 2021. I will be making some forward-looking statements. So I do encourage you to review these cautionary statements, which is available on our website. Just as a bit of an overview or a reminder about Lucara, we are a high-operating margin, mid-tier diamond producer, whose flagship asset is the 100%-owned Karowe diamond mine situated in North Central Botswana. And this mine really continues to be known as one of the world's most important producers of very large, high-value diamonds. Since 2012, we've produced over 3.2 million carats that had generated revenues of more than $1.7 billion. And I think we always like to point out as well that Lucara has returned a significant amount of capital to its shareholders. Between 2014 and 2019, we delivered $271 million out in dividends, which is well in excess of the capital that's been invested in the project and company to date. In 2019, we did make a deliberate decision to suspend the dividend in favor of investing our future cash flows in a very exciting growth opportunity, namely the expansion of the Karowe diamond mine underground and extending our mine life out to at least 2040. And I will be talking a lot more about that towards the end of the presentation. In addition to recovering very large white diamonds, Lucara really has become well known for its approach to innovation. We are a company that has incorporated a lot of new technology in our mine design as well as in our sales process, and I will be talking about our sales strategy in a couple of slides from now as well. We are the first diamond mine in history to have included or utilized XRT recovery technology as our primary diamond recovery method. And that, in turn, has been really important because it's allowed us to recover our largest, more valuable diamonds without damaging them. And we are, in fact, the only diamond mine in reported history to have ever recovered 2 plus-1,000-carat diamonds. And on the next slide, what we're looking at is some of our historic diamond recoveries, and including those 2 plus-1,000 caraters you can see there: the 1,109-carat Lesedi; and the largest diamond to ever come out of Botswana, the 1,758-carat Sewelô. And on this table here, we're really emphasizing the importance of Karowe as a large stone producer. In 8 short years, Karowe has become the dominant producer of large white diamonds. And in fact, if you look at the 62 top rough diamonds recovered greater than 300 carats, we account for almost 25% of those, and we have 4 diamonds in the top 10. So in reflecting on kind of where we've been and where we're going, I think it's important to start out with some commentary on the diamond market and what's happening in that space. And what we saw at the height of the pandemic is rough diamond prices are coming under tremendous pressure. Fortunately, we saw that pressure ease quite quickly, and we have experienced a V-shaped recovery in the rough diamond market, with prices rebounding nicely towards the fourth quarter of 2020. And those prices have now continued very strong into early 2021. And so we really see the pandemic as having interrupted a market that was already in recovery. And it has been a challenging few years for the diamond market overall. We had experienced a lot of pricing volatility in 2018 and leading into 2019. However, a lot of that volatility started to resolve as we saw polished diamond stocks come down dramatically in 2019. And what we're seeing right now is much better balance between rough and polished. And fundamentally, we've seen overall rough diamond supply on the decline. This is something we've been predicting for a number of years, but it's finally starting to manifest. The Argyle Diamond Mine closed its doors last year. They were a significant producer of small diamonds, accounting for almost 10% of global market share. And we now, looking forward, know that there are no big new developments coming along that really can impact that declining supply curve. So our outlook for diamond prices remains very strong, and we see this again as a good time to be revisiting the diamond market and the opportunities in that space. Just a note about COVID. We were declared an essential service by the Government of Botswana early on in the pandemic. So our mine has continued to operate at full capacity, albeit adhering to very strict protocols with respect to social distancing and hygiene. And our operations, I'm pleased to report, have continued basically to meet guidance in terms of carats produced and tonnes processed. And we've also been able to continue to operate safely. Obviously, this continues to be an ongoing effort. And our priority is the health and well-being of all of our workforce and the communities in which we're working and operating. On the next slide, we really are trying to, I guess, send the message and reiterate a common message that we like to deliver at Lucara, which is the fact that we do consistently recover large diamonds greater than 10.8 carats in size. And those diamonds do contribute almost 70% of our revenues. And these aren't anomalies in our production profile. We recover them month by month, year by year. And the graph in the lower right-hand side of your screen is really just showing the recovery of those specials. The cumulative recovery of those specials are all diamonds greater than 10.8 carats in size over the history of our operations. And since 2012, we've recovered close to 190,000 individual diamonds greater than 10.8 carats; 21 diamonds in excess of 300 carats in size; and as I mentioned in the outset, 2 diamonds greater than 1,000 carats in size. And what I'm showing here is just some of the early results leading up into the first quarter of 2021, where we continue to recover these diamonds. And in fact, we have been mining and recovering -- increasing numbers of 10.8 carats as we mine deeper. And that's because our mine plan is increasingly dominated by the South Lobe, which is the source of most of our large diamonds. So as I mentioned in some of the -- in the slide on the diamond market, we did experience extreme pricing pressure for our rough diamonds beginning at the end of the first quarter in 2020. As a result, Lucara made a deliberate decision not to sell any of our