Lucara Diamond Corp. (LUCRF) Q4 2022 Earnings Call Transcript

Lucara Diamond Corp. (OTCPK:LUCRF) Q4 2022 Earnings Conference Call February 22, 2023 10:00 AM ET

Company Participants

Eira Thomas - President and Chief Executive Officer

Zara Boldt - Chief Financial Officer

John Armstrong - VP, Technical Services

Chris Schauffele - Project Manager

Conference Call Participants

Paul Zimnisky - PZDA

Operator

Good morning. My sanction is Marjorie, and I'll beryllium your convention usability today. At this time, I'd for illustration to invited everyone to nan Lucara Diamond 2022 Year End Results Conference Call. All lines person been placed connected shut up to forestall immoderate inheritance noise. After nan speakers' remarks location will beryllium a question-and-answer session. [Operator Instructions] Thank you very much.

Ms. Eira Thomas, your -- you tin -- whitethorn statesman your conference.

Eira Thomas

Thank you very much. Welcome everybody to Lucara's year-end convention call, and convey you for joining america today.

On nan telephone from managements, we person Zara Boldt, CFO; Dr. John Armstrong, VP Technical Services; Naseem Lahri, Managing Director of Lucara Botswana; and Chris Schauffele, our Project Manager for nan underground description project. We will beryllium taking you done a speedy reappraisal of nan 4th and our fiscal 2022 highlights, and past we will unfastened it up for questions.

I will beryllium making forward-looking statements passim this presentation, truthful we do promote you to reappraisal this cautionary connection astatine your leisure, which is disposable connected our website.

In 2022, Lucara was proud to commemorate 10 years of continuous operations from its 100% owned Karowe gem excavation successful North Central Botswana and successfully delivered connected each of its financial and operating metrics, including beardown information performance, open-pit accumulation and processing done nan mill connected plan, patient gem income and gross generation, which resulted successful $86.7 cardinal successful EBITDA and costs trending beneath guidance contempt expanding pressures astir inflation. The assets proceed to execute arsenic expected achieving a patient Specials count of 7.2% by weight, including 34 stones greater than 100 carats.

For nan underground description project, we achieved a number of important milestones, including nan completion of each pre-sinking activities connected schedule and budget, nan execution of our main shaft sinking contract, the commencement of main shaft sinking, and nan completion of a caller powerfulness statement connected schedule and budget. Importantly, we commenced our first grouting shape successful nan accumulation shaft successful December, which was successfully completed successful February of 2023, confirming that our planned attack and methodology for grouting is due and effective. The effect of delays and a slower-than-anticipated ramp-up successful shaft sinking rhythm time, together pinch nan imaginable mitigations and acquisition gained from nan first grouting programme will beryllium incorporated into a refreshed schedule and budget, which is expected to beryllium completed successful nan 2nd 4th of 2023.

Touching connected nan market. Overall gem marketplace fundamentals remained patient and unchangeable successful 2022, though value softening observed successful nan 2nd half of nan twelvemonth did effect revenues year-over-year. Our outlook for gem prices successful 2023 and beyond remains optimistic arsenic world proviso shortages proceed to play retired successful nan market. Importantly, Lucara retains entree to ample liquidity successful support of its maturation plans.

Zara Boldt, Lucara's CFO, will now return america done immoderate financial and operating highlights for nan 4th and afloat year.

Zara Boldt

Thanks very much, Eira. Good morning, and bully afternoon, everyone. Thank you for joining america for our Q4 2022 net call.

Just a speedy reminder that I'll beryllium making immoderate forward-looking statements. So, please mention to Slide 2 of today's position for our cautionary statement.

Also, definite financial measures that I will mention to during today's telephone and which look successful nan position are non-IFRS financial capacity measures. These see adjusted EBITDA, adjusted operating earnings, operating rate travel per share, operating separator per carat sold, and operating costs per tonne of ore processed. Please mention to our MD&A for specifications connected really these measures are calculated.

As a reminder, each references are to U.S. dollars, unless different stated.

