William Lamb, CEO of Toronto-listed Lucara Diamond, says it was never his plan to return to diamonds. He resigned as CEO of Lucara in 2018 after 10 years, but tells the FM loyalty to the Lundin dynasty of mining entrepreneurs brought him back in August 2023.
“The honest truth is I had no desire to come back.” As the self-employed director of WLP Consulting Services in Vancouver, he was working on a lithium prospect in Alaska and a copper project in Peru. “I got up at 8am, went to the gym, and at 10am I sat down and did some work. I was very happy.”
Then Adam Lundin, chair of Lundin Mining, a founding shareholder of Lucara Diamond, asked Lamb around for a chat. Lucara was in the throes of an urgent recapitalisation after the botched underground expansion of Karowe, its Botswana mine. Eira Thomas, a joint founding investor in Lucara and its CEO, had resigned.
Says Lamb: “He takes me down into the sub-basement — there is a big door that opens out into Lake Geneva — and there’s this beautiful wooden green speedboat. He said: ‘Go around the back. Lukas named it the Lesedi La Rona in the exact script that we had used for the stone.’”
Lukas Lundin, the late patriarch of Lundin Group, plucked Lamb from De Beers, where he was a process engineer, to build Karowe. First discovered by De Beers, the mine has since become famous for its astonishing diamonds, of which the 1,111ct Lesedi La Rona (“our light” in Tswana) was among the first, in 2015.
“That was when the penny dropped,” says Lamb. “There was something more emotional. This was something that I actually needed to finish for Lucara.”
Lamb faces multiple hazards though. First, Karowe’s underground expansion needs to be steered carefully. Second, diamond prices are under enormous pressure. Finally, politics in Botswana was unpredictable under former president Mokgweetsi Masisi and is set to remain so, especially given a doubling in the trade deficit amid declining diamond receipts. The new coalition government led by President Duma Boko is an unknown package.
Masisi loomed large in Lucara’s affairs during his six-year presidency. For instance, he pressured the miner into renewing a 10-year marketing agreement with HB Antwerp, a cutter and polisher in which the Botswana government has a 24% stake. Lucara had earlier terminated its relationship with HB Antwerp after it had breached, in Lamb’s words, a financial agreement. “The reason we got back together is not because we wanted to,” says Lamb. “That’s all I’m saying.”
The Botswana government stake in HB Antwerp has also been consequential for the country’s diamond industry. In December, Gem Diamonds CEO Clifford Elphick complained bitterly about “inappropriate sales” from Botswana. Goods, thought to be from HB Antwerp, were flooding the market at prices rivals couldn’t match.
Lamb acknowledges it’s one downside of HB Antwerp’s influence over the Lucara sales mix. In terms of its 10-year deal, HB Antwerp is entitled to sell all diamonds from Karowe above 10.8ct, known as “specials”, which account for 60%-70% of Lucara’s average annual revenue. HB Antwerp’s manufacturing facilities are state of the art, but the firm lacks a distribution network. “If you’re trying to sell to the same people all the time, eventually those people are going to get their pockets full and they won’t pay the maximum value for the stones,” says Lamb.
Masisi cared little for this; nor for incendiary comments about Botswana’s relationship with Debswana, a 50/50 joint venture with De Beers, that unsettled the market. Ahead of Botswana’s national elections last year, Masisi spoke of “increasing our shares in De Beers” despite having signed an in-principle marketing agreement with Anglo American a year earlier.
From a diamond perspective we’re seeing a lot of polished goods come back from China
— William Lamb
Speaking after his surprise election success in November, Boko said De Beers had been “considering walking away”, seemingly affronted by Masisi’s attempts to use the unsigned marketing agreement as an election tactic. Said Boko in a televised statement: “The relationship with De Beers could have been damaged by the way the negotiations were handled. The first thing that needs to be done is to engage the other party.”
While the outlook is promising, a final sales agreement is still outstanding on Debswana.
It hasn’t helped HB Antwerp that diamond prices are so poor. China, the world’s second-largest diamond market, remains the major drag on total demand. Prices in the country fell 50% last year, while in December De Beers cut prices for most grades between 10% and 15%.
