More annual reports from Lucapa Diamond Company:
2023 ReportA n n u a l R e p o r t
f o r t h e y e a r e n d e d 3 1 D e c e m b e r
2020
ASX Code: LOM
ACN 111 501 663
34 Bagot Road, Subiaco WA 6008
Tel: +61 8 9381 5995
Fax: +61 8 9380 9314
Email: general@lucapa.com.au
www.lucapa.com.au
History of +100 carat diamond recoveries
131 ct
2012
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Chairman’s letter
Review of operations
Directors’ report
Resource statement
Corporate governance statement
Consolidated financial statements
Corporate information
Basis of preparation
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
1. Segment reporting
(Loss)/ earnings per share
2. Revenue
3. Expenses
4. Finance cost and income
5. Income tax
6.
7. Financial instruments and financial risk management
7a. Cash and cash equivalents
7b. Trade and other receivables
7c. Financial assets
7d. Trade and other payables
7e. Borrowings
8. Inventories
9. Property plant and equipment
10. Investment in associate
11. Non-current provisions
12. Share capital and share-based payments
13. Commitments and contingencies
14. Parent entity information
15. Related party disclosures
16. Group information
17. Other significant accounting policies
18. Events subsequent to reporting date
Director’s declaration
Independent auditor’s report
Definitions and abbreviations
ASX additional information
Competent person’s statement and forward-looking statements
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114 ct
131 ct
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120 ct
404 ct
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172 ct
227 ct
129 ct
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2012
2016
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2021
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9
Lucapa Diamond Company Limited Annual Report C
h
air
m
a
5
n’s le
t
t
e
r
Dear Fellow Shareholders,
In writing about the events of calendar year 2020, the phrase from Hamlet comes to mind “when
sorrows come, they come not in single spies – but in battalions” - and so it seemed with our Company
when the devastating effects of the COVID-19 pandemic stopped production at both our diamond
mines in Angola and Lesotho, the latter for over half the year. Throughout this period, we continued to
support the over six hundred team members who work for us across our operations as well as ensuring
that the diamond plants and mine sites were suitably maintained.
Coupled with these in-country events, the greater diamond community was threatened when diamond
markets globally were forced to close. No diamond participant was left unaffected as these border
and market closures saw rough and polished diamond prices slump. Many of the world’s diamond
mines suspended operations with some producers seeking creditor protection from the courts and the
manufacturing sector closed its doors. There is no doubt this was a particularly challenging year for the
entire diamond sector and even though we generated a profit for the second half of 2020 our Company
was not immune, recording a loss of US$9.7 million for the full year ended 31 December 2020 (H1 20:
US$12.7 million loss; H2 20: US$3.0 million profit).
These drastic times called for drastic measures. Both of our producing operations were forced to
suspend activities. Our Lucapa Board and management and Mothae board and staff volunteered a 60%
reduction in salaries, whilst Lucapa’s Non-Executive Director’s suspended 100% of their fees. Corporate
office personnel reduced by 20% and in this regard, I would like to pay tribute to Mark Drummond and
and Mariah Suares, both of whom have provided many years of hard, loyal and dedicated service to the
Company. It was necessary for us to support our treasury to see us through these unprecedented times
and with the strong support of our shareholders and financial advisors we were able to raise A$5.2
million in an entitlement issue.
Whilst both the mines were suspended, we used the downtime to thoroughly review the value drivers
and growth opportunities of our producing assets. At the Lulo alluvial mine in Angola, we excavated
a trench for over a kilometre, to divert the Cacuilo River, enabling us for the first time to get in and
systematically mine the Leziria (floodplain) areas of the river. These Leziria areas contained superior
diamond grades to what we have historically mined in the higher lying terraces. The effect of this work
manifested itself with record production at Lulo when SML resumed its mining operations, including
the recovery of two +100 carat diamonds. To note, the Cacuilo River is over 50km in length and has
extensive floodplains.
Sales of Lulo diamonds, following resumption of
mining, amounted to A$28.1 million despite diamond
prices being impacted adversely by some 25% at the
height of the COVID-19 pandemic. SML ended the year
with a healthy diamond inventory of 4,324 carats,
reflecting a very solid operating performance from
SML as it navigated the COVID-19 induced regulations
to curb the spread of the virus in Angola.
the 46 carat Lulo pink
rough diamond delivered a
spectacular 15.2 carat heart
shaped fancy intense orangy
pink polished diamond
Add to that the great success of the cutting & polishing partnership with Safdico International
(“Safdico”), the manufacturing subsidiary of renowned international diamond house Graff
International. This partnership is delivering handsomely, and now that the manufacturing sector is back
to work following its COVID-19 pandemic closure, we will see the material benefits in 2021. Wonderfully,
the 46 carat Lulo pink rough diamond delivered a spectacular 15.2 carat heart shaped fancy intense
orangy pink polished diamond and we eagerly await the onward sale by the partnership.
Frustratingly for all of us, the kimberlite exploration project at Lulo was slowed down by the COVID-19
pandemic, but we continued to push the program forward in the Canguige catchment area achieving
good results. We too are very encouraged by the recent re-engagement with our Angolan partners for
Lucapa to achieve a majority ownership. It would be an historical step as we search for the source of the
magnificent alluvial Lulo diamonds with our partners.
At the Mothae kimberlite mine in Lesotho, we also used the interruption productively. Firstly, we
utilised the technical and sales data accumulated from over the prior fifteen months of production to
update the JORC resource and grew the indicated resource by a significant 280% to 9.2 million tonnes.
With this increase in the indicated resource tonnes, we continue to apply our energy as to how best to
drive value and returns by increasing the throughput capacity of the diamond processing plant.
You will remember, that in 2018 we had originally scoped a Phase 2 expansion to double the processing
Lucapa Diamond Company Limited Annual Report 6
C
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capacity from the current 1.1 million tonnes per annum (“Mtpa”) to 2.2 Mtpa, but the ~US$50 million price tag
in the middle of a global crisis was likely a bridge too far. Through utilisation of additional capacities in certain
modules of the processing plant and debottlenecking others, we finalised plans with our Lesotho Government
partners to increase plant capacity by 45% to ~1.6 Mtpa, establish additional on-site accommodation and provide
working capital support to Mothae – all for a budgeted US$6 million.
Following a strong V-shaped recovery in the diamond sector in the third quarter of 2020, we re-engaged the mining
operations at Mothae in October 2020 and moved to secure funding for the value accretive Mothae expansion
program via a strongly supported and successful equity raise in November 2020. The expansion activities are
progressing well, scheduled to complete by the end of the first quarter of 2021 and we should see the economies of
scale benefit for the remainder of the year and beyond.
Similar to the cutting & polishing partnership for the large and high-value production at Lulo, the ability to extract
additional value at Mothae by accreting polished returns from Mothae’s high-end production was an important
value driver. As such, Lucapa formulated a proposal to the Government of Lesotho (“GoL”) recommending a new
marketing channel for the diamond production from Mothae in addition to tenders or auctions. Following approval
from GoL, Mothae concluded an agreement with Safdico, where Safdico would purchase the run-of-mine diamond
production from Mothae at rough market value and then will share the post mine gate equally with Mothae.
In a strong showing of the content in the resource and why
Lucapa sought to acquire Mothae, soon after mining activities
were re-engaged in October 2020, Mothae quickly recovered
its fourth and fifth +100 carat diamonds. Firstly, in December
2020, Mothae recovered a 101 carat stone and in February 2021
recovered a 215 carat stone. Both diamonds being rare Type IIa
D-colour stones.
Mothae quickly recovered
its fourth and fifth
+100 carat diamonds
Lucapa have emerged strongly from a very tough 2020 and looking forward, our Board, management and
operations teams are acutely focused on continuing to drive value through production and project success.
Once the 45% expansion program at Mothae is completed this month, we will have successfully delivered on our
stated 200% production growth target and vision of becoming a leading global producer of large and high-quality
diamonds. Let me remind you that our two existing mines rank in the top three of the world’s highest price run
of mine diamond productions. Add to that the value now being derived from beyond the mine gate, we have
developed a truly unique, multi-asset and diverse diamond company.
In keeping with the Company’s vision and long-term production plans, we continue to review and identify
prospective development projects that offer a pipeline of complementary production and exploration
opportunities, both now and well into the future. In this regard, in December 2020 we announced that Lucapa was
participating in the acquisition process of the mothballed Merlin Diamond Mine in the Northern Territory, Australia
(“Merlin”) that has a previously published JORC resource of some 4.4 million carats. Merlin sits on point with our
focus on diamond resources containing decent populations of large and higher-value diamonds, 100% or majority
ownership and both asset and geographic diversification. We will update the market as this acquisition process
progresses. There can be no assurance that the acquisition will finally complete.
Lucapa greatly appreciate the support of our committed and supportive shareholders and financiers, and we are
delighted that Ilwella, the diversified family office of the Flannery family, and Safdico, have become substantial
shareholders in our Company.
I must end by thanking our untiring Executive Directors and management, in Perth, Angola and Lesotho for their
massive efforts in driving production growth over the last two years and leading us out of a severe COVID-19
pandemic affected period and into what must surely be a much brighter future.
With best wishes
MILES KENNEDY
Chairman
Lucapa Diamond Company Limited Annual Report 7
operations for
Revie w of
the year ended
31 Dece m ber 2020
Lucapa Diamond Company Limited (“Lucapa” or
“the Company”) and its subsidiaries (collectively
“the Group”), despite the interruptions caused by
the COVID-19 pandemic, continued to focus on the
growth value drivers at the Company’s niche high-
value diamond mines in Angola (“SML”) and Lesotho
(“Mothae”), developing and growing new margin
accretive marketing channels and progressing the
primary source kimberlite exploration joint venture in
Angola (“Project Lulo JV”).
With both the expansion program at SML delivered and
a strong first year of commercial production behind
Mothae in 2019, Lucapa was well poised to deliver solid
operational performances, revenues and therefore
cash flows in 2020. However, after achieving solid
production volumes in a positively trending diamond
pricing environment early in the first quarter, the
diamond industry all but ground to a halt in late March
2020 as the global COVID-19 pandemic forced border,
diamond market and mine closures.
Following the mines re-engaging operations, they
continued where they left off. Notwithstanding the
COVID-19 pandemic’s negative impact on rough
diamond demand, pricing and operational capacities in
2020, SML returned to recovering the large and high-
value production it is well known for and maintained its
status as one of the world’s highest US$ per carat run-
of-mine diamond productions. The ability to continue
to sell diamonds in the height of the shutdowns was a
direct consequence of the new marketing regulations
implemented in Angola with diamond sales continuing
to SML’s preferred buyer and cutting & polishing
partner, Safdico.
The search for the primary source kimberlite also
started the year well, with the excavation and
processing of the Canguige tributary bulk sample and
recovery of diamonds of up to 3.75 carats in individual
size and including Type IIa and D-colour diamonds. The
proximity to Mining Block 46, where SML had already
recovered large and high-value diamonds resulted in
the kimberlites and targets in the Canguige catchment
area becoming the near-term focus of the Project Lulo
JV. As with the mining operations, the exploration
program was also hampered by the COVID-19 pandemic.
Mothae, with the usual commissioning and teething
issues now ironed out in its first year of production in
2019, was looking forward to 2020 and building on its
strong operational performance in 2019, where despite
the teething issues, Mothae surpassed its nameplate
processing capacity. Unfortunately, as a consequence
of the various country lockdowns and market closures
to curb the spread of COVID-19, Mothae’s operations
were suspended in March 2020 for just over six months.
As mentioned in the Chairman’s letter, following a
strong V-shaped recovery in the diamond market where
demand and prices recovered quickly in the second half
of 2020, Mothae resumed mining operations in October
2020 and has since recovered a number of exceptional
diamonds. In addition, and similar to the partnership
arrangement implemented by SML in 2019, the GoL
approved a new additional marketing channel for
Mothae, where Mothae will now receive value from the
beyond the mine gate.
2020 Group operational highlights:
Lulo
New earthmoving fleet increases mining and
overburden stripping rates
New Leziria areas produce superior grades and
production records
New records for annual carats recovered and sold1
Four +100 carat stones recovered, including first
from MB46 adjacent to Canguige catchment area
Achieved EBITDA of US$6.2 million2 in pandemic
affected year
Cutting & polishing partnership delivers further
margins despite pandemic impacting prices
An exceptional 15.2 carat heart shaped pink
polished diamond delivered by cutting & polishing
partnership
25% increase in carats to over 100,000 carats
for first time in updated Lulo Alluvial Diamond
Resource
Highly encouraging kimberlite exploration results
in the Canguige tributary
Bulk sampling completed at L071 and L072
recovering 1.33 carats from L071, including a 0.25
carat Type IIa diamond
Mothae
Resumed mining and processing operations in
October 2020 following strong recovery in diamond
market
Exceptional +100 carat stone recovered – Mothae’s
most valuable diamond sold to date
US$1.1 million EBITDA loss despite pandemic
causing suspension of operations for over six
months
1 Rough diamond production only and on a 100% basis
2 Includes SML’s share of profit from diamonds sold into the cutting & polishing partnership
with Safdico
Lucapa Diamond Company Limited Annual Report
8
o
p
R
3
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2
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r
0
280% increase in JORC indicated resource tonnes
Corporate
45% capacity expansion program commenced
Implemented a new marketing channel including a
cutting & polishing partnership
Significant cost reductions implemented during
pandemic
Concluded successful capital raisings and debt
restructuring agreements
Strong V-shaped recovery in diamond market in
second half of 2020
Continued to review and assess growth
opportunities organically and acquisitively
L
m
i
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u
lo all
e,
A
u
n
g
vial
ola
40 %
Lucapa 40%
associate
Endiama
32 %
2
Rosas & Petalas
8
%
Lulo alluvial mine, Angola Conducted by Sociedade Mineira Do Lulo (“SML”)
Mining and operations
Considering the market impact and capacity limitations
brought on by the COVID-19 pandemic, SML performed
admirably for the year. After a record first quarter for
volumes processed by SML, greatly aided by the new
earthmoving fleet, mining operations at the mine
were forced to suspend at the end of March 2020.
SML was able to restart operations in May 2020 after
a one-month suspension, but at a restricted capacity
due to limits on personnel and travel within Angola.
Production capacity varied in the second half of 2020
as regulations were amended to manage the COVID-19
pandemic in Angola.
Notwithstanding the suspension and capacity
limitations, SML was able to process 271,710 m3 in
2020, almost on par with 2019. The increased ability to
mine gravel and strip overburden as SML re-engaged
activities was a clear indication of the successful
deployment of the new earthmoving fleet purchased
during 2019.
Being able to systematically mine the leziria
(floodplain) areas for the first time since commercial
mining operations commenced in 2015 due to diverting
the Cacuilo River and achieving higher than normal
grades, resulted in the recovery of 23,669 carats at
a grade of 8.7 cphm3 for the full year. This was 25%
higher than the comparable 2019 year and a new record
for annual carat production by SML. Included in the
recoveries were 767 +4.8 carat stones and 237 specials
of which four were +100 carat stones.
Despite the COVID-19 pandemic’s best efforts, SML was
able to resume scaled operations after just one-month,
benefit from the new earthmoving fleet capacity,
access floodplain areas and, continued to recover large
Lucapa Diamond Company Limited Annual Report
9
Lulo alluvial
mine, A ngola
(continued)
exceptional diamonds and sell them, allowing SML to
report an EBITDA profit of US$ 6.2 million for the full
year ended 31 December 2020 (H1 20: US$1.5 million
loss; H2 20: US$7.7 million profit).
In March 2020, Lucapa reported an inferred resource
for SML of more than 100,000 carats for the first time.
Alluvial drilling and pitting continued throughout 2020,
both to better define the alluvial resource channels
ahead of mining and to update the JORC inferred
resource. Notwithstanding the depletion of 23,669
carats in calendar year 2020, the new updated JORC
Resource Statement compiled to 31 December 2020 has
a total inferred resource of 135,900 carats at an average
modelled value of US$1,440/ carat. This is an increase
in the inferred resource carats of 35%.
Table 1: SML Production Results and Recoveries
FY
2 0 1 9
Q 1
Q 2
Q 3
Q 4
FY
2 0 2 0
% Var
2 0 2 0 to
2 0 1 9
276,313
19,010
88,896
4,891
50,779
2,944
66,597
65,438
9,387
6,447
271,710
23,669
6.9
633
212
955
5.5
136
42
5.8
86
30
14.1
314
95
9.9
231
70
8.7
767
237
3,037
2,647
2,104
4,342
4,342
355%
-2%
25%
26%
21%
12%
Volume processed (m3 bulked)
Carats recovered
Grade recovered (cphm3)
+4.8 carat diamonds recovered
+10.8 carat diamonds (Specials)
Closing diamond inventories (carats)
M
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4
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6
2
0
2
4
0
Lucapa Diamond Company Limited Annual Report 10
L
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A
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(c
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ola
d
)
Diamond sales
SML held seven sales during the year and sold 20,397
carats, a new annual record, for gross proceeds of
US$28.0 million or US$1,371/ carat. As noted in the
Chairman’s letter, rough diamond prices were impacted
by up to 25% during the height of the COVID-19
pandemic. However, as e-commerce sales soared and
eroded the high polished inventory levels, countries
opened their borders and markets re-opened, the
sector rebounded very strongly from the lows and
the diamond industry has emerged with a far better
balance, enabling diamond pricing to return to pre-
pandemic levels, especially in the larger and higher-
quality diamonds.
The COVID-19 pandemic also impacted the global
diamond manufacturing sector in 2020 and delayed
manufacturing and timely onward sale of the SML
diamond production sold into the cutting & polishing
partnership. Therefore, the majority of the partnership
margins that were planned to be received during 2020
will now be received and reported in 2021. For 2020,
SML still generated a US$0.5 million profit from the
partnership.
As a consequence to the above, the 2021 partnership
returns for SML will be abnormal.