large, high-value diamonds after Q1 of 2020. Rather, we entered into a very strategic and novel committed supply agreement with a manufacturing company based in Belgium. And this group, which is referred to as the HB Antwerp Group, have since become the largest diamond manufacturer in Europe. And the way that this agreement works is, rather than selling our diamonds as rough, we're actually entering into a partnership where we manufacture each and every one of our plus-10.8-carat diamonds, and we are ultimately paid an initial price on an estimated polished outcome, which is determined again using technology. We're using state-of-the-art scanning and planning technology. And then once that diamond is actually completed and sold into the market, if there's any differential between what we estimated and what we actually achieved, we are paid a true-up less a fee and the cost of manufacturing. The advantage of this arrangement is that we were able to start selling polished at a time when the polished market was performing much better than the rough diamond market, but it also allows us to sell our diamonds more regularly. We are delivering diamonds bi-week -- bi-monthly, and that is delivering us much more regular cash flow. And of course, we are also earning more money on many of these diamonds that have gone into production with HB. In addition to that relationship, we've also fostered and forged an important relationship with Louis Vuitton, the world's leading luxury brand. And we've entered into 2 collaboration agreements with Louis Vuitton and the HB Group in respect of our -- 2 of our large exceptional diamonds. The Sethunya, which was recovered almost a year ago now, which weighs in at 549 carats and is quite possibly one of the nicest diamonds in terms of quality ever recovered at Karowe. And that's shown in its Louis Vuitton case in the center of the screen. And we also entered into a partnership around Sewelô, the largest diamond to come out of Botswana. So really, what we've done in this collaboration is really tethered the producer together with the manufacturer and, ultimately, the luxury brand. And the goal is that, in line with LV's long tradition of personalization, we are working together to craft a very beautiful bespoke, high-value diamond jewelry collection from each of these diamonds, targeting Louis Vuitton's global customer base. And in the case of Sethunya, which is the most valuable of the 2 diamonds, we are guaranteed to receive payment no later than the fourth quarter of 2021. And in addition, we have negotiated with LV that any diamond jewelry sales generated from the manufacturing of Sewelô, will provide 5% of all those retail jewelry sales will be invested into Lucara's community-based sustainability programs in Botswana. So that really covers off what we're doing with our large diamonds greater than 10.8 carats in size. In addition to that, Lucara is using technology to transform the sales process for our diamonds under 10.8 carats in size. And for those of you that have been following the Lucara story, you will remember that we bought this technology, the Clara technology, back in 2018, and we've been very busy commercializing this technology. And we began selling diamonds through Clara in 2019. And what has been a really important silver lining, I think, for Lucara throughout the pandemic is the continued interest in Clara, as we -- as people have been restricted from getting on a plane and traveling to buy diamond. So where we saw interest in Clara really kind of completely go through the roof throughout the pandemic. Our customer base, which we entered the year with roughly sort of 20, 21 buyers on the platform, that increased by 178%. We now are sitting with 83 buyers on the platform, and we are maintaining an active waitlist. And like our relationship with HB, the whole goal with Clara is to create a more efficient marketplace using technology and really working hard to deliver diamonds based on actual demand coming from our manufacturers and our partner brands. And so Clara eliminates the need to visually inspect diamonds in person. Basically, our buyers can buy diamonds from anywhere in the world. And what we've seen in selling diamonds right through the pandemic is that, increasingly, this is the way the world is going to go. And our ambition now with Clara is really to ramp up on sales of third-party supply. We did start selling third-party supply in 2020. But the next big milestone, I think, for Clara and the platform is to open it up and secure some sizable orders of third-party supply. That's a primary objective for 2021, and we are making good progress with that. And we expect to be able to talk more about that in the second half of the year. So on this slide, we are providing some 2021 highlights. I think I've covered off a number of them already. The one piece that I have not spoken about is an important achievement in respect of our underground expansion. We have been working to secure a supplemental debt financing to complete kind of the cash that will be contributed from continued open pit operations at Karowe. And I'm really pleased to report, in the first quarter, we did actually secure credit committee approvals from 5 mandated lead arrangers for financing packages of up to $220 million. We are now in the process of completing all the documentation in relation to those approvals, and we expect to be able to draw down on that cash in the second half of the year. And just as a reminder, the majority of the capital that we required for the underground expansion will come out of cash flow. And in addition to securing those credit committee approvals, we did enter into a 24-month extension on the HB supply agreement that I spoke about a few slides ago. Just as a reminder, Lucara has maintained a strong balance sheet, historically, throughout the pandemic and continues to do so with cash and cash on hand. And in addition to securing the credit committee approvals for the supplemental financing package for the underground, we were able to extend the working capital facility with R&D. And they've now taken on the full extent of that facility going forward into 2021 as we work to complete the larger financing. When you look at some financial