So, let's statesman pinch nan financial highlights from nan 4th fourth ending December 31, 2022. We recognized full revenues of $42.5 cardinal successful nan 4th quarter, down from $57.9 cardinal successful Q4 2021. This included $40.1 cardinal from nan waste of 81,000 carats from Karowe, inclusive of top-up payments of $3.6 million, arsenic good arsenic $2.4 cardinal from nan waste of third-party equipment connected nan Clara platform. The alteration successful quarterly gross was predominantly driven by a 21% alteration successful carats sold during nan 4th quarter. The income statement pinch HB accounted for 60% of full Karowe gross recognized successful nan 4th quarter. Despite nan wide alteration successful gross recognized, gem marketplace fundamentals proceed to support patient prices, arsenic dependable request and immoderate inventory shortages were reported.

Natural variability successful nan value floor plan of nan plus-10.8 carat accumulation successful immoderate accumulation play aliases fiscal 4th results successful fluctuations successful recorded gross and associated top-ups. During nan 4th fourth of 2022, 8.28% of Specials of full carats recovered was accordant pinch nan Karowe assets model. As much North and Center lobe worldly is expected to beryllium processed successful 2023, while this worldly is higher grade, nan weight percent of Specials is expected to alteration while nan measurement of carats recovered is expected to summation erstwhile we're comparing to 2022.

Karowe gem sold during nan 4th generated an mean value of $450 per carat, excluding [Technical Difficulty] payments. This compares to an mean value of $473 per carat achieved successful nan aforesaid 4th past year. In conscionable a moment, we will look astatine our results by income transmission some for nan 4th and year-to-date.

Adjusted EBITDA of $12.6 cardinal decreased from $21.1 cardinal successful nan aforesaid play successful 2021, driven by nan alteration successful quarterly revenue.

Net income for nan 4th was $7.1 cardinal aliases $0.02 basal net per share. This compares to $1.7 cardinal aliases nary net per stock successful Q4 2021. Non-cash items specified arsenic depletion and amortization, overseas speech gains and losses, gains and losses from derivative financial instruments and income taxation expenses present volatility to nett income.

Operating rate travel per share, a non-IFRS financial capacity measure, was $0.03 arsenic compared to $0.05 per stock successful nan 4th fourth past year.

Our adjacent descent sets retired nan operational highlights for nan 4th quarter. As mentioned earlier successful nan call, we met our 2022 guidance for each operating metrics. Ore and discarded mined during nan 4th fourth of 2022 totaled 484,000 and 199,000 tonnes, respectively. During Q4 2022, tonnage processed was connected target astatine 691,000 tonnes pinch an mean people of 12.5 carats per 100 tonnes.

We recovered almost 87,000 carats during nan 4th quarter, and we sold conscionable complete 81,000 carats for proceeds of $36.5 million, excluding top-up payments of $3.6 million. Of nan almost 87,000 carats recovered during nan 4th fourth of this twelvemonth included were 233 Specials pinch 13 diamonds greater than 100 carats, including 2 diamonds greater than 200 carats and 2 diamonds greater than 300 carats successful weight. Recovered Specials equated to 8.6% of nan weight of full recovered carats from ore processed during nan 4th quarter. Ore processed was substantially from nan EM/PK(S) and M/PK(S) units of nan South Lobe and recoveries during nan 4th were wrong nan expected scope of nan South Lobe assets model.

Our operating disbursal per Karowe carats sold was $193 during nan 4th quarter. This compares to $200 per Karowe carat sold successful Q4 2021. Operating expenses decreased by $3.8 cardinal aliases astir 17% from $22.3 cardinal successful Q4 2021 to $18.5 cardinal successful Q4 2022. This reflects a alteration successful carats sold. Increases to input costs, particularly for labor, substance and powerfulness costs were knowledgeable and person been offset by nan use of a stronger U.S. dollar.

Moving to Slide 6 of nan position wherever we person financial highlights for nan twelvemonth ended December 31, 2022. Those results were beardown from some nan financial and operational perspective. And arsenic mentioned earlier, we're correct successful statement pinch our 2022 guidance.

Total gross of $212.9 million, including $9.1 cardinal from non-Karowe equipment transacted done Clara, was reflective of a beardown marketplace early successful 2022 and upside vulnerability to polish gem prices achieved done nan committed income statement pinch HB. During fiscal '22, this statement was extended for a 10-year play to December 2032.