One of the many successes of the cutting & polishing
partnership, is the 46 carat rough Lulo pink stone
which yielded an exceptional 15.2 carat heart shaped
fancy intense orangy pink polished diamond as the
main stone. We look forward to the onward sale of this
spectacular diamond by the partnership.
15.2 carat heart shaped fancy intense orangy pink
diamond cut from the from the 47 carat rough
diamond sold into the Safdico partnership
Lulo Special diamonds recovered in the last quarter of 2020
Lucapa Diamond Company Limited Annual Report
11
M othae
mine, Lesotho
kim berlite
Lucapa
70 %
30 %
Government of
Lesotho (“GoL”)
Mothae kimberlite mine, Lesotho Conducted by Mothae Diamonds (Pty) Ltd (“Mothae”)
Mining and operations
2020 was a disjointed year for Mothae as a
consequence of the COVID-19 pandemic, with the
mining operations being suspended from the end of
March 2020 to the beginning of October 2020. The
approximately six-month suspension resulted in an
EBITDA loss of US$1.1 million being reported for the full
year ended 31 December 2020 (H1 20: US$1 million loss;
H2 20: US$0.1 million loss). To note, to benefit from
sharply recovering diamond prices, Mothae did not sell
any diamonds in the last quarter of 2020.
Whilst in operation for just the first and last quarters
of the year, the mine operated to plan, with tonnes
processed and recovered grades within expectations,
notwithstanding the pandemic induced personnel
constraints in the last quarter. The highlight of 2020
was undoubtedly the recovery of the exceptional 101
carat Type IIa D-colour stone soon after operations
re-commenced in the final quarter. In a strong showing
of what Lucapa expects from its acquisition of Mothae,
that recovery was quickly followed up in the first
quarter of 2021 by the recovery of another large IIa
D-colour stone – this time a 215 carat stone.
Despite the suspension for just over half the year,
neither Mothae’s nor Lucapa’s management teams
stood still, continuing to seek cost savings, further the
expansion plans and explore marketing opportunities
to drive value for when operations were recommenced.
Firstly, on the back of the JORC resource update,
expansion plans to bring forward value were finalised
and approved. This expansion program would see the
processing capacity increase by 45% to 1.6 Mtpa. This
is now well advanced and the plant upgrade is due for
completion by the end of the first quarter of 2021.
Secondly, a new additional marketing channel was
proposed to and approved by the GoL. This would
pave the way for Mothae to be able to sell its diamond
production at full and transparent rough market value
and partner with select diamantaires to ensure Mothae
accrues significant additional value. Following approval,
Mothae concluded a diamond sale and purchase
agreement with Safdico, whereby the mine benefits
from a 50% share of the margins made from polishing
and trading Mothae diamonds post the mine gate. In
addition, the minimum cash flow price implemented
for the first 12 months of the contract solidifies the
financial returns through 2021 and beyond.
As noted earlier, the Mothae JORC resource was also
updated during this suspension period utilising the
diamond production and sales data from 2019 and
early 2020, resulting in a 280% increase in the JORC
indicated resource to 9.2 million tonnes. This resource
incorporating 2019 diamond market prices was used to
inform the expansion plans and the six-year forecast
published in November 2020.
The support of the Industrial Development Corporation
of South Africa (“IDC”) and Equigold as financiers to
Mothae has been exemplary and the postponement
of repayments of interest and principal following the
pandemic has been greatly appreciated.
Lucapa Diamond Company Limited Annual Report 12
M
m
i
n
ki
e, L
(c
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b
e
o
t
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a
e
rlit
e
ti
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d
)
Table 2: Mothae Production Results and Recoveries
FY
2 0 1 9
Q 1
Q 2
Q 3
Q 4
FY
2 0 2 0
Tonnes processed
Carats recovered
Grade recovered (cpht)
+4.8 carat diamonds recovered
+10.8 carat diamonds (Specials)
1,156,093
289,012
30,107
6,853
2.6
531
145
2.4
137
38
-
-
-
-
-
-
-
-
-
-
280,148
569,160
6,603
13,456
2.4
124
42
2.4
261
80
Closing diamond inventories (carats)
4,284
4,780
784
784
7,345
7,345
% Var
2 0 2 0 to
2 0 1 9
-51%
-55%
-9%
-51%
-45%
71%
Diamond sales
Mothae, as a result of the interrupted operations, only
held two diamond sales in early 2020.
A total of 10,268 carats were sold for gross proceeds of
US$4.1 million or US$402/ carat.
As noted above, Mothae chose not to conclude any
rough sales following recommencement of operations
in the last quarter of 2020 to benefit from quickly
recovering diamond prices and as such held a healthy
diamond inventory of 7,345 carats at the end of the
year, including the exceptional 101 carat diamond.
Post year end, two parcels containg 10,295 carats were
sold under the newly signed marketing agreement
and partnership with Safdico for US$11.5 million or
$1,117/ carat. The additional post mine gate margins
anticipated will be received during 2021.
S
ele
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e II
a
4 2
n
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s
0
2
0
Lucapa Diamond Company Limited Annual Report 13
Kim berlite
exploration,
A ngola
51 %
Lucapa
Endiama
Rosas & Petalas
39 %
10 %
Kimberlite exploration, Angola Conducted by Project Lulo Joint Venture (“Project Lulo JV”)
The kimberlite exploration activities of the Project Lulo
JV continued with the program formulated following
the technical review in 2019. Unfortunately, the
planned progress was also adversely impacted by the
personnel and travel limitations put in place by the
Angolan Government to curb the spread of COVID-19.
Notwithstanding the lack of access to exploration
personnel during the key dry season, a significant
volume of work was still completed.
At the beginning of 2020, a 1,865 m3 alluvial bulk
sample that was excavated from the Canguige tributary
to the Cacuilo River was processed and returned 45
diamonds, weighing 30.3 carats in total at a grade
of 1.62 cphm3. It contained diamonds of up to 3.75
carats in individual size and analysis of the diamonds
confirmed the presence of Type IIa D-colour and light
fancy yellow stones. These recoveries and the Canguige
tributary’s proximity to Mining Block 46, which has
produced a number of Special diamonds including three
+100 carat diamonds and fancy coloured diamonds,
led to the kimberlites and targets within the greater
Canguige catchment area becoming the focus of the
2020 campaign (Figure 1).
A total of 111 core holes (4,796m) were completed
during the year. The majority of which were focussed on
delineation of the high interest kimberlite pipes within
the Canguige catchment area, to locate suitable areas
for bulk sampling.
Clearing, preparing and building access roads suitable
for hauling the bulk samples from the kimberlites
identified for bulk sampling within the Canguige
catchment area, has formed a major part of the 2020
work program.
Two kimberlite bulk samples totalling 4,891m3 were
taken from L071 and L072. Two diamonds of 1.08 and
0.25 carats were recovered from L071, with the 0.25
carat stone being confirmed as a Type IIa stone.
Preparations for sampling the other kimberlites in 2021
continue, with sites for five bulk samples identified.
Clearing of haul roads and sampling site preparations
commenced in 2020 and bulk sampling excavation
and processing will resume once ground conditions are
suitable after the end of the wet season.
Four new kimberlite discoveries were made during the
year and designated L157, L179, L403, L432 (Figure
1). Further investigation of these bodies will be
undertaken.
Work to identify suitable alluvial bulk sampling sites
in the Zavige and Xangando drainages was completed,
with mapping, pitting and auger drilling undertaken.
Importantly post year end, Lucapa resumed talks with
its Angolan partners to secure a majority stake in
Project Lulo JV. Lucapa believes that securing a majority
stake in the 3,000km2 kimberlite exploration licence
will open up opportunities to expedite the program
that aims to identify the primary kimberlite sources of
the exceptional alluvial diamonds being mined by SML
at Lulo.
Lucapa Diamond Company Limited Annual Report 14
A
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ola (c
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Figure 1: Exploration progress map
B
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Lucapa Diamond Company Limited Annual Report 15
Other projects
Lucapa is extremely grateful to Equigold, New Azilian
and the IDC for supporting the Group through the
COVID-19 pandemic and beyond. The repayment
concessions and deferral of approximately US$13
million into 2022 and beyond is a significant show of
support for Lucapa and its future aspirations.
Potential acquisition
In December 2020 Lucapa announced its participation
in in the sale process being conducted by the
liquidators of Merlin Diamonds Limited to acquire the
Merlin assets and associated mining and exploration
tenements located in the Northern Territory (“Merlin”).
Merlin is a multi-pit mine development opportunity
with underground mining potential and is home to
Australia’s largest recovered diamond of 104 carats.
Lucapa considers Merlin is complementary to the
Company’s vision and pipeline of projects and is an
opportunity that would significantly benefit from the
proven capability of Lucapa’s experienced development
and operational teams.
We will update the market as this acquisition process
progresses. There can be no assurance that the
acquisition will finally complete.
Schedule of
tene m ents
End date
Brooking exploration
A follow up exploration program involving heavy
mineral stream and loam sampling, complemented
with soil geochemistry sampling, was completed at
Brooking in 2020. This resulted in the recovery of 7
diamonds, including two macro-diamonds (>0.5mm
diameter) and 72 chromites. The results combined with
associated airborne geophysics and satellite imagery,
identified two likely lamproite targets and a potential
lamproite dyke.
The next phase of exploration will seek to confirm
whether the identified targets at Brooking are
lamproites.
Orapa exploration
No field work was undertaken at the Orapa Area
F project and an application for extension of the
prospecting license has been submitted.
The next phase of exploration will seek to confirm
whether the identified targets at Orapa are kimberlites.
Refinancing
As announced to the ASX on 14 August 2020, the
Company concluded facility refinancing discussions and
agreed terms and restructuring payments with its three
major financiers.
Schedule of Tenements as at 31 December 2020
Country
Type
Size (k m2)
Period
Interest (% )
Angola
Exploration (primary) Kimberlite
Angola Mining (secondary) and Exploration Alluvial
Lesotho
Botswana
Australia
Australia
Australia
Australia
Mining Licence
Reconnaissance
Exploration Licence
Exploration Licence
Exploration Licence
Exploration Licence
3,000
1,500
47
8
72
13
29
3
5 years
10 years
10 years
2 years
5 years
5 years
5 years
5 years
39
40
70
05/2024
07/2025
01/2027
100
09/20201
80
80
80
80
12/20222
03/2024
06/2022
06/2023
1 Application for extension has been submitted
2 Application for extension was submitted and granted post year end
Lucapa Diamond Company Limited Annual Report 16
f
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2
0
The Directors present their report together with the financial report of Lucapa and the Group for the financial year
ended 31 December 2020 and independent auditor’s report thereon.
D
ir
e
c
t
o
r
s
1
The Directors of the Company at any time during or since the end of the financial period are:
N a m e
P ositio n
M Kennedy
S Wetherall
N Selby
R Stanley
Non-Executive Chairman
Chief Executive Officer/Managing Director
Chief Operating Officer/Executive Director
Non-Executive Director
A p p oint m e nt
D ate
12 September 2008
13 October 2014
4 September 2017
26 July 2018
The qualifications, experience and other directorships
of the Directors in office at the date of this report are:
Miles Kennedy
Mr Kennedy has held directorships of Australian listed
companies for more than 30 years. He was previously
Chairman of companies including Sandfire Resourc-
es, Kimberley Diamond Company, Blina Diamonds,
Macraes Mining Company, MOD Resources and RNI. He
has extensive experience in the management of public
companies with specific emphasis in the resources
industry. He lives in Quedjinup, Western Australia.
Stephen Wetherall
Mr Wetherall is a qualified chartered accountant and
member of the South African Institute of Chartered
Accountants with more than 20 years’ experience in
financial and operational management, corporate
transactions and strategic planning, most of which has
been in the diamond industry. He has held senior finan-
cial and executive roles with diamond major De Beers
and London-listed Gem Diamonds. He lives in Perth,
Western Australia.
Nick Selby
Mr Selby is an extraction metallurgist with over 35
years’ experience in the mining industry. He began
his career with De Beers, where he spent 19 years in a
range of technical roles. Mr Selby joined Gem Diamonds
in 2005, where he was responsible for establishing
diamond projects in various countries including Angola,
Australia, DRC, Central African Republic, Indonesia,
Lesotho and Botswana. He lives in Perth, Western
Australia.
Ross Stanley
Mr Stanley has an extensive background in the re-
sources industry in Australia and Africa, specialising in
drilling and related exploration and mining services. He
was the founder and Managing Director of ASX-listed
Stanley Mining Services prior to its merger with Layne
Christensen in 1997. Mr Stanley was also a major share-
holder and non-executive director of Perth-based gold
miner Equigold NL, which was taken over by Lihir Gold
for A$1.1 billion in 2008. He is a non-executive director
of emerging ASX listed Cambodian gold miner Emerald
Resources NL. He lives in Perth, Western Australia.
C
o
S
m
p
a
e
c
r
e
t
n
y
a
r
y
2
Mr Clements was appointed Company Secretary on 2
July 2012. Mr Clements holds a Bachelor of Commerce
degree from the University of Western Australia and
is a Fellow of the Institute of Chartered Accountants
of Australia, a Fellow of the Governance Institute of
Australia and member of the Australian Institute of
Company Directors. Mr Clements currently holds the
position of Company Secretary and/ or director of
several publicly listed companies and has experience
in corporate governance, finance, accounting and
administration, capital raising, ASX compliance and
regulatory requirements.
Lucapa Diamond Company Limited Annual Report 17
Director’s
M eeting
3
operations and
principal activities
N ature of
4
Operating and
financial revie w
5
The number of Directors’ meetings and the number of Board meetings attended by each of the Directors of the
Company during the financial year are:
Name
Number of meetings attended
Number of meetings held during
the time the Directors were in
office during the year
M Kennedy
S Wetherall
N Selby
R Stanley
5
5
5
5
5
5
5
5
In 2020, the Group was predominantly focussed on
its Angolan assets (diamond mining, evaluation and
exploration at Lulo), its Lesotho asset (diamond
mining and development operations at Mothae) and
its Western Australian asset (early-stage diamond
exploration at Brooking). No work was undertaken
at Lucapa’s Botswana asset (early-stage kimberlite
exploration at Orapa Area F).
The Group’s financial results for 2020 were
significantly impacted by the COVID-19 pandemic that
created widespread uncertainty and disruption across
the world, affecting all sectors of the global economy,
the diamond industry included. Isolation measures
and/ or lockdowns, implemented by producer countries
and markets that are important to the diamond
industry, resulted in many diamond operations across
the globe being suspended or curtailed. A second half
profit of US$2.9 million in difficult times assisted in
reducing the Group’s reported loss after tax for the full
year ended 31 December 2020 to US$9.7 million (2019:
US$3.3 million loss).
The COVID-19 pandemic affected SML’s operations
with mining activities being suspended from the end
of March 2020 until the beginning of May 2020 and
operating at varying reduced capacities thereafter.
Revenue from rough diamond sales was lower due
to the adverse impact of the COVID-19 pandemic on
both rough and polished prices. In addition, and as with
Mothae, to take advantage of a sharply rising diamond
market a decision was taken to defer the planned sales
in December 2020 to January 2021.
Cash operating cost per m3 for the year was favourable
at US$75 per m3 compared to US$81 per m3 for 2019 and
notwithstanding the market turmoil, SML produced an
EBITDA profit of US$6.2 million in 2020 (H1 20: US$1.5
million loss; H2 20: US$7.7 million profit) (2019: US$12.9
million profit). The Group’s equity accounted share of
SML’s results (after accounting for depreciation and
other below-the-line items) was a US$0.3 million loss
(2019: US$0.2 million profit).
Similarly, Mothae’s mining and processing operations
were also suspended towards the end of March
2020 but remained in suspension and on care and
maintenance until the beginning of October 2020. Cash
Lucapa Diamond Company Limited Annual Report 18
O
fi
p
n
a
n
(c
o
n
e
r
a
ti
cial r
n
g a
e
n
ti
n
vie
d
u
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w
d
)
5
operating costs during production and the care and
maintenance costs during suspension were very well
managed but with only two sales concluded in the
first half and a decision to to defer the planned sale
in December 2020 to January 2021, for reasons noted
earlier, Mothae produced an EBITDA loss of US$1.1
million (H1 20: US$1.0 million loss; H2 20: US$0.1 million
loss) (2019: US$1.2 million profit).
Shortly after the recommencement of operations
at Mothae, the Group announced the start of a
value accretive expansion program to increase the
processing capacity by 45% from 1.1 Mtpa to ~1.6
Mtpa as well as the conclusion of a new GoL approved
diamond sales and purchase agreement with Safdico.
This new agreement includes a minimum cash flow
value per carat to be received for the first 12 months
of the contract by Mothae and 50% of the value
generated beyond the mine gate.
Other noteworthy items that affected the Group
results during the year were:
A fair value loss on Lucapa’s investment loan
with SML of US$0.3 million (2019: US$3 million
gain) following the decision to expand production
capacity and therefore accelerate investment
loan repayments back to Lucapa;
An unrealized foreign exchange loss recognised
due to the weakening South African rand against
the United States dollar of US$0.6 million on the
intergroup development loan (2019: US$0.8 million
gain);
A large saving in Lucapa corporate and Mothae
overheads due to cost saving measures
implemented.
During the year the Company concluded facility
refinancing discussions, agreements and restructuring
payments with its three major financiers as per Note
7e to the financial statements.
The Group had net assets of US$70.3 million as at 31
December 2020 (2019: U$67.5 million).
Review of financial condition
The Group’s assets, given their various stages of
development, will require funding for continued
exploration, evaluation, development and/ or mining
activities. To the extent that sufficient cash is not
generated by the activities or mining operations of the
Group for anticipated loan, interest and/ or dividend
payments, funding will be required.
Due to the uncertainty caused by the COVID-19
pandemic and the potential unknown future impact
on the assumptions contained in the Group’s cash
flow forecasts over the next 12 months, the Directors
recognise that the Group may have to source funding
solutions and/ or restructure existing financing
facilities in order to ensure the realisation of assets
and extinguishment of liabilities as and when they fall
due.