and operating highlights. Basically, the strong message here is that we had and enjoyed a complete rebound in the first quarter in terms of our revenues, achieving $53.1 million in the first quarter of 2021. We also continue to operate safely, and we achieved all of our physical operating metrics. And we were also able to really continue to focus on cost and keep our costs down. The Q1 operating cost per carat sold sat at about $215 per carat. Just to summarize kind of where we're at now in terms of our sales strategy and our sales channels, we really are now selling our diamonds 3 separate ways. For diamonds under 10.8 carats in size and the better colors and qualities, we're selling through Clara, our secure web-based digital marketplace. For our diamonds greater than 10.8 carats in size, we are selling them through HB Antwerp, our manufacturing partner. And I should note here that these results do not reflect the inclusion of several large high-value, polished stones due to the timing of sales. So you will see that move around from quarter-to-quarter. Finally, for those diamonds generally have lower quality and smaller sizes that we don't sell through the first 2 channels, we are continuing to hold regularly scheduled tender sales in Botswana and Antwerp. I won't spend a lot of time on this. So our guidance has been out in the public domain for a good amount of time. We're trending on track for diamond sales of between 350,000 and 400,000 carats, generating revenues of between $180 million and $210 million. And now what I'd like to do is just spend a couple of moments talking about the underground, and I am going to flip to another presentation to give you a little bit more insight on our efforts for the growing underground. So if you can just bear with me for one moment as I switch to that presentation. In here, we have kind of a nice sort of that 3-dimensional view of our current ore body. We are -- yes, at Karowe, basically consists of 3 separate lobes: a north, central and south. The open pit has had contributions from all 3 ore bodies. However, as we mine deeper, the ore body becomes dominated by South Lobe, and that is important in a number of respects. One is that the South Lobe is the ore body that has actually generated our largest, most valuable diamonds, including the Lesedi, and the largest diamond to come out of Botswana, the Sewelô. And -- so as we mine deeper, we are moving into the highest value part of the ore body. And as I like to say, we've got more value ahead of us than behind us at Karowe not. Only does the ore body become higher grade as we mine deeper, we also recover a higher concentration or proportion of specials or diamonds greater than 10.8 carats in size. So as I mentioned, the underground will extend our mine life to at least 2040, we do have the potential to go deeper beyond that. It will add approximately $4 billion in additional revenues using very conservative diamond pricing assumptions, and it will generate an NPV of over $1.2 billion at a 5% discount. This generates a payback of under 3 years. And again, we are using conservative diamond prices. We've, in fact, used a discount to pricing from 2019 unescalated over the life of the mine. And we have removed our largest, highest value diamonds not because we don't anticipate recovering more of those, but because the timing of those recoveries is not always easy to predict. I do want to point out on this slide as well that the geological unit known as the EM/PK(S) does dominate the deeper we mine. And this is one of the reasons that we have made a decision, basically, to sink the shaft to the bottom of the ore body and to mine the ore body, basically, from the base up to the existing open pit. And that high-value rock allows us to pay back that capital quickly. The mining methodology that we have selected is very simple and straightforward. It's technology. And the strategy that's being deployed by many mines around the world, including in Canada. And basically, this is long hole shrinkage, and you can see it's quite a simple outlook. It's a full drill and blast opportunity for the first few years of the underground development. Thereafter, basically, it's a trucking operation of delivering that material to the shaft and sending it to surface. I should also just point out that with the underground now, we have received all of our required approvals from the Government of Botswana. They have issued us a mining license with extension to 2046. So with the credit committee approvals and the completion of the documentation on our supplemental debt financing package, we are in a position to move very quickly into a full ramp up, the second half of the year and get that underground project going in earnest. As a final kind of comments, I do want to talk about Lucara's approach to sustainability. It does underpin everything that we do. We are focused on creating a very transparent workplace environment, focused on the protection of our people, and strong stakeholder engagement with all of our communities of interest. We are certified by the Responsible Jewellery Council. We're compliant with the Kimberley Process, and we're also a member of the Natural Diamond Council. Importantly, in 2018, Lucara also became a member of the United Nations Global Compact. And we do contribute to 10 of the 17 UN Sustainable Development Goals. I do encourage you, for those of you that are interested in more information on the subject to go on to our website and have a review of our sustainability report, which is prepared in accordance with GRI Standards. And our 2020 sustainability report will be published on our website within the next couple of weeks. So I think, just to conclude, Lucara remains a premier, mid-tier, investable diamond company. We've come through the pandemic stronger than ever. We've significantly derisked our story, having secured credit committee approvals for our underground expansion. And we also have an exciting story that is evolving with Clara, our proprietary web-based digital marketplace, that we feel has the potential really to get to the next stage in 2021 and ultimately could be as important to us as our mine itself. Thank you very much, and I'm very happy to open it up to questions now.