Sales of Karowe diamonds proceed to make astir of nan company's yearly revenue. During nan twelvemonth ended December 31, 2022, a full of 327,000 carats were sold done our 3 income channels, generating gross of $165.4 million, earlier top-up payments of $38.4 million, astatine an mean value of $506 per carat sold.

Strong revenues were nan main driver for some nan adjusted EBITDA of $86.7 cardinal and nett income of $40.4 million. Depletion and amortization disbursal of $25 million, deferred income taxation disbursal of $24.1 cardinal and a $10.7 cardinal summation connected liking complaint swaps had nan astir effect connected nett income for nan twelvemonth ended December 31, 2022, and erstwhile we comparison to nett income earned for nan twelvemonth ended 2021.

Deferred income taxation disbursal chiefly relates to nan important superior expenditures incurred for nan Karowe underground task improvement successful 2022, which totaled conscionable complete $106 million. These expenditures are taxation deductible successful nan twelvemonth that nan costs are incurred, which reduces nan existent taxation liability of nan company. A deferred taxation disbursal is recorded and nan deferred taxation liability is created to relationship for nan taxation that will beryllium owed successful early years.

Karowe's operating rate costs for 2022, besides a non-IFRS financial capacity measure, was $27.94 per tonne of ore processed. This was beneath our afloat twelvemonth forecast of $29.50 to $33.50 per tonne processed. Cost per tonne of ore processed reflects costs inflation, chiefly related to labor, substance and power, offset by nan use of a comparatively stronger U.S. dollar and a little magnitude of ore mined erstwhile compared to 2021.

Strong rate travel from operations balanced to $0.19 per stock allowed america to trim nan moving superior equilibrium to zero for respective months successful 2022. Draws of $40 cardinal from nan task indebtedness installation this twelvemonth successful operation pinch excess rate travel from operations, supported an finance of conscionable complete $106 cardinal successful nan Karowe underground description project. Chris Schauffele will speak to building highlights from nan 4th fourth shortly.

As of December 31, 2022, nan magnitude drawn from nan task indebtedness installation was $65 million, and we had $15 cardinal drawn from nan moving superior facility. After year-end, we drew a further $25 cardinal from nan task indebtedness facility, which increases nan magnitude drawn to $90 million, arsenic good arsenic a further $8 cardinal from nan moving superior facility, which increases nan magnitude drawn connected that installation to $23 million.

With respect to our disposable liquidity, location are 2 points that I would for illustration to highlight. The existent moving superior installation matures connected September 2, 2023. It is our volition to activity a renewal of this installation from our existing lenders anterior to its expiry. However, location is nary guarantee that nan installation will beryllium renewed connected nan aforesaid position arsenic nan maturing facility. Historically, we person utilized this installation to negociate our short-term moving superior requirements.

Also, anterior to September '23, we will besides beryllium required to spot $52.9 cardinal into a costs overrun installation pursuant to nan position of our facility's agreement. We expect to meet this backing request by making regular monthly publication to nan costs overrun installation during 2023.

Let's now look concisely astatine immoderate operational highlights for nan twelvemonth ended December 31, 2022. During nan twelvemonth conscionable ended, we achieved each cardinal operational metrics successful statement pinch our 2022 guidance. We mined 3.3 cardinal tonnes and we processed almost 2.78 cardinal tonnes of ore, recovering conscionable nether 336,000 carats astatine a recovered people of $12.12. We sold 327,000 carats for gross proceeds of $165.4 million, earlier top-up payments of $38.4 million. Full twelvemonth operating costs per carat sold of $213 is reflective of higher input costs, arsenic antecedently described, mostly offset by nan use of stronger U.S. dollar against nan Botswana Pula. Our beardown operational results were achieved pinch an fantabulous information grounds arsenic nan Karowe excavation has operated for much than 2 years without a mislaid clip incident.