The ability of the Group to continue to pay its debts as
and when they fall due for the 12-month period from
the date the financial report is signed is dependent on:
The Group’s staff, operations, partners and the
global diamond industry not being adversely
impacted by the ongoing COVID-19 pandemic,
thereby impacting key forecast assumptions
and scheduled loan, interest and/ or dividend
payments;
The Group, as required, successfully sourcing
equity, raising new debt and/ or restructuring
existing debt facilities with its financiers; and
The Company continuing to achieve success with
the Lulo kimberlite exploration program.
The Directors believe that the going concern basis is
appropriate for the following reasons:
The duration and full impact of the COVID-19
pandemic is still unknown, however the diamond
industry has rebounded strongly and with a better
balance seeing diamond prices returning to pre-
pandemic levels;
The Group’s assets exceed its liabilities by US$70.3
million;
The Group has historically been successful in
raising equity and under ASX Listing Rule 7.1 the
Company has the capacity to place securities to
raise equity;
The Group has been successful in restructuring
and raising debt facilities:
The Company has restructured the facilities
with Equigold, New Azilian and the IDC as per
the Directors’ Report; and
The Company continues to review a number of
financing possibilities, which have the potential
to replace a portion of the Company’s existing
debt facilities, improve its working capital
position and/ or fund strategic initiatives,
including acquisitions.
However, despite the Group’s previous track record
in sourcing new funds or restructuring debt facilities
as above for its projects, there remains no assurance
Lucapa Diamond Company Limited Annual Report
19
Operating and
financial revie w
(continued)
the Group in the future will be successful in obtaining
funding required or restructuring debt facilities as and
when needed.
infrastructure upgrades are currently in progress and
are scheduled to be complete by the end of the first
quarter of 2021.
In these circumstances, there exists a material
uncertainty which may cast doubt as to whether the
Group will be able to continue as a going concern and
whether it will realise its assets and extinguish its
liabilities in the normal course of business and at the
amounts stated in the financial statements.
In addition, negotiations with the GoL on a proposal to
market the Mothae diamond production through a new
channel were concluded, paving the way for the new
diamond marketing and sales agreement, including
a cutting & polishing partnership, as outlined in the
Review of operations.
The financial statements do not include any
adjustments relating to the recoverability and
classification of recorded asset amounts nor to the
amounts and classification of liabilities that might be
necessary should the Group not continue as a going
concern.
As per previous years, the Group’s audit report includes
an emphasis of matter with respect to the existence
of this material uncertainty with the Group’s ability to
continue as a going concern.
Significant changes in the state of affairs
Angola
Even though activities were impacted by personnel
and travel restrictions implemented to curb the
spread of COVID-19, the Group continued to focus on
expanding the mining and recovery of large and high-
value alluvial diamonds at Lulo as well as continuing to
advance the kimberlite exploration program aimed at
identifying the primary hard-rock sources.
Lesotho
Mining and processing operations at Mothae were
suspended and placed on care and maintenance from
the end of March 2020 to the beginning of October
2020 and then again for a two-week period in January
2021 as a result of the COVID-19 pandemic.
During the suspension period, plans to increase the
plant processing capacity by 45% to ~1.6 Mtpa were
developed, finalised and approved. The plant and
Australia
Western Australia
A follow up exploration program was undertaken at
Brooking which resulted in the recovery of 7 diamonds,
including two macro-diamonds (>0.5mm diameter) and
72 chromites. The results combined with associated
airborne geophysics and satellite imagery, identified
two likely lamproite targets and a potential lamproite
dyke. The next phase of exploration will seek to
confirm whether the identified targets are lamproites.
Northern Territory
Towards the end of the year, Lucapa announced its
participation in the sale process being conducted by
the liquidators of Merlin to acquire the Merlin assets
and associated mining and exploration tenements.
Merlin has a JORC compliant diamond resource from
multiple pipes and provides additional near-term
diamond production and exploration opportunities for
Lucapa. There can be no assurance that the acquisition
will finally complete.
Botswana
No field work was undertaken at the Orapa Area
F project and an application for extension of the
prospecting license has been submitted.
Corporate
The Company completed the following share capital
transactions during the period.
Transaction
N u m ber
Issue/ exercise
price (A$)
Funds raised
(U S$000)
Issue of shares
Issue of shares
Issue of shares
Issue of shares
Issue of shares
25,899,916
105,102,522
10,431,284
3,252,835
188,876,324
Issue of shares on exercise of performance rights
490,267
0.110
0.050
0.043
0.058
0.055
-
1,852
3,667
308
136
7,627
-
1-Apr-22
Option
expiry
n/a
n/a
n/a
n/a
n/a
Lucapa Diamond Company Limited Annual Report 20
D
ivi
d
e
n
d
s
6
E
No dividends were paid or declared by the Company during the current or prior financial year.
n
vir
r
e
g
o
n
m
u
la
e
n
t
al
tio
n
7
s
u
The Group’s mining and exploration activities are
subject to various environmental regulations. The
respective Company, subsidiary and associate
Boards are responsible for the regular monitoring
of environmental exposures and compliance with
environmental regulations.
The Group is committed to achieving a high standard of
environmental performance and conducts its activities
in a professional and environmentally conscious
manner and in accordance with applicable laws and
permit requirements.
The Board believes the Group has adequate systems
in place for the management of its environmental
requirements and is not aware of any material breach
of those environmental requirements as they apply to
the projects.
r
e
p
b
s
e
E
v
e
o
r
ti
n
q
u
e
n
t
s
g d
n
t t
t
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a
8
On 4 January 2021 Lucapa announced the recovery by
SML of a 113 carat gem-quality white diamond, the 17th
+100 carat white diamond recovered to date.
diamonds in 2021 from SML. The parcel of 4,273 carats
of rough diamonds were sold for a total of US$5.9
million or US$1,375/ carat.
On 11 January 2021 Lucapa announced the first sale of
diamonds in 2021 from Mothae. The parcel of 4,676
carats of rough diamonds were sold for a total of
US$5.6 million or US$1,198/ carat and includes the 101
carat D colour diamond recovered following re-opening
of the mine in the last quarter of 2020 (refer ASX
announcement 10 December 2020).
On 13 January 2021 Lucapa announced a decision has
been taken to temporarily suspend mining operations
at Mothae, following the announcement by the Lesotho
Prime Minister that due to a surge in COVID-19 cases in
the country the Lesotho Government has imposed a
14-day nation-wide lockdown.
On 18 January 2021 Lucapa announced the recovery by
SML of a 104 carat D-colour white diamond from MB46,
the 18th +100 carat white diamond recovered to date.
On 29 January 2021 Lucapa announced the
recommencement of mining operations at Mothae
following the 14-day nationwide lockdown in Lesotho
initiated by the GoL.
On 2 February 2021 Lucapa announced the first sale of
On 24 February 2021 Lucapa announced the recovery by
Mothae of a 215 carat Type IIa D-colour white diamond,
the second +200 carat diamond and the fifth +100 carat
diamond recovered to date.
On 25 February 2021 Lucapa announced the second
sale of diamonds in 2021 from SML. The parcel of
1,040 carats of rough diamonds were sold for a total of
US$3.7 million or US$3,525/ carat.
On 26 February 2021 Lucapa announced the recovery
by SML of a 114 carat Type 11a D-colour white diamond,
the 3rd from MB46 and 19th +100 carat white diamond
recovered to date.
On 22 March 2021 Lucapa announced the completion of
the expansion project at the Mothae, which is designed
to increase processing capacity by 45% from ~1.1Mtpa
to ~1.6Mtpa. The project was completed on-time,
within budget and with no safety incidents recorded.
On 23 March 2021 Lucapa announced an updated Lulo
Diamond Resource, where in-situ resource carats
increased 35% to 135,900 at a modelled value of
$1,440/ carat.
Lucapa Diamond Company Limited Annual Report 21
or US$1,050/ carat and included the 215 carat D-colour
stone (213 carat post-boiling weight) and an 11 carat
pink diamond.
subsequent to
reporting date
Events
develop m ents
Likely
On 24 March 2021 Lucapa announced the second sale
of diamonds in 2021 from Mothae. The parcel of 5,619
carats of rough diamonds was sold for US$5.9 million
9
Directors’
interest
10
As outlined in the Chairman’s letter, Review of
operations and this Directors’ report, the Directors
consider the following as a summary of the likely
developments and expected results for the next 12
months.
Lulo, Angola
Lucapa and its partners plan to continue alluvial mining
and mine development at Lulo in 2021, while continuing
both the kimberlite and alluvial exploration programs.
Further sales of Lulo diamonds are planned, with more
diamonds expected to be delivered into the cutting &
polishing partnership with Safdico.
Discussions with the Angolan partners to secure a
majority stake in the Project Lulo JV have commenced
and will be furthered during 2021.
Mothae, Lesotho
Lucapa and its Lesotho Government partner plan to
complete the plant capacity expansion to ~1.6 Mtpa
as well as build on the new marketing agreement and
cutting & polishing partnership with Safdico.
Brooking, Western Australia
The scope and timing of future exploration programs
at Brooking are being reviewed as Lucapa focuses on
maximising revenues from its two operating mines and
advancing the Lulo kimberlite exploration program.
Orapa Area F, Botswana
The scope and timing of future exploration programs
at the Orapa Area F project are being reviewed as
Lucapa focuses on maximising revenues from its two
operating mines and advancing the Lulo kimberlite
exploration program.
Merlin Diamonds, Northern Territory, Australia
As per ASX announcement of 24 December 2020
Lucapa announced its participation in in the sale
process being conducted by the liquidators of Merlin
to acquire Merlin’s assets and associated mining
and exploration tenements located in the Northern
Territory. There can be no assurance that the
acquisition will finally complete.
The relevant interest of each Director in the shares and options over such instruments issued by the Company
and other related bodies corporate, as notified by the Directors to the ASX in accordance with S205G(1) of the
Corporations Act 2001, at the date of this report is as follows.
Director
Fully p aid
ordin ary
sh ares
Liste d o ptio ns
expirin g 5 Ju n e 2 0 2 2 (1)
(A SX co d e: L O M O C)
ordin ary sh ares
O ptio ns over
expirin g 7 Ju n e 2 0 2 1 (2)
M Kennedy
S Wetherall
N Selby
R Stanley
Note
2,850,153
2,825,100
1,787,350
55,007,014
525,026
445,850
297,892
9,287,683
130,000
210,000
165,000
-
(1) Options granted to Directors following shareholder approval at the annual general meeting held 30 May 2017;
(2) Options granted to Directors following shareholder approval at the annual general meeting held 24 May 2018.
Lucapa Diamond Company Limited Annual Report 22
p
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s a
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11
Unissued shares under options and performance rights
At the date of this report unissued ordinary shares of the Company under option and performance rights are set out
below. These options and performance rights over unissued shares do not entitle the holder to participate in any
share issue of the Company or any other body corporate.
Expiry
d ate
Exercise
price (A $)
N u m b er of
securties
Q u ote d
Share options
7 June 2021
5 June 2022
18 December 2022
Preformance rights
1 April 2022
$0.4355
$0.10
$0.08
1,301,000
113,971,605
54,824,075
$0.00
490,263
-
113,971,605
-
-
R
r
e
p
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m
u
n
o
r
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a
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a
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it
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d
)
12
12.1 Principles of compensation
Key management personnel (“KMP”) have authority
and responsibility for planning, directing and controlling
the activities of the Group, including Directors of the
Company and other Executive management. Currently,
KMP comprises the Directors of the Company.
determined from a market review, to reflect core
performance requirements and expectations of the
relevant position and statutory employer contributions
to superannuation funds. Compensation levels are
reviewed annually by the Board through a process that
considers individual, segment and overall performance
of the Group.
Compensation levels for KMP are competitively set
to attract and retain appropriately qualified and
experienced Directors and Executives. The Directors
of the Company obtain independent advice on the
appropriateness of compensation packages of KMP
given trends in comparative companies both locally
and internationally, and the objectives of the Group’s
compensation strategy.
The compensation structures are designed to attract
suitably qualified industry experts and candidates,
reward the achievement of strategic objectives, and
achieve the broader outcome of creation of value for
shareholders. Compensation packages include a mix
of fixed compensation, equity-based compensation
as well as employer contributions to superannuation
funds.
Shares, options and performance rights may only be
issued to Directors subject to approval by shareholders
in general meeting.
Fixed compensation
Fixed compensation consists of base compensation,
Directors’ fees
Total compensation for Directors and Non-Executive
Directors is set based on advice from external advisors
with reference to fees paid to other Directors of
comparable companies. Non-Executive Directors’
fees are presently limited to an aggregate total of
US$500,000 per annum, excluding the fair value of any
options or performance rights granted. Directors’ fees
cover all main Board activities and membership of any
committee and subsidiary Boards. The Board has no
established retirement (other than superannuation)
or redundancy schemes in relation to Directors. The
Directors’ contracts contain a service bonus in the
event of a takeover or change of control, subject to
shareholder approval where required.
Use of remuneration consultants
The Group employed the services of a remuneration
consultant during 2018 and the recommendations were
implemented in 2019. No remuneration consultants
were employed during 2020 due to the adverse markets
as a result of the COVID-19 pandemic.
Lucapa Diamond Company Limited Annual Report 23
Re m uneration report
(audited) (continued)
12
Equity-based compensation (Long term incentive)
The Company has an equity-based incentive plan
under which Directors and management are awarded
share options and performance rights. The purpose
of the plan is to assist in the incentivisation, reward
and retention of Directors and management, align
their interests with those of the shareholders of the
Company and to focus on the Company’s development
strategy.
Short-term and long-term incentive structure and
consequences of performance on shareholder wealth
Given the Group’s principal activities during the course
of the financial period consisting of exploration,
evaluation, development and mining of mineral
resources, the Board has again for 2020 given
significance to service criteria and performance over
market related criteria in setting the Group’s incentive
and retention schemes.
Accordingly, at this stage the Board does not consider
the Group’s current earnings or earning measures to
be the only appropriate key performance indicator.
The issue of options and performance rights as part of
the remuneration package of Directors, management,
employees and contractors is an established practice
for listed exploration and development companies and
has the benefit of conserving cash whilst appropriately
rewarding the recipient.
In circumstances where cash flow permits, the Board
may approve the payment of a discretionary cash bonus
as a reward for performance. No discretionary cash
bonuses were paid during 2020 or 2019.
In considering the relationship between the Group’s
remuneration policy and the consequences for the
Company’s shareholder wealth, changes in the
Company’s share price are considered.
Service contracts (as at the date of these financial
statements)
Stephen Wetherall
Mr Wetherall has been engaged to act as the
Company’s Chief Executive Officer/ Managing Director.
Mr Wetherall is entitled to receive remuneration of
A$633,938 (gross, including superannuation) per
annum which is subject to review by the Board from
time to time. As a result of the COVID-19 pandemic
his remuneration was reduced by up to 60% for seven
months during 2020. He will be eligible to participate in
any future incentive and retention plans implemented
by the Board. Shareholder approval will be sought for
his participation in any incentive plan involving equity
of the Company. The appointment may be terminated
for various causes of a standard nature. Upon
termination, no benefits are due unless approved by
shareholders.
Nick Selby
Mr Selby has been engaged to act as the Company’s
Chief Operating Officer/ Executive Director. Mr Selby is
entitled to receive remuneration of A$479,588 (gross,
including superannuation) per annum which is subject
to review by the Board from time to time. As a result of
the COVID-19 pandemic his remuneration was reduced
by up to 60% for seven months during 2020. He will
be eligible to participate in any future incentive and
retention plans implemented by the Board. Shareholder
approval will be sought for his participation in any
incentive plan involving equity of the Company. The
appointment may be terminated for various causes of
a standard nature. Upon termination, no benefits are
due unless approved by shareholders.
Miles Kennedy
Mr Kennedy has been engaged to act as the Company’s
non-executive Chairman. Mr Kennedy is entitled to
receive Director fees of A$148,838 (gross) per annum,
which is subject to review by the Board from time
to time. As a result of the COVID-19 pandemic his
remuneration was reduced by 100% for seven months
during 2020. He will be eligible to participate in any
future incentive and retention plans implemented by
the Board. Shareholder approval will be sought for his
participation in any incentive plan involving equity of
the Company. The appointment may be terminated for
various causes of a standard nature. Upon termination,
no benefits are due unless approved by shareholders.
Ross Stanley
Mr Stanley has been engaged to act as a non-executive
Director of the Company. Mr Stanley is entitled to
receive Director fees of A$99,225 (gross) per annum,
which is subject to review by the Board from time
to time. As a result of the COVID-19 pandemic his
remuneration was reduced by 100% for seven months
during 2020. He will be eligible to participate in any
future incentive and retention plans implemented by
the Board. Shareholder approval will be sought for his
participation in any incentive plan involving equity of
the Company. The appointment may be terminated for
various causes of a standard nature. Upon termination,
no benefits are due unless approved by shareholders.
Lucapa Diamond Company Limited Annual Report 24
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12
12.2 KMP remuneration
Details of the nature and amount of each major element of remuneration (in USD) of each KMP of the Company
are:
Key management
personnel
Executive Directors
Stephen Wetherall,
Chief Executive Officer /
Managing Director
Nick Selby, Chief Operating
Officer / Executive Director
Non-Executive Directors
Miles Kennedy, Non-
Executive Chairman
Ross Stanley, Non-
Executive Director
Total
Period
ended
Dec 20
Dec 19
Dec 20
Dec 19
Dec 20
Dec 19
Dec 20
Dec 19
Dec 20
Dec 19
Short-term benefits
Salary & fees
Bonus
Post
employment
benefits
Equity-
settled
share based
payments
Super-
annuation
benefits
Options and
performance
rights(1)
Total (US$)
304,135
424,378
227,474
316,809
39,470
97,728
26,313
63,152
597,393
902,067
-
-
-
-
-
-
-
-
-
-
12,486
17,423
12,486
17,423
3,750
5,999
2,500
5,999
31,222
46,845
1,149
15,140
903
11,821
711
8,348
-
-
317,771
456,941
240,863
346,053
43,931
112,075
28,813
69,151
2,763
35,309
631,378
984,220
(1) These options issued have been valued in accordance with the methodology contained in Note 12 to these financial statements.