Thank you very much, Eira. [Operator Instructions] And we have some interesting questions from shareholders. So let's get right on to it. The first one, how does your underground grade of carats per tonne compare to what you have been mining in the past couple of years?

Great question. The majority of the ore that we've delivered from South Lobe in the pit to date is averaging in between 11 and 15 carats per tonne -- per 100 tonnes rather. So as we mine deeper, we get to -- closer to 20 carats per 100 tonnes. So the grade is increasing quite significantly. And I think it's important to point out that the overall weight percentage of large diamonds greater than 10.8 carats in size, those 2 in excess of 10% versus the 4% to 5% weight percent that we've been enjoying kind of in the open pit, as we've been mining North, Center and South Lobe material over the first 8 years of our mine life.

Thank you, Eira. And the next question is on the HB sales agreement. It has been extended once. Do you expect it to be extended further? Is this the way forward for Lucara? Or is it a temporary thing?

Yes. I think we're really starting to see the benefits. We'd initially committed to selling our diamonds through HB until the end of 2020. We didn't start up the agreements until July. So what we realized at the end of the year, as our diamonds were starting to kind of complete the manufacturing process and ultimately get sold, is that with the benefits of the HB agreement, where we're slowly starting to be realized, but we felt that we needed more time to understand the benefits of this arrangement on a run-of-mine basis. But I'm pleased to report that, as the market has recovered and more and more of these times have now gone through the full cycle, we are starting to see the benefits of selling diamonds this way. Not only are we achieving more for our diamonds, but I think what's really important to understand is that we've really helped to protect the value of our -- our high-value diamonds by selling into actual demand as opposed to selling into pricing uncertainty or volatility, which we experienced during the pandemic.

And the next question is about whether you can give us any sense of what the range of revenue realized in 2021 on specials. Could be, specials that you have already identified?

Listen, we are very comfortable with the guidance that we put into the public domain right now. The market is strong, but we are not at the point where we would feel that it would make sense to change that. So I would say, stay tuned on that one. The market is continuing to be strong. But we're still managing a challenging time through the pandemic, and I think there is a certain amount of uncertainty in front of us. So we feel that the numbers that we've put out there are reasonable. And as we always do, we will continue to update the market if we really feel that guidance should be adjusted.

Thank you, Eira. And the next question is about the inventory and what could the value of the inventory be? Tricky question to answer, I guess.

