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

Good morning, good day, wherever you are. Welcome to this Lucara Diamond Virtual Town Hall Meeting. We're very happy to host one of these again that we do on a regular basis. We used to have these meetings in person in Stockholm before the pandemic, and I'm sure we will see you all in Stockholm at some point, but it's actually proven to be very efficient to do it in this format since we can meet investors and stakeholders from all over the world. And I just wanted to remind you about the question-and-answer function. It's on the bottom of the screen. So you just type in your question, and Eira will be able to answer it at the end of the presentation. And by the way, my name is Robert Eriksson. I am shared resource for the Lundin Group of Companies when it comes to Investor Relations and Corporate Communications based out of Stockholm. So once again, question and answers, Q&A function, not the chat function, on the bottom of the screen. And without further ado, I would like to hand over to Lucara Diamond's CEO, Eira Thomas.

Thank you very much, Robert. And it is a real pleasure to be participating once again in the town hall session. We really appreciate the opportunity to do so. I want to certainly thank Robert for organizing this. We do look forward to getting back to Sweden to hold these in person. But for the time being, we continue to persevere with Zoom. Thank you all for coming. I will be making some forward-looking statements. So I do encourage you to review our cautionary statement, which is available on our website. I think it is a great time to be looking at the diamond space. We have actually emerged into the -- one of the strongest diamond markets that we have experienced in more than a decade. And yet that price buoyancy really has not yet caught up with the diamond equities. We feel that Lucara is one of the best ways to gain exposure to the diamond space because we have a long-lived, high-margin diamond asset situated in Botswana, which we like to refer to as the Switzerland of Africa. And we have fully funded an expansion program at Karowe, which will extend our mine life out to at least 2040. In addition, with an investment in Lucara, you have exposure to Clara, a secondary business, a growth opportunity for our company. It's not a mining opportunity, but it is a diamond opportunity. And Clara is the first ever digital marketplace for the transaction of rough diamonds. It is proprietary technology that we've developed in the last few years, and we believe it is positioned to completely disrupt how diamonds are sold. And it presents a high-margin growth opportunity for Lucara. And I'll say a little bit more about that as we get into the presentation. But suffice it to say you get Clara for free. [ Something ] unique about Lucara is the fact that we have primarily female-led leadership team, 75% of our leadership team is female, and our executive team is positioned here. This is a strong seasoned team with more than 25 years in the diamond business. We're very proud of the fact that our workforce in Botswana is largely Botswanan. 99% of our employees come from Botswana, and many of them were educated in Botswana including Naseem Lahri, who is the first ever female Managing Director of a mine in Botswana. The mine itself has been in production for a little over 10 years. It is situated in North Central Botswana. And over that period of time, we have generated revenues in excess of $1.7 billion. Karowe is renowned for its production of very large, high-value white diamonds. And in fact, we are the only diamond mine in recorded history to have ever recovered 3 diamonds in excess of 1,000 carats in this size. In addition, we are a company that is also well known for our approach to innovation and our incorporation of new technologies, not only in how we actually recover diamonds, but also in how we sell them. And again, I'll go on to talk about Clara a little bit later. Another fun fact about our company is that we have actually paid out $271 million in dividends between 2014 and 2019, which is well in excess of the capital that we have invested in our operations to date. We have suspended paying dividends starting at the end of 2019 in favor of investing that cash flow [ in ] what we believe is one of the most exciting diamond expansion growth opportunities in the world today, and that is the development of our mine underground, extending our mine life out to at least 2040. On this slide, we're including a brief list of historic diamond recoveries around the world. And you can see some of Karowe's historic diamonds pictured at the bottom of the screen, including the largest diamond to come out of Botswana, the 1,758-carat Sewelô as well as the 813-carat Constellation, which sold for a record price of $63 million; the 1,109-carat Lesedi La Rona, which is now the third largest diamond ever recovered in the world; and the 549-carat Sethunya, which is a diamond that we recovered within the last 24 months and represents quite possibly one of the highest quality diamonds ever recovered at Karowe. And I'll say a bit more about that in a moment as well. All told, Karowe has yielded 25% of the world's largest diamonds, and we have 4 in the top 10 and 5 in the top 11. And as I mentioned in my opening remarks, we are the only mine in recorded history to have ever recovered 3 diamonds in excess of 1,000 carats in size. And what we're looking at now on this slide is further evidence of the importance of large diamonds on our revenues. 70% of our revenues come from diamonds greater than 10.8 carats in size. We recover these diamonds consistently, we recover them regularly. And the graph on the lower right is showing the recovery of those diamonds month by month, year by year. And something else to note is the fact that the slope of those yearly annual production lines is gradually steepening the deeper we mine, and this reflects the fact that the ore body itself is becoming richer in large diamonds as we mine deeper. 