12.3 Equity instruments
All options refer to options and performance rights over ordinary shares of the Company, which are exercisable on a
one-for-one basis.
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Lucapa Diamond Company Limited Annual Report
25
Re m uneration report
(audited) (continued)
12
12.3.1 Analysis of movements in options, performance rights and shares
Options and performance rights over equity instruments
The movement during the reporting period in the number of options and performance rights over ordinary shares in
the Company held, directly, indirectly or beneficially, by each KMP, including their related parties, is as follows:
Held at 1
January
or date of
appointment
Options
acquired
Exercise of
options and
performance
rights
Expired
without
exercise
Options and
performance
rights
granted
Held at 31
December
or date of
resignation
Vested &
exercisable
Directors
2020
M Kennedy
360,000
525,026
S Wetherall
610,000
445,850
N Selby
R Stanley
2019
465,000
297,892
-
9,287,683
-
-
-
-
(230,000)
(400,000)
(300,000)
-
M Kennedy
1,119,583
S Wetherall
1,805,000
N Selby
R Stanley
1,382,917
-
-
-
-
-
(152,625)
(606,958)
(569,250)
(625,750)
(342,375)
(575,542)
-
-
-
-
-
-
-
-
-
-
655,026
655,850
462,892
9,287,683
130,000
210,000
165,000
-
360,000
316,666
610,000
540,000
465,000
410,000
-
-
Movements in shares
The movement during the reporting period in the number of ordinary shares in the Company held, directly,
indirectly or beneficially, by each KMP, including their related parties, is as follows:
Held at 1
January
or date of
appointment
Received upon
exercise of
options and
performance
rights
Received as
fee for debt
restructuring
Sales
Purchases
Held at 31
December
or date of
resignation
2,625,127
2,229,250
1,489,458
42,092,999
2,272,502
1,660,000
1,147,083
40,000,436
-
-
-
-
-
-
-
4,345,415
152,625
569,250
342,375
-
-
-
-
-
(300,000)
-
-
-
-
-
-
-
525,026
595,850
297,892
2,850,153
2,825,100
1,787,350
8,568,600
55,007,014
200,000
2,625,127
-
-
2,229,250
1,489,458
2,092,563
42,092,999
Directors
2020
M Kennedy
S Wetherall
N Selby
R Stanley
2019
M Kennedy
S Wetherall
N Selby
R Stanley
No shares were granted to KMP during the reporting period as compensation in 2020 or 2019.
End of audited section.
Lucapa Diamond Company Limited Annual Report 26
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s
13
12.2 KMP remuneration
The Company has entered into deeds of indemnity,
insurance and access (“Deeds”) with each of
its Directors. Under these Deeds, the Company
indemnifies each Director or officer to the maximum
extent permitted by the Corporations Act 2001 from
liability to third parties and in successfully defending
legal and administrative proceedings and applications
for such proceedings. The Company must use its best
endeavours to insure a Director or officer against
any liability, which does not arise out of conduct
constituting a wilful breach of duty or a contravention
of the Corporations Act 2001. The Company must also
use its best endeavour to insure a Director or officer
against liability for costs and expenses incurred in
defending proceedings whether civil or criminal.
The Company has, during and since the end of the
year, in respect of any person who is an officer of the
Company or a related body corporate, paid a premium
in respect of Directors and Officer liability insurance
which indemnifies Directors, officers and the Company
of any claims made against the Directors, officers of
the Company and the Company, subject to conditions
contained in the insurance policy. The Directors have
not included details of the premium paid in respect of
the Directors’ and officers’ liability and legal expenses’
insurance contracts, as such disclosure is prohibited
under the terms of the contract.
The Company has not entered into any agreement to
indemnify the auditors against any claims by third
parties arising from their reports on the financial report
for the year ended 31 December 2020 and prior period
ended 31 December 2019.
M
o
t
h
a
e p
it
Lucapa Diamond Company Limited Annual Report 27
independence and
non-audit services
Auditor
14
The Directors received the following declaration from the Company’s auditors, Elderton Audit Pty Ltd:
Auditor's Independence Declaration
To those charged with the governance of Lucapa Diamond Company Limited
As auditor for the audit of Lucapa Diamond Company Limited for the year ended 31 December 2020, I declare
that, to the best of my knowledge and belief, there have been:
i.
no contraventions of the independence requirements of the Corporations Act 2001 in relation to the
audit; and
ii.
no contraventions of any applicable code of professional conduct in relation to the audit.
Elderton Audit Pty Ltd
Rafay Nabeel
Audit Director
26 March 2021
Perth
During the period Elderton Audit Pty Ltd have not
performed any other services for the Company in
addition to their statutory audit and as a result
the Directors are satisfied that auditors have not
compromised the auditor independence requirements
of the Corporations Act 2001.
Details of the amounts paid to the current auditor of
the Company, Elderton Audit Pty Ltd are set out below:
Lucapa Diamond Company Limited Annual Report
28
i
n
d
e
n
o
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-
a
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n
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A
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(c
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)
14
D
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s r
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Audit services
Other services
31 D ec 2 0 2 0
U S$
35,194
-
35,194
31 D ec 2 0 1 9
U S$
32,241
-
32,241
p
o
r
t
Signed in accordance with a resolution of the Directors, on behalf of the Directors.
R
MILES KENNEDY
Chairman
Dated this 26 March 2021.
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Lulo alluvial diamond resource
LULO CLASSIFIED DIAMOND RESOURCE - 31 December 2020
Lucapa 40% attributable
Resource
Classification
Inferred
Inferred
Date
Area (m2)
Diluted
volume
(m3)
Carats per
Stone
Stones
Carats
31-Dec-20
1,979,200
1,980,000
31-Dec-19
1,586,000
1,151,200
1.23
1.27
110,300
135,900
79,000
100,700
Diluted
grade
(cphm3)
6.86
8.75
Modelled
value
(US$/
carat)*
1,440
1,620
Notes:
(i) m2 = square metres; m3 = cubic metres; cphm3 = carats per 100 cubic metres
(ii) Diluted volumes have been estimated based on historical mining production data to better reflect recoverable volumes and grades
(iii) Bottom cut off screen size: effective 1.5mm
* Special stones are not excluded in the modelling stage, in terms of size or assortment
The Lulo Classified Inferred Diamond Resource
(“Lulo Diamond Resource”) has been independently
estimated and reconciled on a depletion and addition
basis as at 31 December 2020 by external consultants Z
Star Mineral Resource Consultants (Pty) Ltd (“Z Star”)
of Cape Town, South Africa, updating the previous Lulo
Diamond Resource dated 31 December 2019.
Changes in the Lulo Diamond Resource reflect alluvial
mining depletion in 2020 and additional resources
informed by drilling, mining, processing and sales
during 2020. Resources have been reconciled and
depleted as at 31 December 2020.
The Lulo partners are continuing an expanded pitting
and auger drilling program around the known diamond
areas at Lulo, to grow the Lulo Diamond Resource. The
exploration program will continue through 2021.
Lucapa Diamond Company Limited Annual Report
29
Resource state m ent
for the year ended
31 Dece m ber 2020
(continued)
Information included in this report on the Lulo Diamond
Resource is based on, and fairly represents, information
and supporting documentation prepared, compiled
and supervised by Richard Price MAuslMM, who is a
Member of the Australasian lnstitute of Mining and
Metallurgy. Mr Price is an employee of Lucapa Diamond
Company Limited. Mr Price has sufficient experience
which is relevant to the style of mineralisation and type
of deposit under consideration and to the activity which
he is undertaking to qualify as a Competent Person as
defined in the 2012 Edition of the Joint Ore Reserves
Committee (“JORC”) Code. Mr. Price consents to the
inclusion in the announcement of the matters based
on this information in the form and context in which it
appears.
lnformation included in this report that relates to the
stone frequency, grade and size frequency valuation
and validation in the Lulo Diamond Resource estimate
is based on, and fairly represents, information and
supporting documentation prepared and compiled by
Sean Duggan (Pri.Sci.Nat 400035/01) and David Bush
(Pri.Sci.Nat 400071/00). Messrs. Duggan and Bush are
directors and employees of Z Star Mineral Resource
Consultants (Pty) Ltd, of Cape Town, South Africa.
Both hold qualifications and experience such that
both qualify as members of a Recognised Overseas
Professional Organisation (“ROPO”) under relevant
ASX listing rules. Messrs. Duggan and Bush both have
sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration
and to the activity which they are undertaking to each
qualify as a Competent Person as defined in the 2012
Edition of the JORC Code. Messrs. Duggan and Bush
both consent to the inclusion in the announcement of
the matters based on this information in the form and
context in which it appears.
Mothae kimberlite diamond resource
MOTHAE CLASSIFIED DIAMOND RESOURCE - 30 September 2020
Lucapa 70% attributable
To 300m Below Surface; 3mm bottom cut off screen (including incidentals)
Resource
Classification
Indicated
Inferred
TOTAL
Indicated
Inferred
TOTAL
Date
Tonnes (Mt)
Grade (cpht) Carats (million)
Modelled value
(US$/ carat)
30-Sep-20
31-Dec-19
9.16
39.35
48.51
1.87
36.21
38.08
3.1
2.4
2.6
2.9
2.7
2.7
0.28
0.96
1.24
0.055
0.956
1.011
635
601
609
1,146
1,053
1,059
Notes:
(i) Table contains rounded figures
(ii) The grade and average modelled value estimates are quoted at a 3mm bottom cut off screen and include incidental diamond recoveries in the +9
and +11 DTC sieves (“incidentals”)
(iii) The Resource estimate was originally reported in accordance with JORC 2012 guidelines on March 2017 at a 2mm bottom cut off screen
(iv) The Indicated Resource contains material to 75m below current pit bottom in the South Lobe only. The Inferred Resource contains the remaining
material to 300m below surface in the South, Neck and North lobes
(v) The tonnes and grades are quoted as dry tonnes and dry grades
(vi) Exploration targetexists from a depth of 300m to 500m below surface
Lucapa Diamond Company Limited Annual Report
30
R
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3
1
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n
ti
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2
0
d
)
lnformation included in this report on the Mothae
Classified Diamond Resource is based on and fairly
represents information and supporting documentation
prepared, compiled and supervised by Richard Price
MAuslMM, who is a Member of the Australasian
lnstitute of Mining and Metallurgy. Mr Price is an
employee of Lucapa Diamond Company Limited.
Mr Price has sufficient experience which is relevant
to the style of mineralisation and type of deposit
under consideration and to the activity which he is
undertaking to qualify as a Competent Person as
defined in the 2012 Edition of the JORC Code. Mr. Price
consents to the inclusion in this report of the matters
based on this information in the form and context in
which it appears.
C
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Corporate governance statement
In fulfilling its obligations and responsibilities to
its various stakeholders, the Board of Lucapa is a
strong advocate of good corporate governance. The
Board has adopted corporate governance policies
and practices consistent with the ASX Corporate
Governance Council’s “Corporate Governance Principles
and Recommendations” (“Recommendations”) where
considered appropriate for a Company of Lucapa’s size
and complexity.
Lucapa has implemented the ASX Corporate
Governance Council’s Fourth Edition Corporate
Principles (“Fourth Edition”) and Recommendations.
Accordingly, this Corporate Governance Statement
has been prepared on the basis of disclosure under
the Fourth Edition of these principles. Details of
the Company’s compliance with these principles are
summarised in the Appendix 4G announced to the ASX
in conjunction with the Annual Report.
This statement describes how Lucapa has addressed
the Council’s guidelines and eight corporate
governance principles and where the Company’s
corporate governance practices depart from the
Recommendations, the Company discloses the reason
for adoption of its own practices on an “if not, why not”
basis.
Given the size, complexity and development nature of
the Group and the cost of strict compliance with all the
Recommendations, the Board has adopted a range of
modified procedures and practices which it considers
appropriate to enable it to meet the principles of good
corporate governance. At the end of this statement is a
checklist setting out the Recommendations with which
the Company does or does not comply. The information
in this statement is current as at 26 March 2021.
The following governance-related documents can be
found on the Company’s website at www.lucapa.com.
au under the section marked “Corporate Governance”.
Charters
Board
Policies and Procedures
Code of Conduct
Policy and Procedure for Selection and (Re)
Appointment of Directors
Policy on Assessing the Independence of Directors
Securities Trading Policy
Risk Management Policy
Procedure for the Selection, Appointment and
Rotation of External Auditor
Policy on Continuous Disclosure
Shareholder Communication Policy
Diversity Policy
Whistle Blower Policy
Anti-Bribery and Corruption Policy
Anti-Slavery Policy
Lucapa Diamond Company Limited Annual Report
31
Principle 1 - Lay solid
foundations for
m anage m ent
and oversight
The main function of the Board is to lead and oversee
the management and strategic direction of the Group.
The Board regularly measures the performance of
management in implementation of the strategy
through regular Board meetings.
Lucapa has adopted a formal Board charter delineating
the roles, responsibilities, practices and expectations
of the Board collectively, the individual Directors and
management.
The Board of Lucapa ensures that each member
understands their roles and responsibilities and
ensures regular meetings so as to retain full and
effective control of the Company.
Role of the Board
The Board responsibilities are as follows:
Setting the strategic aims of Lucapa and
overseeing management’s performance within
that framework;
Making sure that the necessary resources (financial
and human) are available to the Group and
management to meet its strategic objectives;
Overseeing and measuring management’s
performance in delivering the Company’s strategic
objectives;
Selecting and appointing a Managing Director with
the appropriate experience and skills to help the
Group in the pursuit of its strategic objectives;
Controlling and approving financial and compliance
reporting, capital structures and material
contracts;
Ensuring an adequate system is in place for the
proper delegation of duties for the effective day to
day running of the Group without the Board losing
sight of the direction that the Group is taking;
Establishing a diversity policy and setting
objectives for achieving diversity.
Delegation to management
Other than matters specifically reserved for the Board,
responsibility for the operation and administration
of the Company has been delegated to the Managing
Director. This responsibility is subject to an approved
delegation of authority which is reviewed regularly.
Internal control processes are designed to allow
management to operate within the parameters
approved by the Board and the Managing Director
cannot commit the Group to additional activities or
obligations in excess of these delegated authorities
without specific approval of the Board.
Election of Directors
The Board is responsible for overseeing the selection
process of new Directors, and undertakes appropriate
checks before appointing a new Director, or putting
forward a candidate for election as a Director. All
relevant information is provided in the Notice of
Meeting seeking the election or re-election of a Director
including:
Biographical details including qualifications and
experience;
Other directorships and material interests;
Term of office;
Ensuring that a sound system of risk management
and internal controls is in place;
Statement by the Board on independence of the
Director;
Setting the Company’s vision, core values and
standards;
Statement by the Board as to whether it supports
the election or re-election; and
Undertaking regular review of the corporate
governance policies to ensure adherence to the
ASX Corporate Governance Council principles;
Ensuring that the Company’s obligations to
shareholders are understood and met;
Ensuring the health, safety and well-being of
employees in conjunction with management,
developing, overseeing and reviewing the
effectiveness of the Group’s occupational health
and safety systems to assure the well-being of all
employees;
Any other material information.
Terms of appointment
Non-Executive Directors
To facilitate a clear understanding of roles and
responsibilities all non-executive Directors have signed
a letter of appointment. This letter of appointment
includes acknowledgement of:
Director responsibilities under the Corporations
Act, Listing Rules, the Company’s Constitution and
other applicable laws;
Lucapa Diamond Company Limited Annual Report
32
P
ri
n
ci
p
o
v
f
o
m
a
n
u
n
e
r
sig
le 1 - L
d
h
t (c
a
g
e
a
a
tio
y s
m
o
n
e
n
n
oli
s f
d
t a
ti
n
o
r
u
e
n
d
d
)
Corporate governance processes and Group
policies;
Board and Board sub-committee (if applicable)
meeting obligations;
Conflicts and confidentiality procedures;
Securities trading and required disclosures;
Access to independent advice and employees;
Confidentiality obligations;
Directors fees;
Expenses reimbursement;
Directors and officers insurance arrangements;
Other directorships and time commitments; and
Board performance review.
Executive Directors
The Executive Directors have a signed services
agreement. For further information refer to the
Remuneration Report.
Role of Company Secretary
The Company Secretary is accountable to the Board for:
Advising the Board and committees on corporate
governance matters;
The completion and distribution of Board and
committee papers;
Completion of Board and committee minutes; and
The facilitation of Director induction processes and
ongoing professional development of Directors.
All Directors have access to the Company Secretary who
has a direct reporting line to the Chairman.
Diversity
The Board values diversity in all aspects of its business
and is committed to creating a working environment
that recognises and utilises the contribution of its
employees. The purpose of this is to provide diversity
and equality relating to all employment matters. The
Group’s policy is to recruit and manage on the basis of
experience, ability and qualification for the position
and performance, irrespective of gender, age, marital
status, sexuality, nationality, race/ cultural background,
religious or political opinions, family responsibilities or
disability. The Group opposes all forms of unlawful and
unfair discrimination.
The Board comprises four Directors, all of whom
are male. The Board has determined that the
composition of the current Board represents the best
mix of Directors that have an appropriate range of
qualifications and expertise in the industries and
the jurisdictions in which the Group operates, can
understand and competently deal with current and
emerging business matters and can effectively assess
the performance of management.