Well, I mean, to be clear, Lucara doesn't maintain inventory. There is diamonds in the pipeline, some which have been manufactured and those which haven't. But we are not maintaining an active inventory of diamonds. Our goal is to mine and sell those diamonds as quickly as possible. So from our under 10.8, they immediately get placed on to Clara. And then for our plus-10.8, they immediately go into manufacturing. So it is tricky to estimate exactly when the final polished will be sold, which is why, in our 24-month extension with HB, we did negotiate some slight adjustments to that arrangement, which really ensure that we are getting paid the initial estimated polished price as early as possible that we feel really reflects what we could have expected to achieve had we sold those diamonds in the form of a traditional tender. And then the top-up payment comes along as those diamonds are sold. We do expect, as our relationship matures, and HB, by the way, has been investing heavily in upsizing his business, then -- so as a result, the time cycle between receipt of a rough diamond to final polished sale has definitely condensed. And as we go on throughout the year, I think we'll see that reflected in our financial statements. And those time lines, definitely, will shorten.

Thank you. And I think the Lucara shareholders have really enjoyed the dividends paid over the years. So there are a few questions about reactivating dividends. And have you been talking about that? And when could that be announced? And when in time could dividends be reinstated?

Yes. Listen, I think, for those shareholders that have been part of Lucara story since the beginning, I mean, one of the really extraordinary things about this ore body is that it delivers some very nice surprises on occasion. That really can move the dial in terms of cash and our cash needs. So we have gone out to secure a debt facility for the first time ever in the history of the company in support of this expansion. Because, as we have pointed out, there's a lot of value still ahead of us, and we think that, that underground development is probably the best growth opportunity in the diamond space today. So we want to -- we've redeployed the cash. We had traditionally dividended out into this investment. We think it's important. There are certain limitations or restrictions at the beginning here as we work to get that underground built. However, we are hopeful that we get some -- what we know we will get, but we will get some nice large high-value diamonds, which will help us to basically repay that capital quickly, and we can get back to paying dividends. So we can't give you an exact time line at this stage. But there is the potential for some bonanza recoveries always with this deposit, and that could change our outlook on our cash requirements and needs for the underground very quickly. And our hope is that, that will happen and that we can get back to paying dividends sooner rather than later.

I'm glad to say that we're getting a lot of really good questions here. So let's get on to the next one. In terms of suppliers and contractors needed for the expansion, are there challenges in securing them and the teams around them being a COVID situation and mining industry that is really heating up globally.

Yes. That's a great question. I think, for us, we've really been able to kind of ring-fence that risk around inflation, in particular, because we've been operating in Botswana for 12 years. We obviously have strong relationships. And we have the most important contract as part of the underground expansion is in relation to shaft sinking. And we have secured our contractor and all the equipments required for that. We have continued to invest in the underground even through 2020 and prior to securing this additional supplemental cash. And so we feel we're in very good shape that way. Most of our suppliers and suppliers are coming from South Africa, so not more globally. So inflation is something that we think we've been able to manage and mitigate well to this point, and we don't see that as a big risk for us going forward. The shaft sinking is basically a 5-year contract that we've entered into, and that equipment, basically, is all on-site today.

Thank you, Eira. And when it comes to Clara, could you elaborate a little bit for what you hear from the producers? What are their experiences now having tried selling through Clara for a while?

We've had -- one of the challenges with COVID was that a number of our peer group of producers really struggled in their own operations. And so it was a challenging year on balance for the industry. And so a lot of those producers -- and we had a number of which were ready to do trials on Clara that necessarily delayed those trials. So we've had to reengage with them going into 2021 to get that going. I'm pleased to say that there has been good engagement, and we are kind of moving forward with that. But I think what was very clear through the pandemic, with all the producers, is that modernizing the sales process, which, by the way, hasn't changed for over 100 years in this business, is really an imperative now. Everybody recognizes that the way we've sold them traditionally is completely antiquated. It's inefficient. It's inflexible. And so there's a lot more interest in Clara now post-2020 than there was going into 2020. And I, think for us, it's really just about getting those producers to the point where they are confident and comfortable and able to make diamonds available for a trial. And then the feedback that we've had, overwhelmingly positive from anyone that has had the experience of buying or selling on Clara. And so that -- we remain very confident. We are, I think, at a very important inflection point for Clara. For those that have been following the Clara story, since the beginning, this isn't just a marketplace to sell our diamonds more efficiently. The value of Clara is opening it up to other producers. It's really a volume story. We want to see as many diamonds transacted through Clara as possible. That's how Lucara will make its money. And so we are -- I think, we've clearly demonstrated through the pandemic that the demand is there. We're sitting now with 83 buyers and a waitlist, and they're very anxious to buy more diamonds. We need more diamonds to sell. And so being able to demonstrate that demand to our producers is obviously very -- has been important and positive. Now the next step is, okay, let's get some diamonds onto the Clara platform. And I think the 1 misnomer we really had to work hard to address is that, if you sell on Clara, you can't sell your diamonds any other way. And what we're saying is, look, you don't have to sell all of your diamonds through Clara at the outset. Just try it, see how you do. See how it compares to how you're selling traditionally. And I think once producers sort of recognize that they don't have to completely shift their thinking, that they can sell their diamonds through multiple channels, as we do at Lucara, that they have become a lot more comfortable with the idea of trialing it. We're so confident that they're going to achieve superior results that we are very encouraging for any size of trial for our sellers just to gain the experience and understanding of how the platform works.

