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  5. LUC: I still have my small position in Lucara Diamonds and it still a diaster. [Lucara Diamond Corp.]
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Q: I still have my small position in Lucara Diamonds and it still a diaster. CEO was replaced a couple of months ago and the former CEO came back. Under the former CEO Lucara made an agreement with an Antwerp gem polisher (HB)where they would send there large special diamons, which the Karowe mine in Botswara often find, to HB for polsihing and cutting. Lucara would then get cash flow from the finished products, (potentially higher margin and more steady cash flow). Well the new CEO wants to end that agreement. The open pit mine is still profitable but the development of the under ground mine has hit snags (namely water filtration in the raised shafts) and the finish date has been pushed back another year. What 5i could help me with is a better understanding of the outlook for diamond prices. Every where I look for on outlook on diamond pricing requires a subscription and my position is simply too small to warrant paying a subscription. In the end, should I just dump this dud or hang on a while longer (It is in a TFSA so no tax benefit.)?
Asked by Paul on December 19, 2023
5i Research Answer:

Price forecasts are indeed hard to get, but we would not worry too much about that. Prices continue to be set essentially as a monopoly/duopoloy of supply, and marketing plays a very big role in demand and pricing. But we think the overall trend is not great. This article highlights a few reasons. Millenials don't care, and synthetic diamonds are garnering a much bigger market share. LUC shares are very cheap,  and good earnings growth is expected next year. But, it is leveraged, and it has not created value: shares are down about 90% in the past decade. The share count has risen about 80M in that time. It also stopped its dividend in 2019.  It is priced right, but consider industry risk and small cap risk, and debt levels, we would not miss it if we didn't own it. 

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