Moving now for a speedy reappraisal of our 3 different income channels. We've included a batch of accusation connected this descent pinch some nan existent and comparative quarterly and afloat twelvemonth results for income from nan Karowe excavation presented. But we deliberation it's important to stress that overall, pricing has remained unchangeable crossed nan 3 different income channels moreover pinch variability successful nan measurement of carats sold successful each period. As you tin see, measurement has an important effect connected nan mean value per carat achieved connected a quarterly basis.

For nan 3 months ended December 31, 2022, we recorded gross of $24.1 cardinal from nan HB agreement, including top-up payments of $3.6 million. The alteration successful gross successful nan 4th fourth versus nan comparative 4th successful 2021 tin beryllium attributed chiefly to nan number of high-value diamonds, which we delivered to HB earlier successful 2021, for which nan worth of top-up payments was arsenic expected, higher.

Top-up values will typically summation arsenic nan much valuable stones move done accumulation and go disposable for sale. So, while a little number of carats were delivered to HP successful nan 4th fourth of 2021 erstwhile we're comparing to Q4 2022, nan first worth of those shipments were comparable owed to nan worth of nan stones delivered successful Q4 2021.

Despite nan wide alteration successful gross recognized successful Q4 2022, gem marketplace fundamentals proceed to support patient prices arsenic dependable request and immoderate inventory shortages were reported. Natural variability successful nan value floor plan of nan plus-10.8 carat accumulation successful immoderate accumulation play aliases fiscal 4th does consequence successful fluctuations successful recorded gross and associated top-ups and should beryllium expected.

For nan twelvemonth ended December 31, 2022, nan institution recorded gross of $128.7 million, including top-up payments of $38.4 cardinal from nan waste of conscionable complete 11,000 carats to HB.

For Clara, during nan 4th quarter, income volumes transacted were $6.6 million, down somewhat from $7.7 cardinal successful Q4 2021. While less income were held during nan quarter, nan measurement of third-party equipment transacted represented astir 40% of full volumes transacted and contributed gross of $2.4 million, up from $1.4 cardinal successful nan comparative quarter

15 income were completed connected Clara successful 2022, down from 21 income successful 2021, pinch a full income measurement transacted of $35.7 million, an summation from $28.7 cardinal successful 2021. In 2022, nan wave of income was adjusted to guarantee optimal customer participation. Revenue generated from nan waste of third-party equipment accrued from $2.1 cardinal successful 2021 to $9.1 cardinal successful 2022.

The 4th fourth tender successful 2022 reflected a bully capacity successful unsmooth gem pricing crossed each tendered size classes, though little than what was achieved successful nan first 2 quarterly tenders of 2022, arsenic concerns of a world economical slowdown became much salient against nan backdrop of precocious inflation, liking complaint increases and uncertainty successful proviso chain. Approximately 76,000 carats were sold successful nan December '22 tender, generating revenues of 12.2 -- pardon me, $12.2 million. This compares to astir 97,000 carats sold for $19 cardinal successful nan Q4 2021 tender. For nan year, we sold 305,000 carats done tender for gross proceeds of $53.3 million, up somewhat from nan $51 cardinal successful gross earned done tender income successful 2021.

This adjacent descent sets retired our 2023 guidance. There are a mates of points that I'd for illustration to item here. In 2023, our gross forecast assumes that 52% of nan carats recovered will travel from nan higher-value M/PK(S) and EM/PK(S) units wrong nan South Lobe, while nan remaining 48% of carats recovered will travel from nan Center Lobe successful accordance pinch nan excavation plan. This is expected to make gross betwixt $200 cardinal and $230 cardinal successful 2023. Centre Lobe material, while higher grade, has a little weight percent of stones greater than 10.8 carats successful size erstwhile compared to South Lobe material.

We expect to retrieve betwixt 395,000 and 425,000 carats adjacent year, and to waste betwixt 385,000 and 415,000 carats. As a result, while our gross gross is expected to beryllium accordant pinch nan amounts recognized successful '21 and '22, nan mean value per carat sold is expected to decrease.

In 2023, superior costs for nan underground description are expected to beryllium up to $105 million, and we'll attraction mostly connected shaft reasoning activity on pinch building of nan bulk aerial cooler, tendering of nan underground improvement statement and underground instrumentality purchases. We expect to walk up to an further $20 cardinal connected sustaining superior and task expenditures related to unfastened pit mining operations wherever nan attraction will beryllium connected replacement and refurbishment of cardinal plus components successful summation to dewatering activities.

