The Company's sales during the first half of 2020 were impacted by the COVID-19 pandemic resulting in a 38% decrease compared to the same period in 2019, at $99.5 million (US$74.2 million) versus $156 million in 2019 (US$118 million). The sales of H1 2020 reflect average realised value of $70 per carat (US$52), 23% lower than average realized value of $91 per carat, (US$68) during the same period in 2019.
In Q2, the Company sold 757,360 carats at an average value of $44.92 per carat (US$33.01 per carat) for total proceeds of $34 million (US$25 million). It is important to note that Q2 diamond sales do not represent the normal run of mine production profile.
There were no formal sales held in the second quarter due to the ongoing COVID-19 impact. Markets have been heavily impacted with resultant demand for rough diamonds being extremely limited. As previously announced, the Company entered into US$50 million sales contract with Dunebridge Worldwide Ltd ("Dunebridge"). The contract allows the Company to sell its current production at market related prices and to participate in future potential upside (with no downside risk) when the diamonds are sold by Dunebridge.
$30.6 million (US$22.6 million) of the total sales in Q2 were under the sales agreement with Dunebridge. The initial sale did not reflect a normal, run of mine mix as they contained a lower proportion of larger, higher value diamonds which were accelerated into earlier sales to maximise revenue in Q1. Further, diamonds larger than 10.8 carats recovered during the quarter were not included in any sales.
The sale agreement with Dunebridge was a positive step and allowed the company to maintain its liquidity and meet its current expense obligations. The Company expects to resume its normal market structured sales in September.
Stuart Brown, the Company's President and Chief Executive Officer, commented:
"Our Q2 financial and operational figures have been heavily impacted by COVID-19 headwinds and associated global mitigation efforts to slow down the spread of the virus. These conditions severely reduced retail sales and impacted the diamond pipeline and do not reflect normal operating or market conditions when compared to same period in 2019."
"At the mine, we have had to implement new procedures to reduce the risk of infection. As a result, we have lowered our 2020 production guidance with respect to total tonnes mined and carats recovered by approximately 7% and 9% respectively.
"The severe impact of COVID-19 meant that the market for rough diamonds came to a virtual halt in the second quarter and we were unable to execute any normal sales. The agreement with "Dunebridge" has provided the company with a vital liquidity lifeline. The company remains cautious with respect to COVID-19 as travel, self-imposed trading bans, and limited retail trading are likely to remain in effect for the short term. However, and while post COVID-19 prices for rough diamonds remain under pressure, the demand is gradually opening up for certain categories. We believe the market will start improving later in Q3 of this year and strengthen with the start of the major retail season towards the end of the year and into 2021. The Company remains on track to resume its traditional sales methods in September."
Financial Highlights for Second Quarter 2020 ("Q2 2020")