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Wednesday, November 25, 2020

Lucara Diamond Corp (OTCMKTS:LUCRF) Takes the Blockchain Leap

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Lucara Diamond Corp (OTCMKTS:LUCRF) took flight on Monday as the company announced a move over the weekend that will take it into the blockchain space. Specifically, the company just announced the acquisition of Clara Diamond Solutions Corp., a company whose primary asset is given as “a secure, digital sales platform that will transform how rough diamonds are sold, unlocking value for diamond producers and manufacturers alike.”

But, in the following sentence, traders latched onto one word that will probably be clear as you read it. According to the release, “Clara uses proprietary analytics together with cloud and blockchain technologies to modernize the existing diamond supply chain, driving efficiencies and ensuring diamond provenance from mine to finger. Lucara has agreed to purchase Clara for a total up-front consideration of 13.1 million shares of Lucara (approximately $29 million in up-front consideration based on the closing price of Lucara common shares as at February 22, 2018) resulting in approximately 3.7% dilution to its existing share capital.” For those who didn’t see it, it was “Blockchain”.

Lucara Diamond Corp (OTCMKTS:LUCRF) is a new diamond producer. It’s two key assets are the Karowe mine in Botswana and the Mothae project in Lesotho. The 100% owned Karowe Mine is a newly constructed state-of-the-art mine which was fully commissioned in Q2 2012.

At the 75% owned Mothae project the company has completed the trial mining stage and is working towards completing a Preliminary Economic Assessment (PEA). Both Mothae and Karowe are large scale assets with tonnage and throughput upside and production has consistently included large, Type IIA stones.

According to company materials, “Lucara is a leading independent producer of large exceptional quality Type IIa diamonds from its 100% owned Karowe Mine in Botswana. The Company has an experienced board and management team with extensive diamond development and operations expertise. The Company operates transparently and in accordance with international best practices in the areas of sustainability, health and safety, environment and community relations.”

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As noted above, the company just acquired a blockchain play in the diamond space. According to its release, “Lucara intends to commercialize the Clara platform in the coming months using a selection of the diamond production from the company’s Karowe Diamond Mine. Thereafter, Clara will be scaled to accommodate diamond uptake from a variety of sources across the supply chain. Testing on the platform has demonstrated the potential to unlock greater than 20% of value throughout the diamond pipeline to the benefit of all participants. Clara’s revenue model will be based on capturing a portion of this incremental value.”

The blockchain implementation is about tracking specific diamonds. We have seen similar supply chain logistics moves in other similar industries, so it is tried and tested ground being trodden on here. For a company with low debt, tons of cash, and strong top-line growth, the only barrier here is efficiency. This step could spark the stock by giving it more prominent exposure and introducing that missing element. Time will tell.

Recent action has seen 5% tacked on to share pricing for the name in the past week, with 16% on the pop on Monday alone. Market participants may want to pay attention to this stock. LUCRF has evidenced sudden upward volatility on many prior occasions. Moreover, the company has witnessed a pop in interest, as transaction volume levels have recently pushed a bit less than 1100% over what the stock has registered over the longer-term.

At this time, carrying a capital value in the market of $744.7M, LUCRF has a significant war chest ($114.4M) of cash on the books, which must be weighed relative to virtually no total current liabilities. LUCRF is pulling in trailing 12-month revenues of $327.3M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 96.5%. This may be a very interesting story and we will look forward to updating it again soon. Sign-up for continuing coverage on shares of $LUCRF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $LUCRF, either long or short, and we have not been compensated for this article.

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