We are besides readying an description of nan tailing retention installation successful accordance pinch nan Global Industry Standard connected Tailings Management, and we expect to complete a organization sports installation successful Letlhakane.

Lucara [on its] (ph) progressive taxation complaint computation allows for nan contiguous conclusion of operating costs, including superior expenditures successful nan twelvemonth successful which they are incurred. Based connected our projected 2023 gross of astir $200 million, up to $230 million, and assuming nan underground improvement expenditures of $105 million, nan taxation complaint should beryllium astir zero for 2023.

That concludes nan update connected our financial results for fiscal 2022. I'll now manus backmost to Eira to continue. Thank you very much.

Eira Thomas

Thank you very much, Zara.

Further to nan comments made successful my opening remarks, successful 2022, nan gem marketplace began connected a coagulated trajectory pursuing a banner twelvemonth for gem prices successful 2021, but past softened considerably towards year-end successful consequence to expanding world geopolitical uncertainties and rising inflation, which resulted successful a weaker vacation income play successful nan U.S. compared to nan erstwhile year. Despite this pullback, nan marketplace remains unchangeable and value improvement, on pinch expanding marketplace depth, has been observed successful early 2023.

We stay cautiously optimistic that these value improvements will continue, peculiarly arsenic China emerges from a play of prolonged lockdowns owing to nan pandemic. Medium to longer term, we stay optimistic astir gem prices arsenic unsmooth gem proviso shortfalls proceed to manifest globally, a operation of aging mines and small to nary superior being invested successful exploration.

I deliberation I missed a descent there. Going back. On this slide, we want to conscionable talk a small spot much astir our assets performance. As Zara mentioned, our capacity and nan betterment of Specials successful Q4 remains successful statement pinch expectations and accordant pinch humanities recoveries and quarterly variability expected wrong nan South Lobe. During Q4, we recovered 233 Specials aliases azygous diamonds greater than 10.8 carats successful size, including 13 greater than 100 carats successful size, representing astir 8.6 weight percent Specials of full carats recovered.

One point we did want to reiterate here, which Zara has already mentioned successful her chat and including astir guidance, is that dissimilar successful nan past mates of years, 48% of nan carats recovered successful 2023 will travel from Central Lobe material, which again is higher grade, but has a little weight percent of stones greater than 10.8 carats successful size erstwhile compared to South Lobe material. And arsenic a result, we do expect our recoveries to way much likewise to nan ample chromatic profiles highlighted connected this chart from 2016 and 2017.

Lucara's diversified and optimized attack to gem income is unsocial successful nan manufacture and creates greater alignment on nan worth chain, driving efficiencies utilizing technology, adding transparency and unlocking worth for each participants. In 2022, 26% of our revenues were generated done accepted unsmooth gem tenders, 11% from Clara, our proprietary integer marketplace focused connected income of better-quality unsmooth diamonds betwixt 1 and 15 carats successful size, and 63% from income of polished diamonds manufactured by HB from our plus-10.8 carat high-value unsmooth gem production.

This multichannel attack to income continues to make a stronger wide gross floor plan for Lucara, and by aligning ourselves pinch different participants successful nan worth chain, including nonstop relationships pinch HB and prime unit brands, contributes to longer-term pricing stability. Increasingly important, arsenic sanctions proceed to ramp up successful narration to Russian gem trade, our attack provides complete transparency and assurance connected gem provenance.

After 2 years of proceedings income done HB, wherever each of Lucara's highest worth plus-10.8 carat accumulation from Karowe was being channeled into a unsocial manufacturing business alternatively than being sold is rough, successful November of 2022, nan institution made a bold determination to widen this statement for different 10 years. HB is utilizing state-of-the-art scanning, readying and manufacturing technologies to maximize nan worth of each and each unsmooth diamond, trading into existing request and delivering Lucara a polished price, little a group interest and nan costs of manufacturing.