The Group’s diversity objective is to improve gender
diversity at all levels of its business on a year-on-
year basis whilst recognising that it operates in very
competitive labour markets in remote locations,
with strong cultural sensitivities, where positions are
sometimes difficult to fill. There is periodic reporting
at the Group’s operations to measure the gender mix
within various levels of the organisation. The Group is
committed to continually assessing and proactively
monitoring these diversity trends and advocates that
every candidate suitably qualified for a position has an
equal opportunity of appointment regardless of gender,
age, ethnicity or cultural background.
The Company, together with its subsidiaries and
associates currently have 678 full-time employees and
officers of which 575 are male and 103 are female.
31 December 2020
31 December 2019
Gender representation
Female
Male
Female
Male
Board representation
Group representation
No.
-
103
%
-
15.3
No.
4
571
%
100
84.7
No.
-
102
%
-
15.5
No.
4
557
%
100
84.5
Lucapa Diamond Company Limited Annual Report
33
Principle 1 - Lay solid
foundations for
oversight (continued)
m anage m ent and
Performance review
Board and Board committees
A review of the Board’s performance and effectiveness
is conducted annually and the performance of
individual Directors is undertaken regularly. The Board
has the discretion for these reviews to be conducted
either independently or on a self-assessment basis.
The review focuses on:
Strategic alignment and engagement;
Board composition and structure;
Processes and practices;
Culture and dynamics; relationship with
management; and
Personal effectiveness.
A review of the Board’s performance and effectiveness
in respect of the year ended 31 December 2020 was
conducted.
Access to employees
Directors have the right of access to any employee.
Any employee shall report any breach of corporate
governance principles or Company policies to the
Chairman or as outlined under the Whistleblower
policy. If the breach is not rectified to the satisfaction
of the employee, they shall have the right to report
any breach to an independent Director without further
reference to senior executives of the Company.
Directors’ and officers’ liability insurance
Directors’ and officers’ liability insurance is maintained
by the Company for the Directors and senior executives
at the Company’s expense.
Board meetings
The frequency of Board meetings and the extent of
reporting from management at Board meetings are as
follows:
A minimum of four scheduled meetings are to be
held per each financial year;
Managing Director and senior executives
Other meetings will be held as required;
Performance evaluations of the Managing Director and
senior executives is undertaken annually through a
performance appraisal process which involves reviewing
and assessment of performance against agreed
corporate objectives and individual key performance
indicators or deliverables.
A review of the Managing Director and Chief Operating
Officer’s performance and effectiveness in respect of
the year ended 31 December 2020 was conducted.
Retirement and rotation of directors
Retirement and rotation of directors are governed by
the Corporations Act 2001 and the Constitution of the
Company. Each year, one third of Directors must retire
and may offer themselves for re-election. Any casual
vacancy filled will be subject to shareholder vote at
the next Annual General Meeting of the Company. It is
intended that Mr Ross Stanley will stand for re-election
by rotation at the Company’s Annual General Meeting,
expected to be held in May 2021.
Independent professional advice
Each Director of the Company or a controlled entity has
the right to seek independent professional advice at
the expense of the Company or the controlled entity.
However, prior approval of the Chairman is required
which will not be unreasonably withheld.
Meetings can be held where practicable by
electronic means;
Information provided to the Board includes all
material information related to the operations
of the Group including exploration, evaluation,
development and mining operations, budgets,
forecasts, cash flows, funding requirements,
investment and divestment proposals, new
business development activities, investor
relations, financial accounts, sales and market
information, taxation, external audits, internal
controls, risk assessments, people and health,
safety and environmental reports, statistics and
new business;
Once established or as necessary, the Chairman
of the appropriate Board sub-committee or other
meeting will report at the subsequent Board
meeting the outcomes of that meeting.
The number of Directors’ meetings (including meetings
of committees of Directors where applicable) and the
number of meetings attended by each of the Directors
of the Company during the financial year are set out in
the Directors’ Report.
Lucapa Diamond Company Limited Annual Report
34
P
ri
n
ci
p
t
h
le 2 - S
e
B
tr
u
e
o
ff
e
c
a
r
d t
tiv
e a
n
d v
c
t
u
r
e
o b
e
a
d
al
u
d
e
The names of the Directors of the Company and
their qualifications are set out in the section headed
“Information on Directors” in the Directors’ Report.
The ASX Corporate Governance Council guidelines
recommend that the Board should constitute a majority
of independent Directors and that the Chairperson
should be independent. The Board consists of four
Directors of whom one is considered independent,
being Mr Miles Kennedy (non-executive Chairman -
appointed as a director on 12 September 2008 and
served as Executive Director until 11 December 2014).
The Board considers that whilst Mr Kennedy has served
as a Director for a long period, he remains independent
from management and substantial shareholders and
is therefore able to bring an independent judgement to
bear on issues before the Board and to act in the best
interests of the Company as a whole rather than in the
interests of an individual shareholder or other party.
Mr Ross Stanley (non-Executive Director – appointed
26 July 2018) has a substantial shareholding in the
Company and therefore does not meet the criteria
for an independent Director. Mr Stephen Wetherall
(appointed 13 October 2014) is Managing Director
and therefore does not meet the criteria for an
independent Director due to his executive role. Mr Nick
Selby (appointed 4 September 2017) is an Executive
Director and therefore does not meet the criteria for an
independent Director due to his executive role.
Board skills and experience
The Company objective is to have an appropriate mix of
experience and expertise on the Board and Committees
so that the Board can effectively discharge its strategic,
corporate governance and oversight responsibilities.
The composition of the Board has been structured so
as to provide the Company with an adequate mix of
non-executive and executive Directors with exploration,
development and mining industry knowledge, country
specific knowledge, technical, commercial, capital
markets and financial skills together with integrity
and judgment considered necessary to represent
shareholders and fulfil the business objectives of the
Group.
The Board comprises Directors who each have extensive
exploration, development and mining industry
knowledge, country specific knowledge, technical,
financial, capital markets and commercial expertise.
The Board will address the skills commensurate with
the growth and development of the Group’s activities
to ensure those skill sets are complemented by
additional industry or other expertise in the sector.
This mix is described in the Board skills matrix as
follows:
Skill
Resources industry and
Africa experience
Diamond industry experience
Strategy
Mergers and acquisitions
Finance
Risk Management
Government relations
Capital projects;
financing/project management
Sustainable development
Previous board experience
Governance
Policy
Executive leadership
Remuneration
Number of
Directors
holding
this skill
4
4
4
4
4
4
4
4
4
4
4
4
4
4
Nomination of other Board members
Membership of the Board of Directors is reviewed on an on-
going basis by the Chairperson of the Board to determine
if additional core strengths are required to be added to
the Board in light of the nature of the Group’s businesses
and its objectives and diversity. The Board does not have a
separate Nomination Committee and does not believe
it is necessary in a Group of Lucapa’s size.
Director induction and ongoing professional
development
The Company does not have a formal induction
program for Directors but does provide Directors with
an information pack detailing policies, corporate
governance and various other corporate requirements
of being a director of an ASX listed company. To the
extent required, new Directors are provided access to
the diamond industry centres and given audiences with
key management, industry participants and players
as part of the induction. Due to the size and nature
of the business, Directors are expected to already
possess a level of both industry, technical, corporate
and commercial expertise before being considered for
a directorship of the Company. Directors are provided
with the opportunity to access employees of the
business and any information as they require on
the business including being given access to regular
operational updates, industry update, news articles and
publications where considered relevant.
Lucapa Diamond Company Limited Annual Report
35
Principle 3 - Instil
a culture of acting
la wfully, ethically
and responsibly
Directors, officers, employees and consultants to
the Group are required to observe high standards of
behaviour and business ethics in conducting business
on behalf of the Group and they are required to
maintain a reputation of integrity on the part of both
the Group and themselves. The Group does not contract
with or otherwise engage any person or party where it
considers integrity may be compromised.
Code of Conduct
The Company’s Code of Conduct policy has been
endorsed by the Board and applies to all Directors,
officers, employees and consultants.
Whistleblower policy
In line with the Code of Conduct, the Company has
a Whistleblower policy that ensures that all eligible
whistleblowers who make a report in good faith can
do so without fear of intimidation, disadvantage or
reprisal.
Anti-Bribery and Corruption and Anti-Slavery policies
The Company’s Anti-Bribery and Corruption and Anti-
Slavery policies have been endorsed by the Board and
applies to all Directors, Group employees, consultants,
contractors and third-parties.
Conflicts of interest
Directors are required to disclose to the Board actual
or potential conflicts of interest that may or might
reasonably be thought to exist between the interests
of the Director or the interests of any other party in so
far as it affects the activities of the Group and to act
in accordance with the Corporations Act if the conflict
cannot be removed or if it persists. That involves taking
no part in the decision-making process or discussions
where a conflict does arise.
Trading in Company securities
Directors are required to make disclosure of any
trading in the Company’s shares. The Company
policy in relation to share trading is that Directors,
key management personnel, officers, employees,
consultants and contractors of the Group (“Staff”) are
prohibited to trade whilst in possession of unpublished
price sensitive information concerning the Group or
within a certain period of the release of results i.e. the
blackout period. That is information which a reasonable
person would expect to have a material effect on the
price or value of the Company’s shares.
Staff must receive authority to acquire or sell shares
from the Chairman or the Company Secretary prior
to doing so to ensure that there is no price sensitive
information of which Staff might not be aware. The
undertaking of any trading in shares by a Director must
be notified to the ASX.
Principle 4 -
Safeguard the
corporate reports
integrity of
Lucapa has a financial reporting process which includes
quarterly, half year and full year reports which are
signed off by the Board before they are released to the
market.
The Company’s Continuous Disclosure policy ensures
that any corporate reports that are released to the
market that are not audited or reviewed by an external
auditor are reviewed by the Board and appointed
responsible officers, which are the Managing Director,
the Company Secretary and Chief Financial Officer
(or equivalent), to verify the accuracy of information
before being released.
The Board does not have a separate Audit Committee
and does not believe it is necessary in a Group of
Lucapa’s size. Instead, the four Board members,
who each have extensive corporate, commercial and
financial expertise, manage the financial oversight as
well as advise on the modification and maintenance
of the Group’s financial reporting, internal control
structure, external audit functions, and appropriate
ethical standards for the management of the Group.
In discharging its oversight role, the Board is
empowered to investigate any matter brought to
its attention with full access to all books, records,
facilities, and personnel of the Group and the authority
to engage independent counsel and other advisers as it
determines necessary to carry out its duties.
The Managing Director and Chief Financial Officer (or
Lucapa Diamond Company Limited Annual Report 36
P
ri
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ci
p
t
h
le 4 - S
e i
n
c
o
r
p
a
f
e
(c
o
r
a
t
e
o
n
e
p
t
e r
ti
n
g
rit
g
u
a
r
d
y o
f
o
r
t
s
u
e
d
)
equivalent) reports on the propriety of compliance on
internal controls and reporting systems and ensures
that they are working efficiently and effectively in all
material respects.
The Company has established procedures for
the selection, appointment and rotation of its
external auditor. The Board is responsible for the
initial appointment of the external auditor and the
appointment of a new external auditor when any
vacancy arises. Candidates for the position of external
auditor must demonstrate complete independence
from the Company through the engagement period.
The Board may otherwise select an external auditor
based on criteria relevant to the Company’s and
Group’s business and circumstances. The performance
of the external auditor is reviewed on an annual basis
by the Board.
The Company’s external auditor attends each Annual
General meeting and is available to answer questions
from shareholders relevant to the conduct of the
external audit, the preparation and content of the
Auditor’s Report, the accounting policies adopted by
the Company and the independence of the auditor.
ti
m
n
P
ri
ely a
ci
p
n
le 5 -
d b
is
ala
d
clo
n
c
M
a
k
e
e
d
s
u
r
e
The Company has adopted a formal policy dealing
with its disclosure responsibilities. The Board has
designated the Company Secretary as the person
responsible for overseeing and coordinating disclosure
of information to the ASX as well as communicating
with the ASX. In accordance with the ASX Listing Rules
the Company immediately notifies the ASX of non-
public information:
Concerning the Group that a reasonable person
would expect to have a material effect on the price
or value of the Company’s securities; and
That would, or would be likely to, influence
persons who commonly invest in securities in
deciding whether to acquire or dispose of the
Company’s securities.
The policy also addresses the Company’s obligations to
prevent the creation of a false market in its securities.
The Company also publishes other information to
assist investors to make an informed decision on its
website.
The Managing Director has ultimate authority and
responsibility for recommending market disclosure to
the Board which, in practice, is exercised in conjunction
with the Board and Company Secretary.
In addition, the Board will also consider whether there
are any matters requiring continuous disclosure in
respect of each and every item of business that it
considers.
P
ri
n
ci
s
e
c
u
rit
p
t
h
le 6 -
e rig
y h
h
ol
d
R
e
s
p
e
c
t
t
s o
f
e
r
s
The Board’s fundamental responsibility to shareholders
is to work towards meeting the Company’s strategic
objectives to add value for them. The Board maintains
an investor relation program which will inform
shareholders of all major developments affecting the
Group by:
Preparing half yearly and yearly financial reports;
Preparing quarterly cash flow reports and reports
as to activities;
Making announcements in accordance with
the listing rules and the continuous disclosure
obligations;
Lucapa Diamond Company Limited Annual Report
37
Principle 6 - Respect
security holders
the rights of
(continued)
Posting all the above on the Company’s website
once released to the ASX;
Annually, and more regularly if required, holding
a general meeting of shareholders and forwarding
to them the annual report, if requested, together
with notice of meeting and proxy form; and
Voluntarily releasing other information which it
believes is in the interest of shareholders.
The Annual General Meeting enables shareholders
to discuss the annual report and participate in
the meetings either by attendance or by written
communication. The Company provides all shareholders
with a Notice of Meeting so they can be fully informed
and be able to vote on all resolutions at the Annual
General Meeting. Shareholders are able to discuss any
matter with the Directors and/ or the auditor of the
Company who is also invited to attend the Annual
General Meeting.
Shareholders have the option to receive all Company
and share registry communications electronically
and may also communicate with the Company by
contacting the Company via email or its website. All
shareholders have the ability to request copies of ASX
releases, all of which are published and available on the
Company’s website immediately after they are released
to ASX.
The Company regularly reviews its Shareholder
Communication policy and endeavours to maintain
a program appropriate for a company of its size and
complexity.
Principle 7 -
Recognise and
m anage risk
The Board has adopted a Risk Management policy,
which sets out the Group’s risk profile. Under the
policy, the Board is responsible for approving the
Group’s policies on risk oversight and management and
satisfying itself that management has developed and
implemented a sound system of risk management and
internal control.
Under the policy, the Board delegate’s day-to-day
management of risk to the Managing Director, who is
responsible for identifying, assessing, monitoring and
managing risks with other executive management. The
executive is also responsible for updating the Group’s
material business risks to reflect any material changes,
with the approval of the Board.
In fulfilling the duties of risk management, the
executive has unrestricted access to Group employees,
contractors and records and may obtain independent
expert advice on any matter they believe appropriate.
The Board does not have a separate Risk Management
Committee as the Board monitors and reviews the
integrity of financial reporting and the Group’s internal
financial control systems. Management assess
the effectiveness of the internal financial control
on an annual basis and table any concerns and/ or
recommendations at Board meetings where required.
In addition, the following risk management measures
have been adopted by the Board to manage the Group’s
material business risks:
Establishment of financial control procedures and
authority limits for management;
Approval of an annual budget;
Adoption of a compliance procedure for the
purpose of ensuring compliance with the
Company’s continuous disclosure obligations;
Adoption of a corporate governance manual which
contains other policies to assist the Group to
establish and maintain its governance practices;
and
Compilation, maintenance and review of a risk
register to identify the Group’s material business
and operational risks and risk management
strategies for these risks. The risk register is
reviewed half yearly and updated as required.
The Executive reports to the Board on material
business risks at each Board meeting.
The Board has required the executive to design,
implement and maintain risk management and internal
control systems to manage the material business risks
Lucapa Diamond Company Limited Annual Report
38
P
ri
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ci
p
a
n
le 7 -
d
m
R
e
c
a
n
(c
o
g
o
n
a
g
n
is
ti
n
e ris
k
e
u
e
d
)
of the Group. The Board also requires management
to report to it confirming that those risks are being
managed effectively.
The ability to replace resource and reserves as
they are depleted or become uneconomical and/ or
achieve exploration success;
The Chief Financial Officer (or equivalent) has provided
a declaration to the Board in accordance with section
295A of the Corporations Act and has assured the
Board that such declaration is founded on a sound
system of risk management and internal control and
that the system is operating effectively in all material
respects in relation to financial risks.
The Board monitors the adequacy of its risk
management framework regularly to ensure that it
continues to be sound and deals adequately with
contemporary and emerging risks and that the
Company is operating with due regard to the risk
appetite set by the Board and discloses that reviews
have taken place at the end of each reporting period.
Internal Audit
The Group does not have an internal audit function as
the Board believes the business is neither the size nor
complexity that requires such a function. The Board is
currently responsible for monitoring the effectiveness
of internal controls, risk management procedures and
governance.
Sustainability and industry risks
The Group’s operations are and will continue to be
subject to a range of the hazards and risks normally
incidental to exploring for, evaluating, developing and
mining diamond resources.
The Company and its subsidiaries have detailed risk
matrices which are regularly reviewed, and which
highlight critical risk factors that the Group faces at any
particular time. Principal risks to the business include,
amongst others, those relating to:
Macroeconomic factors, sovereign and partner risk,
global diamond market and diamond demand and
pricing;
The ability to raise capital and/ or required
additional funding for continued exploration,
evaluation, development and mining operations;
Operational issues such as severe weather
conditions, supply delays, major equipment
breakdowns and labour disputes;
Environmental, health and safety and social issues
(see below); and
Retention and reliance on key executives.
As the Group expands its activities either within
existing projects or with the addition of new projects,
it is expected that the sustainability risks will change
accordingly.