The next question is quite a technical one. And it's about if you -- whether you're able to mine and draw from 2 separate levels at the same time, and consequently, deliver more ore to the mill than it currently process, meaning can we look forward to mill and the processing expansion leading to an increased production?

Yes. Listen, we've looked carefully at the production throughput rate. And we -- after doing a lot of optimization work on that and consideration at this stage, we don't think it makes sense to expand the mill throughput rate. One of the things that's great about this project, and when we talk about it with investors and analysts alike, is that it really is a brownfield expansion project. We're not looking to invest a lot more money into existing infrastructure. We're simply going to be moving from open pit to underground. We're sinking the shaft, and we're going to be delivering kind of the same throughput. However, because of the increased grade, you will see our carat production increase. So we will have a similar throughput through the mill. However, we're almost twice the grade at 800 meters below surface, as we are in the current open pit. And I think that will see, obviously, an impact on our cash flows, and that is why we're able to pay back that $514 million CapEx so quickly in under 3 years.

Thank you, Eira. The next question is about the lack of the De Beers Botswana sales agreement, and whether that is affecting Lucara in any way.

No. It's having no impact for us. That's an important one, obviously, for the Government of Botswana. They're very focused on that. But it really has -- had no impact on our operations. As I mentioned, we were very pleased to receive a mining license extension from the Government of Botswana at the end of 2020, which has basically given us the green light to march forward. I would say that De Beers and Debswana, despite the lack of an agreement, have announced that they are looking at a $6.5 billion investment in the expansion of the Jwaneng diamond mine in Botswana, which, I think, is a very positive development for the market overall. It really signals that De Beers has got a very positive outlook on the diamond market. That's a significant investment for De Beers and Anglo American. So we see that as a positive development and further testament to the market fundamentals looking much stronger today than where they've been over the last several years.

And I think we have the last question here, and it's a shareholder who would like you to go into a little bit more detail about the market situation for small versus larger diamonds.

Yes. Listen, I think that's a great question. We saw, in 2018, in particular, some real pressure in small diamonds. And for a while, it was really only small diamonds that really were impacted in terms of weak prices. However, eventually, that weakness extended into the larger stones as well, and it really, I think, was a result of overall challenges, particularly within the middle part of the pipeline, the manufacturing part of the business. We saw challenges with these manufacturing groups, particularly in India, where we saw banks are starting to stop lending into the midstream, and then we saw the demonetization of the rupee. All of that kind of created volatility. So what started is pricing weakness in the small eventually kind of migrated into the large stones. And -- but overall, large diamond prices have been much more stable and less volatile, ultimately, because they're rare. And it's a slightly different kind of distribution and marketplace. What we are experiencing today is overall buoyancy throughout the market in all sizes and classes, and we will see if that continues. But in general terms, we do see more pricing volatility in small diamonds versus large diamonds. But it is a continuum, and it's always good to see strength across all size categories in that space.

Thank you, Eira. And with that, we have no more questions from the audience. So I would like to thank everyone for joining us today, and we're looking forward to get back and update you in a few months again. And it's great to have so many of you joining us, and we're looking forward to have you aboard for an exciting journey together with Lucara. Thank you, Eira.

Thank you very much, Robert. And thank you all for participating today. We're really looking forward to actually coming back to Sweden and presenting in person next time. But it is really heartening to see the level of participation, and I just want to emphasize that we're really excited about where Lucara is going. We feel that we're really well positioned for another strong inning here. We are extremely levered to an improving diamond price environment and excited about our growth opportunities and plans for both the underground expansion and Clara. Thank you very much for your time, everybody.

Thank you.