2021, as a result, was a record year, 39 diamonds in excess of 100 carats including our third diamond over 1,000 carats, 7 diamonds over 300 carats, 8 diamonds over 200 carats and 23 diamonds over 100 carats. As we reflect on our -- the year just completed 2021, really, the theme is a year of recovery from the pandemic. We returned very strong revenues of $230.1 million or $603 per carat, which was well in excess of guidance, that was owing to continued strong, safe, reliable production from Karowe, including a record year for mill throughput. And as I've already spoken to, it was also a record year for the recovery of diamonds greater than 10.8 carats in size. Other important developments in 2021 included the extension of our novel supply agreement with a manufacturing company based in Antwerp, whereby we are manufacturing all of our plus 10.8 carat diamonds and selling polished. In addition, another very important mile store -- milestone for us in 2021 was the completion of a supplemental debt financing, which has allowed us to move forward with a fully sanctioned, fully permitted underground expansion program. And we spent about $86.3 million by the end of the year, and we're on track to spend a further $110 million in 2022. In addition, our secondary business, Clara, where rough diamonds are transacted, globally increased its buyers to more than 88. We are now maintaining an active waitlist. And we basically increased total sales volume by 168% over 2020. The other final comment I'd like to make about 2021 is that we continued to maintain a very strong balance sheet with the debt and equity finances that were completed, a total of $250 million. The company has ample access to liquidity to be able to execute on our underground expansion program, and we ended the year with cash and cash equivalents of $27 million. The underground expansion is, as I mentioned, a very important growth opportunity for our company. On this slide, we're looking at a summary of the economics, and I do want to highlight the fact that we have used very conservative diamond pricing in all of our underground economic models. And we've also removed all of our largest, highest value diamonds from the economic model just to add an extra layer of conservatancy. As I mentioned, the project is now fully financed, and it has received full Board sanction. And we are moving very forward with an aggressive spend and plan, which will see an investment of $534 million going out to 2025 with first ore from underground being delivered in early 2026. The program is tracking on plan and on budget. On this slide, we're showing you a cross-section of our current open pit. For the first, roughly, 8 years of our mine life, we were mining from 3 lobes, North, Central and South. But as we mine deeper and going forward in 2022, we are exclusively focused on mining from the South lobe. The South lobe, in turn, has been responsible for most of our large, exceptional diamond recoveries, all 3 of our diamonds in excess of 1,000 carats. And the South lobe is further differentiated between 2 geological units, the one that we refer to as the M/PK(S) shown in green; and blue, which shows our EM/PK(S). And it is the EM/PK(S) that has the coarsest distribution of large diamonds. And that was really the big value driver and the rationale for expanding our mine underground. The plan is basically to sink twin shafts down to 800 meters depth, and we will ultimately be mining the ore body from the bottom up. This allows us to access the highest value ore early and pay back our capital in under 3 years. I'm going to switch now and talk a little bit about the diamond market. I mentioned that we were -- have emerged into a very strong diamond market. This is after enduring a difficult year in 2020 brought on by the pandemic, where we saw diamond prices discounted as much as 50%. Luckily, those discounts were short-lived. We saw a sharp V-shaped recovery, and we are now trending higher and higher. This is a result of fundamental structural changes within the diamond market itself, where we can now see that global supplies of rough natural diamonds are on the decline. By contrast, diamond demand is increasing. Why are global diamond stocks on the decline? It's because many of our large world-class diamond mines are aging. They're nearing their natural end of life. And in fact, one of the world's largest diamond mines, the Argyle Diamond Mine closed its doors in 2021. And so we know that there is nothing coming along on the horizon that has the potential to significantly impact supply, and that is supporting a much stronger price outlook for our diamonds. And just as further evidence of that, this slide looks at U.S. jewelry sales in 2021. And you can see that it was an extraordinary year with diamond jewelry sales in the U.S. up almost 52%. Looking at quarterly aggregated rough diamond prices, this is a Paul -- a slide put together by Paul Zimniski, a well-known analyst in the diamond space. He is calling for prices reaching a new all-time high. We also concur with Paul's view. The one caveat we would say is that for our largest, most valuable diamonds, those price recoveries have been slower. But fortunately for us, we started to see stabilization and price increasing towards the end of the year and continues on a very positive trend also as we head into 2022. Lucara used the pandemic and the challenges imposed by the pandemic to really revisit and rethink our approach to sales. We had already launched Clara, which really works to completely transform how diamonds are sold, for the first time selling diamonds digitally on a web-based platform based on specific demand and selling individual rough diamonds into that demand. So Clara was a technology that we had purchased a few years ago and had begun commercializing. Never had the rationale for Clara become more apparent than during the pandemic when global travel restrictions really made it incredibly difficult for people to travel around the world and buy diamonds traditionally. So the business case for Clara really took off during the pandemic. At the same time, Lucara used the opportunity to think about how it sells its largest, highest