The Board reviews the overall sustainability of both the
diamond business and more specifically, the Group, in
its normal course of business and therefore does not
produce a separate sustainability report.
Environmental and Social Risks
The Group strives to operate in accordance with
the highest standards of environmental practice
and comply in all material respects with applicable
environmental laws and regulations. Such regulations
typically cover a wide variety of matters including,
without limitation, prevention of waste, pollution and
protection of the environment, labour regulations and
worker safety. The Company may also be subject under
such regulations to clean-up costs and liability for toxic
or hazardous substances which may exist on or under
any of its properties or which may be produced as a
result of its operations.
The Company has adopted a formal Anti-Bribery and
Corruption and Anti-Slavery policies which apply to all
staff, consultants and contractors that work with the
Group. The policies seek to ensure that the Company
operates in an ethical and transparent manner in
all business dealings and that the Company has a
Whistleblower policy and mechanism for staff to alert
management should any issues or incidents occur.
The Board monitors the adequacy of its environmental
and social risk management to ensure that it continues
to be sound and deals adequately with contemporary
and emerging risks in the respective jurisdictions the
Group operates within.
Lucapa Diamond Company Limited Annual Report
39
Re m unerate fairly
Principle 8 -
and responsibly
The Company does not have a Remuneration
Committee as the Board believes the business is
neither the size nor complexity that requires such a
function. Instead, the Board monitors and reviews the
remuneration level and policy of the Group. The Board
does engage an independent remuneration consultant
to review the Group’s policy on remuneration as and
when required.
Details of the remuneration policy are contained in
the Remuneration Report included in the Directors’
Report. The Company’s policy is to remunerate non-
executive Directors at a fixed fee for time, commitment
and responsibilities. Any services over and above
their agreed responsibility is remunerated separately
on normal commercial terms. Remuneration for
non-executive Directors is not linked to individual
performance. The Company may grant options and
performance rights to non-executive Directors. The
grant of options and performance is designed to
recognise and reward efforts as well as to provide
non-executive Directors with additional incentive to
continue those efforts for the benefit of shareholders
and the Group.
The maximum aggregate amount of fees (including
superannuation payments) that can be paid to
non-executive Directors is subject to approval by the
shareholders at general meeting.
Pay and rewards for executive Directors and senior
executives consists of a base salary, performance
and retention incentives. Medium and long-term
performance incentives may include options and/ or
performance rights granted at the discretion of the
Board and subject to obtaining the relevant approvals.
The grant of options and/ or performance rights is
designed to recognise and reward efforts as well as to
provide additional incentives and retentions and may
be subject to the successful completion of performance
hurdles. Executives are offered a competitive level of
base pay at market rates (for comparable companies
and industry) and are reviewed annually to ensure
market competitiveness. The Company’s policy is not
to allow transactions in associated products which
limit the risk of participating in unvested elements of
equity-based compensation plans.
The Directors are not entitled to a termination bonus
or retirement benefit (other than for superannuation).
The Directors’ contracts contain a service bonus in the
event of a takeover or change of control, subject to
shareholder approval where required.
1
2
d
ia
9 c
m
a
r
a
t
o
n
d
Lucapa Diamond Company Limited Annual Report 40
Consolidated financial statements for the year ended 31 December 2020
Corporate information
Corporate information
Lucapa Diamond Company Limited (“Lucapa” or “the
Company”) is a company domiciled and incorporated in
Australia. The address of the Company’s registered
office is 34 Bagot Road, Subiaco WA 6008. The
Company, its subsidiaries and associates (collectively
Basis of preparation
Basis of preparation
Statement of compliance
The financial report is a general purpose financial report
which has been prepared in accordance with Australian
Accounting Standards (“AASBs”) (including Australian
Interpretations) adopted by the Australian Accounting
Standards Board (“AASB”) and the Corporations Act
2001. The financial report of the Group complies with
International Financial Reporting Standards (“IFRSs”)
and
International
Accounting Standards Board (“IASB”).
interpretations adopted by the
The basis of preparation of the financial report is set out
below and in the notes to the consolidated financial
statements. The financial statements were authorised
for issue by the Board of Directors on the date of the
Directors’ report.
Basis of measurement
The financial statements have been prepared on the
going concern basis, which contemplates the continuity
of normal business activities and the realisation of
assets and settlement of current liabilities in the
ordinary course of business.
Going concern
As detailed in the Directors’ report, despite a second half
profit of US$2.9 million as the Group’s operations
emerged from the COVID-19 pandemic, the Group
recorded a loss after tax of US$9.7 million for the full
year ended 31 December 2020, (2019: US$3.3 million).
Whilst the Group achieved operational successes with
diamond mining and development, diamond marketing
and kimberlite and alluvial exploration, the year’s
revenues and trading results of both SML and Mothae
were materially affected by the challenging economic
environment as a result of the COVID-19 pandemic.
As at 31 December 2020, the Group’s assets exceeded
liabilities by US$70.3 million (2019: US$67.5 million).
Due to the uncertainty being caused by the COVID-19
pandemic and the potential unknown future impact on
the material assumptions contained in the Group’s cash
flow forecasts over the next 12 months, the Directors
recognise that the Group may have to source funding
solutions and/ or restructure existing financing facilities
in order to ensure the realisation of assets and
extinguishment of liabilities as and when they fall due.
The ability of the Group to continue to pay its debts as
and when they fall due for the 12-month period from the
date the financial report is signed is dependent on:
“the Group”) are primarily involved in the exploration,
evaluation, development and mining on diamond
projects in Africa and Australia.39
•
The Group’s staff, operations, partners and the
industry not being adversely
global diamond
impacted by the ongoing COVID-19 pandemic,
thereby impacting key forecast assumptions and
scheduled
interest and/ or dividend
payments;
The Group, as required, successfully sourcing
equity, raising new debt and/ or restructuring
existing debt facilities with its financiers; and
• The Company continuing to achieve success with
loan,
•
the Lulo kimberlite exploration program.
The Directors believe that the going concern basis is
appropriate for the following reasons:
• The duration and full impact of the COVID-19
pandemic is still unknown, however the diamond
industry has rebounded strongly and with a better
balance seeing diamond prices returning to pre-
pandemic levels;
• The book value of the Group’s assets exceed its
liabilities by US$70.3 million;
• The Group has historically been successful in raising
equity and under ASX Listing Rule 7.1 the Company
has the capacity to place securities to raise equity.
• The Group has been successful in restructuring and
raising debt facilities:
o The Company has restructured the facilities
with Equigold, New Azilian and the IDC as per
the Directors’ report; and
o The Company continues to review a number of
financing possibilities, which have
the
replace a portion of the
potential to
Company’s existing debt
facilities and
improve its working capital position.
However, despite the Group’s previous track record in
sourcing new funds or restructuring debt facilities as
above for its projects, there remains no assurance the
Group in the future will be successful in obtaining
funding required or restructuring debt facilities as and
when needed.
In these circumstances, there exists a material
uncertainty which may cast doubt as to whether the
Group will be able to continue as a going concern and
whether it will realise its assets and extinguish its
liabilities in the normal course of business and at the
amounts stated in the financial statements.
39 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
Consolidated financial statements for the year ended 31 December 2020
Basis of preparation (continued)
Basis of preparation (continued)
41
to
relating
financial statements do not
include any
The
recoverability and
adjustments
classification of recorded asset amounts nor to the
amounts and classification of liabilities that might be
necessary should the Group not continue as a going
concern.
the
40 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
42
Consolidated financial statements
Consolidated statement of profit or loss and other comprehensive income
for the year ended 31 December 2020
Consolidated statement of profit or loss and other comprehensive income
for the year eneded 31 December 2020
Revenue
Revenue
Cost of sales
Cost of sales
Gross profit
Gross (loss)/ profit
Share of (loss)/ profit of associate
Share of (loss)/ profit of associate
Royalties and selling expenses
Royalties and selling expenses
Corporate expenses
Corporate expenses
Share-based payments
Share-based payments
Foreign exchange (loss)/ gain
Foreign exchange (loss)/ gain
Operating loss
Operating loss
Finance cost
Finance cost
Finance income
Finance income
Fair value adjustments
Fair value adjustments
Loss before income tax
Loss before income tax
Income tax expense
Income tax expense
Loss after income tax
Loss after income tax
Other comprehensive (loss)/ income
Other comprehensive (loss)/ income
Total comprehensive loss for the year
Total comprehensive loss for the year
(Loss)/ earnings per share
(Loss)/ earnings per share
Basic loss per share (cents)
Basic loss per share (cents)
Diluted loss per share (cents)
Diluted loss per share (cents)
Note
2
3
10
3
12
7
4
4
7
5
6
6
31 Dec 2020
US$000
Note
31 Dec 2020
US$000
31 Dec 2019
US$000
31 Dec 2019
US$000
2
4,612
(6,518)
3
10
3
12
7
(1,906)
(268)
(302)
(1,866)
(47)
(1,340)
4
(5,729)
(3,753)
4
4
(241)
(9,719)
(19)
(9,738)
4,612
(6,518)
(1,906)
(268)
(302)
(1,866)
(47)
(1,340)
15,147
15,147
(14,277)
(14,277)
870
870
173
173
(962)
(962)
(3,278)
(3,278)
(270)
(270)
889
889
(2,578)
(5,729)
(2,578)
(4,554)
(3,753)
(4,554)
4
53
53
3,825
(241)
3,825
(9,719)
(19)
(9,738)
(3,254)
(3,254)
(49)
(49)
(3,303)
(3,303)
(343)
(343)
36
36
(10,081)
(10,081)
(3,267)
(3,267)
Cents
(1.60)
(1.60)
Cents
(1.60)
(1.60)
Cents
(0.67)
(0.67)
Cents
(0.67)
(0.67)
7
5
6
6
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the
accompanying notes.41
41 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
Consolidated financial statements
Consolidated statement of financial position
as at 31 December 2020
Consolidated statement of financial position
as at 31 December 2020
Assets
Assets
Cash and cash equivalents
Cash and cash equivalents
Trade and other receivables
Trade and other receivables
Contract assets
Contract assets
Inventories
Inventories
Total current assets
Total current assets
Property plant and equipment
Property plant and equipment
Non-current financial assets
Non-current financial assets
Investment in associate
Investment in associate
Total non-current assets
Total non-current assets
Total assets
Total assets
Liabilities
Liabilities
Trade and other payables
Trade and other payables
Current borrowings
Current borrowings
Total current liabilities
Total current liabilities
Non-current provisions
Non-current provisions
Non-current borrowings
Non-current borrowings
Deferred tax liabilities
Deferred tax liabilities
Total non-current liabilities
Total non-current liabilities
Total liabilities
Total liabilities
Net assets
Net assets
Equity
Share capital
Equity
Reserves
Share capital
Accumulated losses
Reserves
Total equity
Accumulated losses
Total equity
43
Note
Note
31 Dec 2020
US$000
31 Dec 2020
US$000
31 Dec 2019
US$000
31 Dec 2019
US$000
7
7
8
9
7
10
7
7
11
7
5
12
7
9
7
4,136
1,737
-
4,965
8
10,838
7
62,037
22,739
4,472
10
89,248
100,086
4,136
1,705
1,705
1,737
2,050
2,050
-
100
100
2,021
4,965
2,021
5,876
5,876
60,570
60,570
23,933
23,933
4,741
4,741
89,244
89,244
95,120
95,120
10,838
62,037
22,739
4,472
89,248
100,086
7
4,224
4,755
7
8,979
7
1,105
11
19,672
43
5
20,820
29,799
70,287
4,224
4,755
3,967
3,967
22,518
22,518
26,485
8,979
26,485
1,064
1,105
1,064
-
-
19,672
43
43
43
1,107
1,107
27,592
27,592
67,528
67,528
20,820
29,799
70,287
129,716
(5,102)
(54,327)
12
70,287
116,888
(4,546)
116,888
(44,814)
(4,546)
(44,814)
67,528
129,716
(5,102)
(54,327)
70,287
67,528
The consolidated statement of financial position is to be read in conjunction with the accompanying notes.42
42 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
44
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E
Lucapa Diamond Company Limited Annual Report
45
Consolidated financial statements
Consolidated statement of cash flows
for the year ended 31 December 2020
Consolidated statement of cash flows
for the year ended 31 December 2020
Cash flows from operating activities
Cash flows from operating activities
Receipts from products and related debtors
Receipts from products and related debtors
Cash paid to suppliers and employees
Cash paid to suppliers and employees
Interest and finance cost
Interest and finance cost
Interest received
Interest received
Net cash used in operating activities
Net cash used in operating activities
Cash flows from investing activities
Cash flows from investing activities
Payments for exploration costs
Payments for exploration costs
Proceeds from/ (payments to) associate
Proceeds from/ (payments to) associate
Payments for property plant and equipment
Payments for property plant and equipment
Net cash used in investing activities
Net cash used in investing activities
Cash flows from financing activities
Cash flows from financing activities
Proceeds from issue of share capital
Proceeds from issue of share capital
Share issue costs
Share issue costs
Repayment of borrowings
Proceeds from borrowings
Repayment of borrowings
Borrowing transaction costs
Proceeds from borrowings
Net cash generated from/ (used in) financing activities
Borrowing transaction costs
Net increase/ (decrease) in cash and cash equivalents
Net cash generated from/ (used in) financing activities
Cash and cash equivalents at beginning of period
Net increase/ (decrease) in cash and cash equivalents
Exchange gain/ (loss) on foreign cash balances
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Exchange gain/ (loss) on foreign cash balances
Note
7
Cash and cash equivalents at end of period
Reconciliation of loss after tax to cash flows from operations:
Reconciliation of loss after tax to cash flows from operations:
Loss for the period
Loss for the period
Adjustments for:
Adjustments for:
Depreciation expense
Depreciation expense
Director and employee options
Director and employee options
Exchange gains
Exchange gains
Interest received
Interest received
Interest and other finance costs paid
Interest and other finance costs paid
Fair value loss on financial assets
Fair value loss on financial assets
Share of loss/ (profit) of associate
Share of loss/ (profit) of associate
Other non cash items
Other non cash items
Working Capital adjustments:
Working Capital adjustments:
Increase in inventory
Decrease/ (increase) in trade and other receivables
Increase in inventory
Decrease/ (increase) in trade and other receivables
Increase in trade and other payables relating to operating
activities
Increase in trade and other payables relating to operating
activities
Net cash used in operating activities
Net cash used in operating activities
31 Dec 2020 31 Dec 2019
31 Dec 2020
US$000
US$000
Note
31 Dec 2019
US$000
US$000
4,678
(9,617)
4,678
(9,617)
(1,787)
(1,787)
4
4
(6,722)
(6,722)
(218)
(218)
-
-
(623)
(623)
(841)
15,298
15,298
(16,898)
(16,898)
(2,059)
(2,059)
53
53
(3,606)
(3,606)
(485)
(485)
1,608
1,608
(3,806)
(3,806)
(2,683)
(841)
(2,683)
12,821
12,821
(694)
(2,280)
(694)
-
(2,280)
-
-
9,847
-
2,284
9,847
1,705
2,284
147
1,705
4,136
147
-
-
(16)
(6,986)
(16)
6,909
(6,986)
(20)
6,909
(113)
(20)
(6,402)
(113)
8,200
(6,402)
(93)
8,200
1,705
(93)
7
4,136
1,705
(9,738)
(9,738)
2,922
2,922
47
47
(147)
(147)
-
-
2,655
2,655
242
242
268
268
(740)
(740)
(2,944)
(2,944)
369
369
344
(6,722)
344
(6,722)
(3,303)
(3,303)
2,332
2,332
270
270
93
93
-
-
2,497
2,497
(3,824)
(3,824)
(173)
(173)
(29)
(29)
(1,808)
(212)
(1,808)
(212)
551
551
(3,606)
(3,606)
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes.44
Refer Notes 7e and 12 for details on non-cash financing and investing activities.
44 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
46
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|
5
4
Lucapa Diamond Company Limited Annual Report
47
Notes to the consolidated financial statements
for the year ended 31 December 2020
1. Segment reporting (continued)
1.
Segment reporting (continued)
Further information
The Group engages in business activities within the
following business segments: exploration & evaluation
projects in Angola, Botswana and Australia, mining in
Angola and Lesotho and corporate and other
administrative functions in Western Australia to
support and promote its activities.
The Group’s operating segments are managed by
geographical region as the risks and required rates of
returns are largely affected by differences in the regions
in which they operate.
2. Revenue
2.
Revenue
Overview 43
Revenue from contracts with customers
Revenue from contracts with customers
Sale of goods
Sale of goods
Further information
The Group’s revenue arises mainly from the sale of
diamonds.
Accounting policy
To determine whether to recognise revenue, the
following 5-step process is followed:
Identifying the contract with a customer;
Identifying the performance obligations;
•
•
• Determining the transaction price;
• Allocating the transaction price to the
performance obligations; and
• Recognising revenue when/ as performance
obligation(s) are satisfied.
The transaction price is the amount to which the Group
expects to be entitled to in exchange for the transfer of
goods and services and is allocated amongst the various
performance obligations based on their relative stand-
alone selling prices. The transaction price for a contract
excludes any amounts collected on behalf of third
parties.
Revenue is recognised either at a point in time or over
time, when (or as) the Group satisfies performance
obligations by transferring the promised goods or
services to its customers.
Accounting policy
Segment disclosures are based on information that is
provided to the Board of Directors, which is the Group’s
chief decision-making body.
An operating segment is a component of the Group that
engages in business activities from which it may
expend capital and generate revenues and incur
expenses, including revenues and expenses that relate
to transactions with any of the Group’s other
components.
All operating segments’ operating results, for which
discrete financial information is available, are reviewed
by the Group’s Managing Director and management to
assess their performance and make decisions with
respect to the allocation of resources to that segment.
31 Dec 2020
31 Dec 2020
US$000
US$000
31 Dec 2019
31 Dec 2019
US$000
US$000
4,612
4,612
4,612
4,612
15,147
15,147
15,147
15,147
Revenue from the sale of rough diamonds is recognised
on a point in time basis.