For nan first clip successful our 10-year history, we person penetration connected what becomes of each and each plus-10.8 carat unsmooth gem produced from our excavation participating successful each measurement of nan readying and manufacturing process correct done to nan last polish sale. Not only has this attack stabilized prices for our astir valuable accumulation segment, but it has besides demonstratively grown demand, our halfway objective.

In nan 4th quarter, Clara, Lucara's 100% owned proprietary unafraid web-based integer income platform, proceed to turn successful standard and interest, and importantly, proceed to adhd third-party proviso volumes, which now relationship for astir 40% of nan volumes transacted. For nan afloat year, full income volumes accrued by 25%. And importantly, gross generated from nan waste of third-party equipment accrued by much than 400%, highlighting a affirmative trajectory.

Another cardinal milestone for nan level successful 2022 was nan completion of our first shaper trial, which generated highly affirmative results and has led to precocious discussions astir formalizing a longer-term contract, a cardinal nonsubjective for nan level successful 2023.

Moving connected to nan underground. As a reminder, this is simply a afloat financed task that will widen our excavation life retired to astatine slightest 2040. And arsenic Zara has already indicated, we made awesome advancement successful 2022 pinch expenditures of astir $106 cardinal pinch nan task installation now drawn down -- drawdown that sitting astatine astir $65 cardinal astatine nan extremity of nan 4th quarter.

And connected this slide, we are highlighting nan economics astir nan project. And I really want to stress that nan numbers you spot present are based connected very blimpish gem prices based connected a discount to gem prices successful 2018. We've since emerged into a overmuch stronger market. In addition, we removed our largest -- highest worth diamonds from our economical exemplary successful bid to beryllium -- adhd an other furniture of conservancy. So, that's $4 cardinal of anticipated further nett revenues from nan underground, we do judge is conservative.

I'm now going to move it complete to Chris Schauffele, who will springiness america a small much item connected immoderate of nan advancement that we've made connected nan underground description successful 2022. Chris?

Chris Schauffele

Yes. Thank you, Eira, and hullo to everybody connected nan call.

A spot of an operational update here. So, our Q4 attraction for nan underground description was centered astir shaft sinking and advancing nan depths of some nan accumulation and ventilation shafts. At nan adjacent of nan year, nan accumulation shaft was astatine a extent of 132 meters beneath nan aboveground and wrong nan basalt stone formation, and conscionable astir nan modulation into nan sandstones, it's astir six meters distant from nan sandstones. The ventilation shaft was astatine a extent of 179 meters beneath nan aboveground and was wrong nan sandstone formation.

For our rhythm times, which are nan cardinal metrics to find really agelong it takes to beforehand each shaft, they person improved complete nan quarter. Improvements were mostly related to instrumentality and unit changes that were implemented. However, arsenic of nan adjacent of nan year, sinking rhythm times person not yet consistently met our planned rates.

During December, nan ventilation shaft was wrong nan sandstones and nan accumulation shaft six meters distant from entering this formation. The sandstones are known to beryllium water-bearing and pre-excavation shaft grouting has commenced wrong each shaft. Grouting is performed successful beforehand of sinking to seal retired h2o from entering nan shaft excavation.

The grouting materials we're utilizing are a type of chemic grout that tin permeate profoundly into nan sandstone formation. And nan chemic grout, this is simply a proven exertion we're utilizing and utilized successful galore shafts astir nan world. Our grout uptake wrong nan sandstone statement is indicating that nan chemic grout type being utilized is effective for sealing retired nan water.

So, based connected nan learnings and existent capacity for some nan rhythm times and grouting durations, we are preparing a refresh to nan project's fund and schedule. Work connected nan refresh is ongoing and will beryllium fresh by nan extremity of Q2 of this year.

Other aspects of nan task continued to way good done nan quarter. These are chiefly aboveground aspects. So, anterior to nan year-end, we had successfully commissioned and energized our bulk powerfulness supply, which consists of 29 kilometers of high-voltage 132KV transmission lines and 2 substations. This was really a collaborative effort betwixt nan task squad and nan Botswana Power Corporation, and now nan task is being afloat powered by statement power.

We person besides awarded nan shaft bulk aerial cooling statement for which elaborate engineering is now underway, and this statement will modulation into building later this year.