value diamonds, which account for close to 70% of our current revenues. And because rough diamond prices were so highly discounted during the pandemic, we made a decision not to sell rough. Rather, we entered into a strategic partnership with a new company out of Antwerp, Belgium, the HB group, whereby we partnered on creating and manufacturing diamonds and selling polished. All of this has resulted in Lucara's strategy and ability to actually increase margin capture downstream. The relationship with HB led further -- to further downstream with the opportunity to actually partner with some of the world's leading luxury brands. And Lucara, today, has 2 collaboration agreements with Louis Vuitton, the world's leading luxury brand on 2 of our exceptional diamonds, the 1,758-carat Sewelô, which we are now heading into the manufacturing phase on; and the 549-carat Sethunya, one of the nicest quality diamonds ever recovered where we made a deliberate decision not to sell that in 2021 as diamond prices for the very largest exceptional stones were only just starting to recover. Our plan is to work with our partners on finding the right opportunity for Sethunya in 2022. So a little bit more on Clara. Again, a completely novel way of selling diamonds and really driving significant efficiencies within the supply chain. Unlocking value, not only for us as sellers, but also for our manufacturing customers, increasing their margins. Clara also has the added advantage of working under an exclusive collaboration agreement with Sarine Technologies, which is a technology company out of Israel that has been supplying the manufacturing world with scanning technology with -- for some 10 years now. So in 2021, we marked 60 sales in total, transacting $50 million in diamonds since inception. We increased the buyers. We now have an active waitlist. And we're at a really critical inflection point with Clara where we have the potential now to move into the next phase, which is opening up the platform for increased participation by third parties, not only with producers, but also with secondary sellers. And in 2021, we did increase the quantum of third-party diamonds sold on Clara. But in 2022, we are actively engaged with a number of producers to open up the platform to them as well. Ultimately, our 5-year plan is to get to 10% of market share, which we think is very modest. But if we can achieve just 10% of market share, Clara will deliver as much cash to Lucara as our existing mining operations at Karowe. I'm going to talk very briefly about some of our financial and operating highlights now. And again, the theme really here is one of recovery. We recorded basically almost double in terms of our average price per carat achieved. We maintained stable and actually very healthy operating costs. We operated our mine very safely. And we had almost a fivefold increase in our adjusted EBITDA for 2021. On the operating front, despite COVID, we were able to maintain strong stable operations. We basically outperformed on all of our -- outperformed guidance on all of our physical metrics, including a record year for mill throughput. And we sold just over 380,000 carats. Our outlook for 2022 is broadly similar to 2021. Again, we actually increased our guidance slightly, reflecting the much stronger market that we are now selling into, but we are anticipating selling approximately 300,000 to 340,000 carats, generating revenues of between $195 million and $225 million. Last but not least, I do want to touch on our approach to sustainability because it is foundational to everything we do at Lucara. We do prepare an annual sustainability report, which is available on our website. We are certified by the Responsible Jewellery Council. We are compliant with the Kimberley Process, and we're also a member of the Natural Diamond Council. In 2018, Lucara also became a proud member of the United Nations Global Compact, and we contribute to 10 of the 17 UN Sustainable Development Goals. Part of our strategy with Clara is to work really, really closely within our communities of interest. We have 18 communities that we engage with on a regular basis. And a large part of our success is attributable to the fact that our communities provide us with the insight we need to support them. And it's really about meeting their needs and expectations. And on this slide, we're really highlighting one of our projects that we're very proud of. This is a farm project called Mokubilo that we set up a couple of years ago to address malnutrition in one of our communities. What's been remarkable about this project is that the food that we grew ultimately to address malnutrition has actually surpassed all of our expectations. We now have excess food in these farms. These farms are being run by the community, for the community, owned by the community. And they are now able to sustainably sell and deliver produce and eggs into the broader marketplace within Botswana. We are rolling this model out in other areas as well. In terms of the pandemic and our response to COVID, vaccines finally arrived in Botswana in late 2021. So we are very pleased to be reporting that our entire workforce has now been vaccinated with 2 doses and are now eligible for boosters. This was also a significant derisking for our company in 2021. So to sum up, I'd just like to say, I think it's a really outstanding time to be thinking about investment in the diamond space. We are witnessing the best diamond market that we've seen in many, many years. Lucara itself has come through a major de-risking effort in 2021. We have this very high-margin diamond mine in Botswana, which is now on track for expansion. We will be extending the mine life at Karowe out to 2020 -- out to 2040 at least. And we are going to be continuing to deliver the world's largest, most valuable diamonds. In addition, an investment in Lucara also gives you asset diversification and optionality through Clara, our first of its kind secure web-based marketplace for the transaction of rough diamonds. Thank you very much. And Robert, I think I can open it up for any questions.