“From a diamond perspective we’re seeing a lot of polished goods come back from China, and that’s just adding into the available stockpile of goods,” says Lamb. According to a report by the Financial Times this month, De Beers has a $2bn capital build — the largest stockpile since the 2008 global financial crisis.
The stockpile is not the largest De Beers has carried in its long history, but it’s certainly an unwanted complication. Anglo in May announced a far-reaching restructure in which it decided to sell its coal, platinum and diamond investments. Analysts think De Beers might be the hardest part of Anglo’s restructuring puzzle.
Anglo has the balance sheet to support the capital build in De Beers, but would a buyer potentially limit the number of interested parties? Furthermore, knowing the stockpile can’t be easily released in a slow-burn market, the price for Anglo’s 85% in De Beers might be heavily discounted. It might be that Anglo decides to retain De Beers for longer, breaking CEO Duncan Wanblad’s pledge to complete the restructuring process in 18 months to two years.
“I would actually say that it’s a much more complex question to answer because you can throw in Russian sanctions which start [the] first half of this year,” says Lamb. “You can also throw in the current fiscal situation in Botswana and how the government is going to view any Anglo/De Beers transaction.
“I don’t think there’s a clear view on how that’s actually going to fall out,” he says.
In this interplay between politics and markets, Lamb can’t afford any slip-ups with the commissioning of Karowe’s expansion, now pushed out two years from its original date to the first half of 2028.
Shaft-sinking has progressed to more than 700m from 167m when Lamb rejoined Lucara. In addition, his team discovered De Beers’s data from exploration it conducted before 2007, providing accurate geology on potential water intersects. Had Lucara known this previously, its project delays might have been avoided.
Lucara’s bind, however, is maintaining ore feed to its plant as its open-pit mine depletes. While stockpiles suffice, there is grade depletion which raises questions about production from 2027 until the project begins. In terms of the recapitalisation, Lucara raised a total $220m of debt of which $30m is a working capital facility. Crucially, the Lundin Group, as well as HB Antwerp, have provided cost overrun guarantees totalling $57m.
“Now we’ve actually got reality — and the reality is that it’s going to take two years longer to do the project,” says Lamb.
Dazzling in the dark
Lesedi La Rona, the 1,111ct diamond recovered from Karowe’s “south lobe” open pit in 2015, astonished the world. At the time it was the world’s second-largest gem-quality diamond, surpassed only by the 3,106ct Cullinan diamond discovered more than a century ago, now set in the UK crown jewels.
Since then, Karowe has yielded larger and larger pieces, culminating in a 2,492ct stone unveiled in August. Described by Lamb in an interview with the Financial Times as “a sparkle in a gloomy market”, the diamond is tipped to sell for $40m. Lucara’s share price raced up 40% after its discovery was made public
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But magnificent finds of this ilk don’t always translate into financial bonanzas for Lucara, not immediately anyway. It took two years to sell Lesedi La Rona (for $53m to specialist manufacturer Graff) after Lucara first put it on auction at Sotheby’s. The Sotheby’s auction was lambasted by the midstream of diamond cutters and polishers, who believed it should have been cut and polished into smaller stones.
But Lamb says the midstream failed to recognise Lucara was seeking to put the stone “in storage” as a way of protecting the manufacturing industry. At the time, a bidder for Lesedi La Rona acknowledged it was struggling to sell five 100ct pieces.
“The short and sweet of it is that these are not easy stones to move, if you looked at the universe of people that could afford the stone — you’ve got to be fairly selective.”
As with Lesedi La Rona, the 2,492ct diamond might best reside with a single buyer. Lamb says it isn’t as white as Lesedi La Rona, owing to glitches, or dirt, in the diamond reflected as brown. However, a small piece that came off the diamond is interpreted by Lamb as a type D, or colourless, in the diamond grading scale, which by value is the highest-quality diamond — but then often the hardest to move.
Lucara is entertaining all comers at the moment, including museums which want the stone as a drawcard owing to its historic value. Trustees from a museum in Texas offered $42m for Lesedi La Rona.
“We’ve had discussions with three different museums across the globe who want to acquire the stone. They want it in the rough; they don’t want to polish it.”
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