In position of our walk for nan underground description successful 2022 was $106 million, bringing nan full finance to $226 cardinal astatine nan adjacent of nan year. Our committed funds, which see acquisition orders that are successful process specified arsenic underground mobile instrumentality and underground infrastructure equipment, totaled $112 cardinal astatine nan adjacent of nan year.

And this concludes nan underground description update. Thank you.

Eira Thomas

Thank you very much, Chris.

I'd for illustration to now spell connected and opportunity a fewer words astir our attack to sustainability earlier closing retired nan call. During 2022, Lucara continued to fortify its narration pinch Botswana, moving pinch each of our communities of liking to understand needs and to advancement and create meaningful activity plans that tin lend towards sustainable economical improvement beyond nan life of our mine.

Highlights from these efforts included continued support for cultivation products designed to make Botswana little reliant connected nutrient imports; finance successful a caller nationalist standard sports installation successful Letlhakane; and feasibility activity to understand nan opportunity of adding star power powerfulness procreation astatine our excavation site, not only to decarbonize our ain operations, but to supply much-needed replacement powerfulness options for our section communities.

Another important nonsubjective undertaken by our mining and sustainability teams successful 2022 included nan improvement and implementation of an updated tailings model aligned to nan Global International Standard for Tailings Management, aliases GISTN. And during nan 4th quarter, connections to a caller tailings reservoir paddock, constructed according to these GISTN guidelines, were completed and nan paddock was put into usage successful January of this year.

Another inaugural launched successful '22 successful anticipation of underground operations commencing successful 2026 was nan improvement of a training scheme for workforce transition, including underground excavation rescue training.

Lucara does nutrient an yearly sustainability study and we do promote everyone to person a look astatine this report, which is disposable connected our website.

So, summing up, 2022 was different engaged and productive twelvemonth for Lucara. The excavation continues to execute good and we will proceed to thrust efforts astir operational excellence, aimed astatine improving capacity and expanding efficiencies successful 2023 successful support of our ongoing underground description program.

We proceed to judge that Lucara represents an fantabulous finance opportunity. The gem marketplace is positioned to do good from now and good into nan future, owing to marketplace fundamentals that are underpinned by world proviso shortfall. And we deliberation that Lucara is 1 of nan champion ways to get vulnerability to nan gem business having a beardown anchor flagship task successful Karowe, which will beryllium mining diamonds now retired into astatine slightest 2040.

In addition, we person plus diversification done Clara, which is not a mining opportunity, but it is simply a gem opportunity, and we really judge that Clara has nan imaginable to proceed to disrupt nan humanities attack to gem income and go an important contributor to Lucara's early rate flows.

With that, I'd for illustration to opportunity convey you very overmuch for each of you participating today. And I'd now for illustration to unfastened nan telephone up to questions.

Question-and-Answer Session

Operator

Thank you, Ms. Thomas. [Operator Instructions] Ms. Thomas, we'll return our first mobility from Paul Zimnisky from PZDA.

Paul Zimnisky

Hi, everyone. Two questions for me, please. I conjecture this will beryllium much applicable successful nan future, but really should we look astatine really non-Karowe unsmooth showed connected Clara's translating to gross and profit for Lucara? I guess, for example, could this beryllium implied from full gross minus unsmooth sales, minus top-up payments?

And past conscionable secondly, could you please supply an update aliases immoderate commentary connected what you're seeing successful a ample chromatic market? Maybe really is looking compared to six months agone and 12 months ago? Thanks.

Eira Thomas

Sure. Thank you, Paul. And possibly I'll conscionable inquire a constituent of explanation connected your mobility connected Clara. Can you -- sorry, tin you conscionable opportunity that again? I wasn't rather clear what your -- first portion of your mobility was there.

Paul Zimnisky

Yes. What's nan champion measurement to imply, I guess, nan gross and profit to Lucara from nan income commissions of third-party unsmooth connected Clara?