Certainly. Thank you very much, Eira, very informative. We have a few very good questions here, and I encourage you to ask more questions. [Operator Instructions]. But let's start right away. So the first question is, what are the assumptions for the optimistic supply case? And what is the probability of that scenario you think?

Maybe I just need to clarify on this question. With the assumptions around the optimistic -- and maybe I'll go back up to that slide, I think it's referring to our outlook on supply and demand overall. And the assumptions really are around the 25 existing mining operations that are in production today and really other projects that are maybe not yet in development, but in the permitting phase. So we're looking at every possible project out there today that we think might make it into production, but by the way, is not yet confirmed on the optimistic demand. Our base demand is really what we know. This is what we know about the existing mining operations and what their life of mine, production profiles actually look like. And then when we consider base supply, it's really more pessimistic, again, about the ability to go after all of the resources that exist today in the production pipeline. I hope I've answered that correctly.

Thank you, Eira. And here, we have a question from a person that is attending one of these presentations for the first time. Would like to thank you for an informative presentation. He notes that the shares were trading at CAD 3 in late 2017. Can you please explain how you are placed today relative to 2017?

Well, thank you for asking that question because I think it's remarkable to reflect on that. At that point in time, we had a mine life out to 2023, and we didn't have Clara. What transpired after 2017, which created such a headwind for us was really the diamond market itself. There was a lot of volatility. We had underperformance in the midstream. And we had a number of our peer group of companies that really struggled with their own operations and overlevered balance sheet. So there was very much an off-diamond sentiment that began about a year after that, that has created significant headwinds for the industry overall. What's really great about where we are today is that we've largely fixed all those problems. Our peer group of companies today are much stronger. A number of them have gone through restructuring and are well positioned to take advantage of this very strong market and the very strong outlook for diamond prices. For Lucara, it was all about really determining what our growth profile was going to look like. So completing the feasibility study and then ultimately, financing, adding a supplemental debt financing package on to support our plans for expansion was a really important step. We came through that. And I think, quite frankly, the market has not caught up yet, and it's going to because diamonds have not had their day in the sun for a long, long time, and we really do think that, that is coming. The other thing, I think, for Lucara that's important to remember is that when we look at our outlook and our guidance, we have removed all of our large high-value diamonds. There's always the potential for a bonanza with Lucara, that next 1,000 carat diamond that could add tens of millions of dollars. None of that is really baked into our guidance and outlook. Not because we don't believe it's there, but because we can't say exactly when it is that we're going to recover that bonanza stone. So I think Lucara represents better value today than it ever has in the history of the company, and I've really been involved with Lucara as a founder since day 1, and I'm a very large shareholder. And I really feel excited about the potential to get that share price back up on the basis of all these opportunities in front of us, not the least of which is the fact that the diamond market itself is now supporting a much stronger outlook.