Revenue from cutting and polishing partnerships:
•
•
is considered to be variable consideration and is
recognised to the extent that it is highly probable
that its inclusion will not result in a significant
revenue reversal in the future when the uncertainty
has been resolved. This is generally the case when
cutting and polishing work has substantially been
completed and relative certainty exists over the
quality of the final product or when the polished
diamonds have been sold;
is recognised once a high level of certainty exists
regarding factors that influence the sale prices
including the size, quality and colour of the final
polished diamonds. These factors are considered per
individual stone.
If the Group satisfies a performance obligation before it
receives the consideration, either a contract asset or a
receivable is recognised in the statement of financial
position, depending on whether something other than
the passage of time is required before the consideration
is due.
43 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
48
Notes to the consolidated financial statements
for the year ended 31 December 2020
3. Expenses
3.
Expenses
Overview 47
Note
Note
31 Dec 2020
31 Dec 2020
US$000
US$000
31 Dec 2019
31 Dec 2019
US$000
US$000
Breakdown of expenses by nature
Breakdown of expenses by nature
Raw materials, consumables and other input costs
Raw materials, consumables and other input costs
Changes in inventories of finished goods and work in progress
Changes in inventories of finished goods and work in progress
Employee benefits expenses (excluding share based payments)
Employee benefits expenses (excluding share based payments)
Depreciation and amortisation
Depreciation and amortisation
Auditors remuneration
Auditors remuneration
Mining and short term leases
Mining and short term leases
Consulting fees and other administrative expenses
Consulting fees and other administrative expenses
Total cost of sales and coprorate expenses
Total cost of sales and coprorate expenses
Employee benefits expenses
Employee benefits expenses
Wages, salaries and director remuneration
Wages, salaries and director remuneration
Superannuation costs
Superannuation costs
Share-based payments
Share-based payments
Other associated employee expenses
Other associated employee expenses
12
12
Auditors remuneration
Auditors remuneration
EEllddeerrttoonn PPttyy LLttdd ((AAuuddiittoorrss ooff ppaarreenntt ccoommppaannyy && ccoonnssoolliiddaattiioonn))
Elderton Pty Ltd (Auditors of parent company & consolidation)
Audit services
Audit services
Other services
Other services
Other group auditors (for subsidiary companies)
OOtthheerr ggrroouupp aauuddiittoorrss ((ffoorr ssuubbssiiddiiaarryy ccoommppaanniieess))
Audit services
Audit services
Other services
Other services
3,919
3,919
(2,911)
(2,911)
4,089
4,089
2,922
2,922
45
45
141
141
177
179
8,384
8,384
4,061
87
46
(59)
4,061
87
46
(59)
4,135
4,135
35
-
35
-
35
35
9,482
9,482
(1,333)
(1,333)
6,274
6,274
2,332
2,332
38
38
128
128
633
633
17,555
17,555
5,988
5,988
127
127
270
270
159
159
6,544
6,544
32
-
32
-
32
32
10
-
10
45
10
-
10
45
6
-
6
-
6
6
38
38
Accounting policy
Expenses recognised in profit or loss are classified and
presented on a functional basis.
Employee benefits
SShhoorrtt--tteerrmm eemmppllooyyeeee bbeenneeffiittss
Liabilities for employee benefits for wages, salaries and
annual leave that are expected to be settled within 12
months of the reporting date represent present
obligations resulting from employees’ services provided
to reporting date and are calculated at undiscounted
amounts based on remuneration wage and salary rates
that the Group expects to pay as at the reporting date
including
as workers
such
on-costs,
compensation insurance and payroll tax.
related
LLoonngg--tteerrmm eemmppllooyyeeee bbeenneeffiittss
The Group’s net obligation in respect of long-term
employee benefits is the amount of future benefit that
employees have earned in return for their service in the
current and prior periods plus related on-costs: that
benefit is discounted to determine its present value, and
the fair value of any related assets is deducted. The
discount rate is the yield at the reporting date on
government bonds
that have maturity dates
approximating the terms of the Group’s obligations.
TTeerrmmiinnaattiioonn bbeenneeffiittss
Termination benefits are recognised as an expense when
the Group is demonstrably committed, without realistic
possibility of withdrawal, to a formal detailed plan to
either terminate employment before the normal
retirement date, or to provide termination benefits as a
result of an offer made to encourage voluntary
redundancy.
Share based payments
Refer note 12.
47 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
Notes to the consolidated financial statements
for the year ended 31 December 2020
4. Finance cost and income
4.
Finance cost and income
Overview 48
Finance cost
Finance cost
Finance cost on borrowings
Finance cost on borrowings
Interest expense on lease labilities
Interest expense on lease labilities
Unwinding of discount rate on rehabilitation liability
Unwinding of discount rate on rehabilitation liability
Finance income
Finance income
Interest income on bank deposits
Interest income on bank deposits
Net finance cost on financial instruments
Net finance cost on financial instruments
Accounting policy
Finance income and expenses comprises interest income
on funds invested, interest expense on borrowings
calculated using the effective interest method and
unwinding of discounts on provisions.
Interest income is recognised in the statement of profit
or loss and other comprehensive income as it accrues,
using the effective interest method. All borrowing costs
are recognised in the statement of profit or loss and
other comprehensive income using the effective interest
method.
49
31 Dec 2020
31 Dec 2020
US$000
US$000
31 Dec 2019
31 Dec 2019
US$000
US$000
3,381
3,381
303
303
69
69
3,753
3,753
4
4
4
4
3,749
3,749
4,453
4,453
22
22
79
79
4,554
4,554
53
53
53
53
4,501
4,501
to
General and specific borrowing costs that are directly
attributable
the acquisition, construction or
production of a qualifying asset are capitalised during
the period of time that is required to complete and
prepare the asset for its intended use or sale. Exchange
differences arising from foreign currency borrowings
used to acquire qualifying assets are regarded as an
adjustment to the interest cost and included in the
capitalised amount. Qualifying assets are assets that
necessarily take a substantial period of time to get ready
for their intended use or sale.
48 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
50
Notes to the consolidated financial statements
for the year ended 31 December 2020
5. Income tax
Income tax
5.
Overview 49
Current tax expense
Current tax expense
Current income tax charge
Current income tax charge
Current income tax adjustments relating to prior years
Current income tax adjustments relating to prior years
Deferred tax expense
Deferred tax expense
Relating to origination and reversal of temporary differences
Relating to origination and reversal of temporary differences
Total income tax expense
Reconciliation of tax expense and the accounting profit multiplied
Total income tax expense
by Australia’s domestic tax rate
Reconciliation of tax expense and the accounting profit multiplied
Net loss before tax
by Australia’s domestic tax rate
Income tax benefit using the Australian domestic tax rate of 30%
Net loss before tax
Increase in income tax due to tax effect of:
Non-deductible expenses
Income tax benefit using the Australian domestic tax rate of 30%
Tax rate differential on foreign income
Increase in income tax due to tax effect of:
Non-deductible expenses
Current year tax losses not recognised
Tax rate differential on foreign income
Foreign taxes paid
Current year tax losses not recognised
Share of loss of associate
Foreign taxes paid
Decrease in income tax expense due to:
Share of loss of associate
Non-assessable income
Decrease in income tax expense due to:
Share of profit of associate
Non-assessable income
Impact of movement in unrecognised temporary differences
Share of profit of associate
Utilisation of previously unrecognised tax losses
Impact of movement in unrecognised temporary differences
Utilisation of previously unrecognised tax losses
Differences upon foreign currency conversion
Differences upon foreign currency conversion
Deductible equity raising costs
Deductible equity raising costs
Income tax expense
Income tax expense
Recognised deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Recognised deferred tax assets
Tax losses
Accruals & provisions
Recognised deferred tax assets
Tax losses
Accruals & provisions
Less: Set off of deferred tax liabilities
Net deferred tax assets
Less: Set off of deferred tax liabilities
Recognised deferred tax liabilities
Net deferred tax assets
Property plant and equipment
Capitalised interest and foreign exchange adjustments
Recognised deferred tax liabilities
Property plant and equipment
Capitalised interest and foreign exchange adjustments
Other
Other
Less: Set off of deferred tax assets
Net deferred tax liabilities
Less: Set off of deferred tax assets
Deferred tax assets not recognised
Net deferred tax liabilities
Tax revenue losses
Tax capital losses
Deferred tax assets not recognised
Deductible temporary differences
Tax revenue losses
Tax capital losses
Deductible temporary differences
31 Dec 2020
US$000
31 Dec 2020
US$000
31 Dec 2019
US$000
31 Dec 2019
US$000
19
-
-
19
19
-
-
19
48
-
1
49
48
-
1
49
(9,719)
(2,916)
(9,719)
(3,254)
(976)
(3,254)
(2,916)
460
390
2,610
19
80
(35)
460
390
2,610
19
80
(35)
(258)
(303)
-
(28)
19
(258)
(303)
-
(28)
814
241
898
48
-
(976)
814
241
898
48
-
(904)
(52)
(904)
(52)
-
-
-
(20)
-
-
-
(20)
49
19
49
9,501
408
9,909
(9,909)
9,501
408
-
9,909
(9,909)
-
(8,809)
-
(8,809)
(1,143)
-
(9,952)
(1,143)
9,909
(43)
(9,952)
9,909
(43)
11,982
5,098
644
11,982
5,098
644
17,724
10,007
473
10,007
10,480
473
(10,480)
-
10,480
(10,480)
-
(9,213)
(759)
(9,213)
(551)
(759)
(10,523)
(551)
10,480
(43)
(10,523)
10,480
(43)
12,172
4,561
25
12,172
4,561
16,758
25
49 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
17,724
16,758
Lucapa Diamond Company Limited Annual Report
Notes to the consolidated financial statements
for the year ended 31 December 2020
5. Income tax (continued)
5.
Income tax (continued)
Further information
The estimated tax losses above may be available to be
offset against taxable income in future years. The
availability of these losses is subject to satisfying
taxation legislative requirements. The deferred tax asset
attributable to tax losses has not been brought to
account in these financial statements because the
Directors believe it is not presently appropriate to regard
realisation of the future income tax benefits as probable.
Accounting policy
Income tax expense represents the sum of the tax
currently payable and deferred tax. The tax currently
payable is based on taxable profit/ (loss) for the period.
Taxable profit differs from net profit as reported in the
statement of profit or loss and other comprehensive
income because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The
Group’s liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by
the balance sheet date.
Deferred tax is the tax expected to be payable or
recoverable on differences between the carrying amount
of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of
taxable profit/ (loss) and is accounted for using the
balance sheet liability method. Deferred tax liabilities
are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be
temporary
available
against which
deductible
51
differences can be utilised. Such assets and liabilities
are not recognised if the temporary difference arises
from goodwill (or negative goodwill) or from the initial
recognition (other than in a business combination) of
other assets and liabilities in a transaction that affects
neither the tax profit/ (loss) nor the accounting profit/
(loss).
liabilities are recognised for taxable
Deferred tax
in
temporary differences arising on
subsidiaries and associates, and interests in joint
ventures, except where the Group is able to control the
reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the
foreseeable future.
investments
The carrying amount of deferred tax assets is reviewed
at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable profit
will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are
expected to apply in the period when the liability is
settled or the asset realised. Deferred tax is charged or
credited in the statement of profit or loss and other
comprehensive income, except when it relates to items
charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when they
relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax
assets and liabilities on a net basis.
50 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
52
Notes to the consolidated financial statements
for the year ended 31 December 2020
6. (Loss)/ earnings per share
(Loss)/ earnings per share
6.
Overview 51
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
31 Dec 2020
31 Dec 2020
Cents
(1.60)
(1.60)
Cents
(1.60)
(1.60)
31 Dec 2019
31 Dec 2019
Cents
(0.67)
(0.67)
Cents
(0.67)
(0.67)
Loss used in calculating earnings per share
Loss used in calculating earnings per share
Loss attributable to members of the Company used in calculating
Loss attributable to members of the Company used in calculating
basic earnings per share
basic earnings per share
Loss attributable to members of the Company used in calculating
Loss attributable to members of the Company used in calculating
diluted earnings per share
diluted earnings per share
Weighted average number of shares used as the denominator
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares outstanding during the
Weighted average number of ordinary shares outstanding during
period used in calculation of basic earnings per share
the period used in calculation of basic earnings per share
Weighted average number of ordinary shares outstanding during
Weighted average number of ordinary shares outstanding during the
the period used in calculation of diluted earnings per share
period used in calculation of diluted earnings per share
US$000
US$000
US$000
US$000
(9,738)
(9,738)
(3,303)
(3,303)
(9,738)
(9,738)
Number
Number
(3,303)
(3,303)
Number
Number
608,401,126
608,401,126
491,273,918
491,273,918
609,176,342
609,176,342
492,567,767
492,567,767
Accounting policy
Basic earnings/ (loss) per share is calculated by dividing
the net profit/ (loss) attributable to the ordinary
shareholders of the Company by the weighted average
number of ordinary shares of the Company during the
period. Diluted earnings/ (loss) per share is determined
by adjusting the net profit/ (loss) attributable to the
ordinary shareholders and the number of shares
outstanding for the effects of all dilutive potential
shares, which comprise share options.
51 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
Notes to the consolidated financial statements
for the year ended 31 December 2020
7. Financial instruments and financial risk management
7.
Financial instruments and financial risk management
Overview 52
Summary of carrying value of financial instruments
Summary of carrying value of financial instruments
Financial assets
Financial assets
Cash and cash equivalents
Cash and cash equivalents
Trade and other receivables
Trade and other receivables
Other current financial assets
Other current financial assets
Non-current financial assets
Non-current financial assets
Financial liabilities
Financial liabilities
Trade and other payables
Trade and other payables
Current borrowings
Current borrowings
Non-current borrowings
Non-current borrowings
Summary of amounts recognised in profit or loss
Fair value adjustments
Summary of amounts recognised in profit or loss
(Loss)/ gain in respect of the alluvial project receivable
Fair value adjustments
Gain on borrowing embedded derivatives
(Loss)/ gain in respect of the alluvial project receivable
Gain on borrowing embedded derivatives
Foreign exchange gain
Foreign exchange gain
(Loss)/ gain on revaluation of intergroup loans
(Loss)/ gain on other financial instruments
(Loss)/ gain on other financial instruments
(Loss)/ gain on revaluation of intergroup loans
Net finance cost on financial instruments
Net finance cost on financial instruments
Further information
Financial risk management
The Group has exposure to market, credit and liquidity
risks from the use of financial instruments. This note
presents information about the Group’s exposure to
each of the above risks, their objectives, policies and
processes for measuring and managing risk, and the
management of
Further quantitative
disclosures are included throughout this financial report.
capital.
The Board of Directors has overall responsibility for the
establishment and oversight of the risk management
framework. Risk management policies are established to
53
Note
Note
31 Dec 2020
31 Dec 2020
US$000
US$000
31 Dec 2019
31 Dec 2019
US$000
US$000
7a
7b
7c
7c
7a
7b
7c
7c
7d
7e
7e
7d
7e
7e
4,136
4,136
1,737
1,737
-
-
22,739
22,739
28,612
28,612
4,224
4,224
4,755
4,755
19,672
19,672
28,651
28,651
1,705
1,705
2,050
2,050
-
-
23,933
23,933
27,688
27,688
3,967
22,518
-
3,967
22,518
-
26,485
26,485
(349)
108
(349)
108
(241)
(241)
2,958
867
2,958
867
3,825
3,825
(574)
(574)
(766)
(766)
789
100
789
100
4
4
(1,340)
(1,340)
3,749
889
889
4,501
3,749
4,501
identify and analyse the risks faced by the Group, to set
appropriate risk limits and controls, and to monitor risks
and adherence to limits. Risk management policies and
systems are reviewed to reflect changes in market
conditions and the Group’s activities. The Group,
through its training and management standards and
procedures, aims to develop a disciplined and
constructive control environment in which all employees
understand their roles and obligations.
52 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
54
Notes to the consolidated financial statements
for the year ended 31 December 2020
7. Financial instruments and financial risk management (continued)
Financial instruments and financial risk management (continued)
7.
to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable
losses or risking damage to the Group’s reputation.
Ultimate responsibility for liquidity risk management
rests with the Board of Directors. The Group manages
liquidity risk by maintaining adequate cash reserves, or
from funds raised in the market, or by debt and by
continuously monitoring forecast and actual cash flows.
The liquidity profile of the Group’s financial liabilities are
disclosed in the relevant notes below.
Capital risk management
The Group’s objectives when managing capital are to
safeguard its ability to continue as a going concern, so as
to maintain a strong capital base sufficient to maintain
future exploration and development of its projects. In
order to maintain or adjust the capital structure, the
Group may return capital to shareholders, issue new
shares, raise debt finance or sell assets to reduce debt.
The Group’s focus has been to raise sufficient funds
through equity and debt finance to fund exploration,
mine development, evaluation activities and corporate
overhead.
Fair value hierarchy
Details of the significant accounting policies and
methods adopted, including the criteria for recognition,
the basis of measurement and the basis on which
revenues and expenses are recognised, in respect of each
class of financial asset, financial liability and equity
instrument are disclosed below.
The financial assets and liabilities are classified as
follows in terms of the fair value hierarchy:
•
the SML receivable (Note 7c): level 3 due to the use
of unobservable inputs;
the Equigold and New Azilian embedded
derivatives: level 1 due to the use of market based
and observable inputs; and
other financial assets and liabilities approximate
their net fair value, determined in accordance with
the accounting policies.
•
•
MMaarrkkeett rriisskk
•
Commodity price risk
The Group is focussed on its diamond mining and
exploration
in Africa and Australia.