Eira Thomas

Yes. So, arsenic you know, Paul, nan rationale down Clara is not only for trading our ain goods, achieving amended prices, which we do. And we cognize that because we tin comparison to humanities results complete 10 years of trading our diamonds done accepted tenders. But nan rationale, of course, for Clara is really to unfastened it up to third-party sales, and it really is simply a measurement story. So, arsenic we ramp up connected third-party volumes, that really drives nan rate travel generating potential. So, astatine nan moment, nan measurement that our business exemplary is evolving, we are fundamentally charging a committee for income done Clara, and that committee is what's driving nan gross numbers you spot successful our quarterly earnings.

John aliases Zara, do you want to adhd thing to that portion earlier we spell to nan 2nd part?

Zara Boldt

Not from me. Thank you.

John Armstrong

Not from me, Eira. Thank you.

Paul Zimnisky

Okay. Eira, I conjecture conscionable connected Slide Number 14, wherever you showed nan five-year maturation imaginable profile. If we look astatine nan gross there, I mean, is that -- truthful that's benignant of what we're talking about. So, say, you generated astir $9 cardinal successful third-party commissions from Clara successful 2022. So, nan forecast is that number will beryllium person to $30 cardinal successful 2023. Is that -- americium I knowing that correctly?

Eira Thomas

Yes. And it really is limited connected securing that further third-party supply, Paul, but really nan conception location and what you spot successful that five-year scheme is really assuming that we tin get to 10% of world marketplace stock for transactions done Clara. So, betwixt $1.5 cardinal and $2 cardinal of transactions. And if we tin do that, that will make nan types of revenues that you spot there, revenues and rate flow, rather frankly, that will beryllium comparable to what we're generating to Karowe. But it is very overmuch limited connected expanding that supply. And we are -- we believe, astatine a very important inflection constituent having completed our first successful shaper trial. And of course, we're continuing to ramp up connected nan third-party proviso from secondary sources arsenic well. So that is our scheme for 2023.

Paul Zimnisky

So, is that included successful nan gross guidance, nan third-party gross from Clara? Or is that imaginable upside?

Eira Thomas

Zara, do you want to reply that?

Zara Boldt

Yes. Potential upside. Thank you.

Eira Thomas

Yes. We've been very blimpish connected that, Paul. But -- and it has taken clip to get take connected Clara, but it is starting to happen. And I deliberation erstwhile group person nan opportunity to proceedings nan platform, nan results are very, very compelling and speak for themselves. I deliberation nan different rationale for utilizing Clara coming really comes from a desire to summation transparency and beryllium assured successful provenance, and we're getting a batch of liking connected Clara from that position arsenic well.

Paul Zimnisky

Great. Thanks. And then, conscionable quickly if you could possibly remark connected nan ample chromatic marketplace and possibly really it looks coming versus six months agone and 12 months ago?

Eira Thomas

Yes. I deliberation what's really important astir our inaugural pinch HB is nan presumption is that nan logic we entered into this is related to summation separator seizure downstream. That's really only portion of nan story. By channeling each of our equipment done a azygous manufacturer, it gives america overmuch greater power connected really those diamonds are sold and really we tin activity pinch existing request retired location successful nan marketplace. So, a large portion of nan rationale for HB has been astir stabilizing prices for our largest, astir valuable diamonds. And that's really been, I think, nan taxable for america complete nan past 2.5 years.

Large chromatic prices did travel nether unit anterior to COVID and past utmost unit during COVID. What we've seen decidedly is value stabilization now for our ample stones. And nan imaginable present -- we're starting to spot those prices really strengthen. That's 1 of nan reasons that we stay very excited astir our caller income strategy, because we really do judge this is only nan beginning. We judge if we proceed to beryllium very disciplined and focused connected really we waste our diamonds that will really support continued value appreciation for our ample stones, which is not what we saw betwixt benignant of 2016 and 2020. So, we deliberation we're really astatine nan opening of nan betterment successful nan ample gem prices.

Paul Zimnisky

Excellent. Thank you very much.

Eira Thomas

You're welcome.

Operator

And astatine this time, we person nary further questions successful nan queue.

Eira Thomas

Okay. Well, convey you very much, everybody, for joining us, and we look guardant to connecting pinch you successful Q1. Bye for now.

Operator

Thank you. And ladies and gentlemen, that does reason today's conference. We admit your participation. Have a awesome day.