Thank you, Eira. And we have a question, if there is any update on the 62.7 carat and the other fancy pink diamonds recovered at the same time, have you recognized the revenue for them yet?

For the smaller ones we have, we are still in the manufacturing phase for the largest. And part of the really interesting learning for us now that we are actually in the manufacturing business with our partners at HB is the advantage of having all those diamonds going through one channel is that we can work on the smaller pink diamonds, learn about how they behave and how they react during the manufacturing process, which allows us to optimize the polishing process for the larger ones. So that is now nearing completion, but we have not yet realized all the revenue from those diamonds. So that's still to come.

And there is a question also on the exploration side in terms of diamond exploration. Is Clara doing anything currently?

We've been so focused on getting to the milestone of financing and sanctioning the underground that we really have been very prudent with our cash, and we have not been actively investing in exploration. I think based on the strong year that we had in 2021, with revenues exceeding guidance without the sale of the Sethunya, we are now back to having those discussions with our Board of Directors. We will not go back to spending huge sums of money on exploration, but we do have the expertise in this area, particularly with Dr. John Armstrong. And it is our intention to start to think about spending a modest and disciplined amount of money on exploration because we think that, that's important. We think the world is completely under-invested in exploration, and that is leading to the supply constraints that we see here today.

And in terms of Clara is the long-term plan to retain the ownership of Clara or is the company planning to or is it open to spinning off or selling Clara?

I think I mentioned that you kind of get Clara for free in Lucara right now. We are at a really important point, where the addition of third-party supply has the potential, I think, to start generating significant revenues for Lucara. Once we do have a good volume of committed third-party supply, we will be revisiting that opportunity. If we do not feel that Clara is being recognized and given value within the Lucara share price, then we absolutely would consider spinning Clara out. So it really is all about recognizing the value of Clara. And the only other thing I would say about it is that we do often get feedback from shareholders that marrying a technology story and a mining story is not always the easiest thing to do. And that, again, there would be a good potential to unlock more value for Clara if it was in its own separate vehicle. So we continue to look at that, but that is not something that we have immediate plans for.

Thank you, Eira. And we have a question from Matthew who thinks it was a great update. ESG is a major investment theme right now. You certainly have the S and G factors covered. But could you talk a bit about the E factor? How do you stack up against your peers when it comes to the environmental?

Well, that's another great question. I mean, in short, we stack up very well. However, a big priority for our organization going forward, like with many other mining operations is really a focus on decarbonization. So we are actively engaged and working with our team in Botswana to evaluate the opportunity for solar power at our operations, and we are in the process of doing a feasibility study on that very opportunity. And so that's something that we're very, very focused on. In terms of our other environmental performance, we've been in operation for 10 years. So we have a very strong, reliable team managing our environmental stewardship on site in Botswana and have been doing a great job. So we are very comfortable and confident with our environmental performance overall. But it is that piece on carbon, which we are very focused on now. Our major source of energy comes from the Botswana grid. The Botswana grid is largely coal-fire powered. So -- and there's not a lot we can do about that, but we think solar represents a great opportunity to reduce our reliance on that grid power and also assist with potentially providing power within our local communities of interest. We have gone a fair ways down the path with solar so far, for example, that is what's powering our sustainability projects, Mokubilo Farm and our second farming project that we're just getting going. And we have added solar to our existing mining operations on the administration side. But the opportunity that we're now exploring is a much larger one, which could have the potential for significant offsets against the grid power that we're currently consuming.

Thank you, Eira. Certainly interesting, hot topic in all sectors these days, of course. And we have quite a few questions on dividends. Lucara has been paying significant dividends over the years. When are you expecting to move back into free cash flow positive and resume paying dividends?

