Q3 Revenue Estimate of 55 MUSD Below is my rough estimate on the Q3 revenue. What do you think, does it make sense?
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Before Corona, Lucara had an operating outlook for 2020 with a revenue forecast of 180-210 MUSD.
If we take the lower number (180) and decrease that by 10%, due to reduced rough prices (Ziminsky Rough Diamond index is YTD down 10.4%), we get 162 MUSD.
That would result in an average quarterly revenue of 162/4 = 40.5 MUSD.
According to Lucara, about 70% of their revenue is from +10.8 ct stones ('specials').
So the quarterly average number would then be around 28.5 MUSD from specials and 12 MUSD from ordinary.
However, under the supply agreement with HB, Lucara’s +10.8 carat production will be sold at prices based on the estimated polished outcome of each diamond, determined through state of the art scanning and planning technology, with a true up paid on actual achieved polished sales thereafter, less a fee and the cost of manufacturing.
According to presentations by Eira, Lucara ships diamonds to HB every second week and gets initial payment after 60 days.
The Q2 report includes this information "The Company will start recognizing revenue from this sales agreement inclusive of the production from the +10.8 carat stones that would have ordinarily been part of the Q2 tender in the third quarter this year."
My understanding is hence that the Q3 number will include initial revenue from HB for specials produced both during Q2 and Q3.
Assuming that the sales through HB will result in the same revenue as if sold as rough (28.5 MUSD as calculated above) that would result in 57 MUSD.
However, the initial price paid by HB is most likely a conservative estimate, say 75% of the actual.
Then the revenue estimate from diamonds sold through HB would be ~43 MUSD if we conservatively assume that no polished stones have been sold yet.
But there has also been a regular tender in Antwerp during Q3, using the estimate from above, that would add another 12 MUSD in revenue.
So in total, with these assumptions, the Q3 revenue number would then be 43+12 = 55 MUSD from the inital payment from HB for Q2 and Q3 special production and one ordinary tender during Q3.