Well, listen, that's a great question. We -- based our feasibility study on diamond prices that were discounted to 2018 prices, we slowly escalated them through to the end of '21, and then we keep them flat through 2040. The current market today has blown right through that. So we know these prices are conservative. If they continue on this trajectory -- and again, I don't mean going up as much as they have, but even if they stabilize where they are today, then that is going to be really helpful for Lucara to think about moving forward with refinancing the debt facility that we just concluded in 2021. So we think it's possible within 24 months that we would be in a position to revisit that. That in turn could lead to the restart of a dividend earlier than anticipated. But the other thing I will say is that Clara is not captured by our facilities agreement. So any cash we generate out of Clara, we are free to distribute in any way that we would like. So I think that represents a really interesting opportunity as well. And again, we remain very excited about Clara. It is at an important inflection point. We think we can start to really push volumes up. And if we are able to do that, that will start to deliver free cash flow in its own right that we could think about dividending out. So no immediate plans. But because of the stronger market environment we find ourselves in, we do feel optimistic that we could get back to paying a dividend sooner than later.

And we also have a question from one of the attendees here about future equity raise needs. Do you see a need to raise more equity like in July 2021 to fund the underground expansion?

No, we really don't. And we did not anticipate even needing to do that equity raise in July, but it really was a result of the decision not to sell diamonds in 2020 in response to the deep discounts of COVID. So that -- and so really, it was a deferral of revenue that meant when it came to our facilities agreement that we just needed more cash on the balance sheet to complete that debt facility. So we feel very comfortable with the cash we have available to us today. $220 million in supplemental debt. We raised $30 million in equity, and we're really, really pleased to see the Lundin family support us in that effort and continue to be very strong and committed shareholders. And we think we've got ample liquidity to carry out everything we need to do with the underground. So we are not anticipating having to do another equity raise.

Thank you, Eira. And we have a few questions on Clara. What activities are ongoing to bring in new supply sources, both primary and secondary? And what milestones have you set to expand the platform?

Yes. Listen, it's been such an interesting 24 months for Clara. In some ways, COVID was the real silver lining for -- Clara was a silver lining for us in COVID because never before has the rationale or the need for Clara been greater. And so we ramped up on our customer base, the demand side, much, much quicker than we'd anticipated to the point where we now have an active waitlist. And I'm currently in Israel, meeting with some of our customers. And honestly, it's hard to go 25 feet without running into someone who's inquiring how they can become a buyer on Clara. The experience that our buyers are having is so positive. They can buy diamonds without leaving their desk, they can buy diamonds exactly meeting their needs. It's the ultimate cherry picking opportunity. They don't have to buy assortments. They don't have to buy buckets of diamonds. They buy exactly what they need to run their businesses efficiently. And so the experience on the buyer side is very, very positive. On contrast, the challenge in 2021 with our -- in engaging with other producers and putting more third-party supply onto the platform was that a lot of our peer group of companies were just beginning to recover from a very difficult few years. So they were really not in a position to think about an alternate sales strategy. They were busy trying to repair balance sheets and get their business back healthy again. I'm pleased to report, towards the end of the year, we started getting good reengagement with the producers and are now actively discussing trials once again. So we feel very confident in our ability to move forward with those trials in 2022. And the other, I guess, eureka moment for us in 2021 was that a number of our buyers asked if they could also become sellers. A lot of our buyers have built up inventories of unwanted diamonds over the years. And so provided that those diamonds were qualified with Kimberley Process certificates, we were very happy to take those diamonds from the secondary market and start selling those. So that was a big surprise for us in 2021. We didn't realize how much traction we would have with the secondary sellers. And what's been really, I guess, as a final positive comment about this whole strategy, is that our buyers are enjoying buying on Clara. They're earning healthy margins. They're now, a number of them, also sellers and they're also enjoying strong prices on the selling. So it's the greatest endorsement of the platform that we could ever have. It really does demonstrate that this marketplace unlocks value for both. So we continue to ramp up month by month with our sellers on the secondary market side as well. And so we're pushing it hard on both channels.

Then we have a question on the -- in light of the current high inflation environment worldwide, do you see an increased demand from customers looking for diamonds as an inflation hedge?

That's another great question. We started to see that in 2021. I think Lucara has always had a certain number of buyers that wanted to buy diamonds as a commodity, as a hard asset like gold. And I do think interest in the diamond space has ramped up as we've continued to really experience global kind of volatility in terms of the geopolitical environment, but also just in respect to sort of understanding the pandemic and the liquidity that's out there. So yes, we are finding that there are customers today that are interested in purchasing large polished diamonds just to stick away in the safe. And it's a lot easier to put $50 million of diamonds in your safe than it is $50 million of gold bricks in terms of the space they take up. So that is something that we have seen more interest in.

And following up on that, we have an attendee here thanking for an excellent presentation and would like to know a little bit your view on the impact of demand or pricing from the -- on the rough diamond market, we should expect from the sanctions being imposed on Russia.

Yes, this is a really tough question. We've all been watching so closely to try and understand what this is going to mean. I think in the first week or so of the crisis, the response was -- it was going to be really focused on certain individuals. It is now, I think, becoming more problematic for Russia to distribute its diamonds certainly in the same way that it has in the past, but I think it's important to remember that they do have the ability to move or sell diamonds through India and China. So at this point, I would say it's too early to call. But clearly, certain markets like the American market are going to be, I think, watching this space much more closely and there will be -- I think there will be some discrimination certainly on Russian diamonds. What does that do for us? Potentially puts more pressure on diamond prices to go up, quite frankly, because Russia accounts for 30% to 40% of global diamond supply. So we're watching this space carefully. We think the market is strong. What we're most encouraged by is the fact that rough prices are tracking in tandem with polished prices. We don't always see that. That's what gives us confidence and a stronger outlook for a strong diamond market overall. But the Russia piece is still unclear at this stage. And it's one we just have to continue to watch very closely.

Can Clara handle diamonds below 1 carat? And does Clara make regular parcels less attractive?

Yes. Clara can handle diamonds smaller than for -- 1 carat. But the real sweet zone for Clara is really diamonds between 1 and 15 carats. There is a computational cost to selling diamonds through Clara. And as computational costs come down and our technology gets more and more efficient, then increasingly, we will be able to take smaller and smaller diamonds. But right now, the finest diamonds, the smallest diamonds does become -- we do become constrained by computational costs. However, it's fast moving, and we do expect to be able to widen that size range in time. Sorry, Robert, what was the second half of that question? I just [indiscernible]

And the use in Clara, does that make regular parcels less attractive?

No. I think one of the wonderful things -- one of the wonderful learnings for me about Clara when we got involved with this technology and had the opportunity to purchase it, the prevailing wisdom traditionally for all of us producers has been, well, we have to package up our less attractive diamonds with our more attractive diamonds if we're going to sell them consistently for repeatable revenues. Clara completely turns that myth on its head. What we've learned is that there is no such thing as an undesirable diamond, only a diamond that gets stranded in the system and it takes 5 to 7 to 9 trades in order to get that diamond to the right polishing wheel somewhere in the world. In other words, all diamonds eventually get consumed. What Clara does is it delivers the right diamond to the manufacturer that's positioned to best maximize its value in one step. And as further testament to that, our sell-through rate on Clara right now is 100%. So we have no left shoes.

Thank you, Eira. And then we have a question concerning a reverse split. Have you ever discussed a reverse split to make the shares more attractive to institutional investors who cannot invest in sub-$1 shares?

This does come up with our shareholders from time to time. It is not something that we are actively discussing with our largest shareholder in our Board, but we certainly continue to convey the feedback that we do get from our shareholders. But at this time, we do not have a plan for a reverse split.

Thank you, Eira. And the last question is whether you can estimate the value to the people of Botswana of Lucara's operations. What are the royalties and fees that flow into the country?

Yes. That's another great question. Botswana is a very important partner in all of this, and they have -- and there is a large benefit accruing to Botswana and the people of Botswana. We pay a 10% royalty on the top. And then we also are taxed on the basis of a sliding scale of how profitable we are. So the taxes can be -- tax rate can vary between 22% and 55%. As we are investing heavily in our underground expansion, we are currently on the low end of the tax, but we are paying also a 10% royalty. I would also reiterate that we employ close to 1,200 people in Botswana, 99% of whom actually are from Botswana. So we're very proud of the fact that Botswana is a significant stakeholder in all of our operations.

Thank you, Eira. And with that, we have answered all open questions. And as always, I think we're truly impressed by the quality of questions and all the topics that come up and it's great to have this interaction with all you shareholders and other interested parties. And I want to thank you for attending tonight. And know that both Eira and I look forward to see you soon again.

Thank you very much, everyone.

Thank you.