Accordingly, the Group is exposed to the global
pricing structures of the diamond market.
interests
•
•
Foreign exchange risk
The Group operates internationally and is exposed
to foreign exchange risk arising from various
currency exposures, primarily with respect to the US
dollar, Australian dollar, South African rand and
Angolan kwanza. Foreign exchange risk arises from
future commercial transactions, recognised assets
and liabilities and net investments in foreign
operations that are not in the individual business
unit’s functional currency. The Group manages its
foreign exchange risk by monitoring
its net
exposures, maintaining an appropriate balance
between foreign currency assets and liabilities and
making use of hedging instruments. The Group does
not speculate with the use of hedging instruments
and derivatives. The extent of the Group’s exposure
to foreign currency risk at balance date is disclosed
below for each category of financial instrument.
Cash flow interest rate risk
Cash flow interest rate risk, is the risk that a
financial instrument’s value will fluctuate as a result
of changes in the market interest rates on interest-
bearing financial instruments. The Group does not
these
currently use derivatives
exposures. The extent of the Group’s exposure to
interest rate risk at balance date is disclosed below
for each category of financial instrument.
to mitigate
CCrreeddiitt rriisskk
Credit risk refers to the risk that a counterparty will
default on its contractual obligations resulting in a
financial loss to the Group. The Group’s potential
concentration of credit risk mainly relates to amounts
advanced to SML (Note 7c). The Group’s short-term cash
surpluses are placed with banks that have investment
grade ratings. The maximum credit risk exposure
relating to the financial assets is represented by their
carrying values as at the balance sheet date.
LLiiqquuiiddiittyy rriisskk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The
Group’s approach to managing liquidity is to ensure, as
far as possible, that it will always has sufficient liquidity
53 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
Notes to the consolidated financial statements
for the year ended 31 December 2020
7. Financial instruments and financial risk management (continued)
7.
Financial instruments and financial risk management (continued)
55
Accounting policy
Recognition, initial measurement and derecognition
Financial assets and financial liabilities are recognised
when the Group becomes a party to the contractual
provisions of the financial instrument and are measured
initially at fair value adjusted by transactions costs,
except for those carried at fair value through profit or
loss, which are measured
initially at fair value.
Subsequent measurement of financial assets and
financial liabilities are described below.
Financial assets are derecognised when the contractual
rights to the cash flows from the financial asset expire,
or when the financial asset and all substantial risks and
is
rewards are
derecognised when
is extinguished, discharged,
cancelled or expires.
transferred. A
it
financial
liability
Subsequent measurement of financial assets
For the purpose of subsequent measurement, financial
assets of the Group are classified into either the
amortised cost or fair value through profit or loss
(“FVPL”) categories. Classifications are determined by
both the Group’s business model for managing the
financial asset and
flow
characteristics of the financial assets.
the contractual cash
All income and expenses relating to financial assets that
are recognised in profit or loss are presented within
finance costs, finance income or other financial items,
except for impairment of trade receivables which is
presented within other expenses.
FFiinnaanncciiaall aasssseettss aatt aammoorrttiisseedd ccoosstt
Financial assets are measured at amortised cost if the
assets meet the following conditions (and are not
designated as FVPL):
•
•
they are held with the objective to hold the assets
and collect its contractual cash flows;
the contractual terms of the financial assets give
rise to cash flows that are solely payments of
principal and interest on the principal amount
outstanding.
initial
After
recognition, these are measured at
amortised cost using the effective interest method.
Discounting is omitted where the effect of discounting is
immaterial. The Group’s cash and cash equivalents,
trade and most other receivables fall into this category
of financial instruments.
FFiinnaanncciiaall aasssseettss aatt ffaaiirr vvaalluuee tthhrroouugghh pprrooffiitt oorr lloossss
Financial assets that are held within a different business
model other than ‘hold to collect’ or ‘hold to collect and
sell’ are categorised at fair value through profit and loss.
Further, irrespective of business model financial assets
whose contractual cash flows are not solely payments of
principal and interest are accounted for at FVPL. All
derivative financial instruments fall into this category.
Subsequent measurement of financial liabilities
The Group’s financial liabilities include borrowings, trade
and other payables and derivative financial instruments.
Subsequent to initial recognition, financial liabilities are
measured at amortised cost using the effective interest
method, except for derivatives and financial liabilities
designated at FVPL, which are carried subsequently at
fair value with gains or losses recognised in profit or loss.
All interest-related charges and, if applicable, changes in
an instrument’s fair value that are reported in profit or
loss are included within finance costs or finance income.
Leases
inception to determine
Contracts are assessed at
whether a contract is, or contains, a lease. It is classified
as such if the contract conveys the right to control the
use of an identified asset for a period of time in exchange
for consideration.
A single recognition and measurement approach is
applied for all leases, except for short-term leases,
leases of low-value assets and leases to explore for or
mine minerals and similar non-regenerative resources.
The Group recognises lease liabilities to make lease
payments and right-of-use assets representing the right
to use the underlying assets.
Right-of-use assets are included under Property Plant
and Equipment (refer note 9).
Lease liabilities are recognised at the commencement
date of the lease and measured at the present value of
lease payments to be made over the lease term. The
lease payments include fixed payments (including in-
substance fixed payments) less any lease incentives
receivable, variable lease payments that depend on an
index or a rate, and amounts expected to be paid under
residual value guarantees. The lease payments also
include the exercise price of a purchase option
reasonably certain to be exercised by the Group and
payments of penalties for terminating the lease, if the
lease term reflects the Group exercising the option to
terminate.
lease
The Group uses its incremental borrowing rate at the
lease commencement date to calculate the present
value of lease payments, if the interest rate implicit in
the
is not readily determinable. After the
commencement date, the amount of lease liabilities is
increased to reflect the accretion of interest and reduced
for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the
lease payments (e.g., changes to future payments
resulting from a change in an index or rate used to
determine such lease payments) or a change in the
assessment of an option to purchase the underlying
asset.
54 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
56
Notes to the consolidated financial statements
for the year ended 31 December 2020
7. Financial instruments and financial risk management (continued)
Financial instruments and financial risk management (continued)
7.
Lease liabilities are included in interest-bearing loans
and borrowings.
principal and interest cash flows, discounted at the
market rate of interest at the reporting date.
Lease payments for short-term leases, leases of low-
value assets and leases to explore for or mine minerals
as well as variable lease payments that do not depend on
an index or a rate are recognised as expenses (unless
they are incurred to produce inventories) in the period in
which the event or condition that triggers the payment
occurs.
Determination of fair values
TTrraaddee aanndd ootthheerr rreecceeiivvaabblleess
The fair value of trade and other receivables is estimated
as the present value of future cash flows, discounted at
the market rate of interest at the reporting date.
FFiinnaanncciiaall lliiaabbiilliittiieess
Fair value, which is determined for disclosure purposes,
is calculated based on the present value of future
Significant accounting judgements, estimates and
assumptions
FFiinnaanncciiaall aasssseettss
The Group’s financial assets include the receivable in
respect of SML
future
reimbursement in US dollars of the Group’s historic
alluvial exploration and development costs incurred at
Lulo. The recoverable amount of the receivable is
reassessed using calculations which incorporate various
key assumptions as per above.
represents
that
the
55 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
57
Notes to the consolidated financial statements
for the year ended 31 December 2020
7a. Cash and cash equivalents
7a.
Cash and cash equivalents
Balances on hand
Balances on hand
Bank balances
Bank balances
Foreign exchange risk
Cash balances exposed to foreign currency risk, based on notional amounts
FFoorreeiiggnn eexxcchhaannggee rriisskk
Cash balances exposed to foreign currency risk, based on notional amounts
Interest rate risk
IInntteerreesstt rraattee rriisskk
Cash balances held at variable interest rates
Average rate for 2020: 0.2% (2019: 1.2%)
Cash balances held at variable interest rates
56
Average rate for 2020: 0.2% (2019: 1.2%)
7b. Trade and other receivables
7b.
Trade and other receivables
Balances on hand
Current
Bank balances
GST/ VAT receivable
Prepayments and other receivables
Foreign exchange risk
Cash balances exposed to foreign currency risk, based on notional amounts
FFoorreeiiggnn eexxcchhaannggee rriisskk
Interest rate risk
Receivable balances exposed to foreign currency risk, based on
Cash balances held at variable interest rates
notional amounts
Average rate for 2020: 0.2% (2019: 1.2%)
56
IInntteerreesstt rraattee rriisskk
Non-interest bearing balances
31 Dec 2020
31 Dec 2020
US$000
US$000
31 Dec 2019
31 Dec 2019
US$000
US$000
4,136
4,136
4,136
4,136
1,838
1,838
4,135
1,705
1,705
1,705
1,705
105
105
1,705
4,136
1,705
31 Dec 2020
31 Dec 2020
US$000
US$000
31 Dec 2019
31 Dec 2019
US$000
US$000
4,136
1,014
4,136
723
1,705
1,316
1,705
734
1,737
1,838
2,050
105
4,135
459
1,705
649
1,737
2,050
56 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
58
Notes to the consolidated financial statements
for the year ended 31 December 2020
7c. Financial assets
Financial assets
7c.
Overview 57
Non current financial assets
Non current financial assets
Receivable in respect of SML
Receivable in respect of SML
At 1 January
At 1 January
Investment during the period
Investment during the period
Repayment received
Repayment received
Transferred to Deferred exploration and evaluation costs (note 9)
Transferred to Deferred exploration and evaluation costs (note 9)
31 Dec 2020
31 Dec 2020
US$000
US$000
31 Dec 2019
US$000
31 Dec 2019
US$000
30,260
30,260
63
63
-
-
(908)
(908)
29,415
(6,676)
29,415
(6,676)
22,739
22,739
32,371
1,515
(2,110)
(1,516)
32,371
1,515
(2,110)
(1,516)
30,260
(6,327)
30,260
(6,327)
23,933
23,933
22,739
22,739
23,933
23,933
Significant unobservable inputs are the timing and
amounts of future repayments which are based on the
expected cash flows per the Company’s forecast model
for SML. Sensitivity factors which could impact the
valuation include operational recoveries, prices and
delays in the timing of repayments which will decrease
the fair value estimate. A discount rate of 12.85% (2019:
11.89%) has been applied in the fair value calculation.
31 Dec 2020
US$000
31 Dec 2020
US$000
31 Dec 2019
US$000
31 Dec 2019
US$000
1,471
1,125
1,628
1,471
1,125
1,628
1,251
1,251
1,125
1,125
1,591
1,591
4,224
3,967
4,224
3,967
525
334
525
334
4,224
3,967
4,224
3,967
4,224
4,224
3,967
3,967
Fair value adjustment due to discounting
Fair value adjustment due to discounting
At end of period
At end of period
Interest rate risk
IInntteerreesstt rraattee rriisskk
Non-interest bearing balances
Non-interest bearing balances
Further information
The receivable in respect of SML was transferred from
Alluvial development in 2016 and represents the future
reimbursement in US dollars of the Company’s historic
alluvial exploration and development costs incurred at
Lulo. The receivable has been re-measured to its
estimated fair value using the income approach, which is
a valuation technique that converts future cash flow into
a single discounted present value and is classified as
level 3 in the fair value hierarchy due to the use of
unobservable inputs.
7d. Trade and other payables
Trade and other payables
7d.
Trade payables
Trade payables
Mothae deferred purchase consideration
Mothae deferred purchase consideration
Accruals and other payables
Accruals and other payables
Total
Total
Foreign exchange risk
FFoorreeiiggnn eexxcchhaannggee rriisskk
Payable balances exposed to foreign currency risk, based on
Payable balances exposed to foreign currency risk, based on
notional amounts
notional amounts
Interest rate risk
IInntteerreesstt rraattee rriisskk
Non-interest bearing balances
Non-interest bearing balances
Liquidity risk
LLiiqquuiiddiittyy rriisskk
Contractual maturities profile
Payable within one year
Contractual maturities profile
Payable within one year
57
57 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
Notes to the consolidated financial statements
for the year ended 31 December 2020
7e. Borrowings
7e.
Borrowings
Overview 58
Current borrowings
Lease liabilities
Current borrowings
Other short-term loans
Lease liabilities
Current loans - Embedded derivatives
Other short-term loans
Current loans - Embedded derivatives
Total
Total
Non-current borrowings
Lease liabilities
Non-current borrowings
Other non-current loans
Lease liabilities
Other non-current loans - Embedded derivatives
Other non-current loans
Total
Other non-current loans - Embedded derivatives
Foreign exchange risk
Total
Borrowings exposed to foreign currency risk, based on notional amounts
FFoorreeiiggnn eexxcchhaannggee rriisskk
Interest rate risk
Borrowings exposed to foreign currency risk, based on notional amounts
Balances at variable interest rates
IInntteerreesstt rraattee rriisskk
Average rate for 2020: 14.3% (2019: 18.1%)
Refer interest rate sensitivity analysis below
Balances at variable interest rates
Average rate for 2020: 14.3% (2019: 18.1%)
Balances at fixed interest rates
Refer interest rate sensitivity analysis below
Average rate for 2020: 11% (2019: 11.8% )
Balances at fixed interest rates
Average rate for 2020: 11% (2019: 11.8% )
Liquidity risk
Contractual maturities profile, including estimated interest payments and
excluding the impact of netting agreements
LLiiqquuiiddiittyy rriisskk
Borrowings
Contractual maturities profile, including estimated interest payments and
Payable within one year
excluding the impact of netting agreements
Payable after one year but less than five years
Borrowings
Payable after more than five years
Payable within one year
Payable after one year but less than five years
Leases
Payable after more than five years
Payable within one year
Payable after one year but less than five years
Payable after more than five years
Leases
Payable within one year
Other disclosures in respect of leases
Payable after one year but less than five years
Payable after more than five years
Cash outflow
Low value lease expense
OOtthheerr ddiisscclloossuurreess iinn rreessppeecctt ooff lleeaasseess
Expense relating to variable lease payments not included in the
measurement of lease liabilities
Non-cash financing recognised
Cash outflow
Low value lease expense
Expense relating to variable lease payments not included in the
measurement of lease liabilities
Non-cash financing recognised
59
31 Dec 2020
31 Dec 2020
US$000
US$000
31 Dec 2019
31 Dec 2019
US$000
US$000
1,234
3,521
1,234
-
3,521
-
4,755
4,755
1,304
17,325
1,304
1,043
17,325
19,672
1,043
19,672
8,187
8,187
7,347
7,347
17,079
255
21,612
255
651
21,612
651
22,518
22,518
-
-
-
-
-
-
-
-
7,415
7,415
7,136
7,136
15,382
17,079
15,382
6,573
19,389
-
6,573
19,389
1,446
1,384
-
-
1,446
1,384
414
-
22
414
409
22
3,115
409
3,115
-
15,846
9,901
-
15,846
9,901
126
164
-
126
164
68
-
24
68
-
24
-
-
-
58 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
60
Notes to the consolidated financial statements
for the year ended 31 December 2020
7e. Borrowings (continued)
Borrowings (continued)
7e.
Further information
Terms and conditions
LLeeaassee lliiaabbiilliittiieess
The lease liabilities consist of the amounts due in
respect of the following:
• Mining equipment and plant at Mothae, leased at
monthly payments of ZAR1.6 million (US$0.9
million) until December 2022. During the suspension
of operations at Mothae, payments were suspended
in terms of a force majeure clause in the lease
agreement; and
• Various lease contracts for office space, office and
other equipment used in its operations. Lease terms
vary between 2 and 3 years.
Generally, the Group’s obligations under its leases are
secured by the lessor’s title to the leased assets. Certain
include extension and termination
lease contracts
options.
OOtthheerr llooaannss
The loan amounts reflect the balances due to Equigold,
IDC and New Azilian. In 2019, all loans were reflected as
current borrowings as the facility refinancing discussions
with the financiers were not concluded at the date of the
report. As per the Financial Position review, the
refinancing discussions were concluded during 2020 and
the borrowings have been re-classified accordingly. The
revised terms of the loans include the following:
EEqquuiiggoolldd
•
Loan facility of US$5.9 million (2019: US$7.5 million)
fully utilised;
The principal balance is repayable as follows:
•
o Two quarterly payments of US$0.5 million
in January 2021 and April 2021; and
o Four quarterly payments of US$1.2 million
commencing October 2022.
• Market related fees were payable on draw down and
with interest payments;
•
•
• Equigold, at its election, can convert the last two
quarterly payments into ordinary shares in the
Company at the then market price;
Interest is payable at 9.75% (previously 13%) pa;
Fifty percent of quarterly interest and fees can be
converted into ordinary shares in the Company at
the then market price at Lucapa’s election;
Fifty percent of quarterly interest and fees can be
converted into ordinary shares in the Company at
the then market price at Lucapa’s election after
agreement with Equigold;
•
IIDDCC
•
•
•
Total loan facility of ZAR100m (US$6.9 million),
fully utilised at the end of the period;
The capital balance is repayable in nine quarterly
payments commencing January 2021 (previously
January 2020). January 2021 capital repayment
deferment still subject to IDC internal approval;
Interest
is payable quarterly based on the
Johannesburg Interbank Average Rate (JIBAR) plus
8.6%;
•
• A moratorium on payment of the interest in respect
quarters ending June 2020 and September 2020
until 2021;
The loan is secured by way of:
o Bonds over Mothae's movable assets, diamond
treatment facility and ancillary equipment;
o Mortgage over the mining right and the land
right granted under the mining agreement;
o A 70% proportional guarantee by Lucapa of all
amounts due and payable;
o A subordination of Lucapa’s shareholder claims
in and loans to Mothae, back ranking to the
Equigold loan agreement;
o A pledge and session by Lucapa of its shares in
Mothae and a cession of all its loans and claims
against Mothae, once such are released by
Equigold;
o A cession of insurance policies and proceeds
interest noted
thereof with the Lender’s
thereon;
o Certain negative pledges.
Certain financial covenants to be maintained.
•
NNeeww AAzziilliiaann
• New Azilian is an entity associated with non-
•
•
•
•
executive director Ross Stanley;
Loan facility of A$10.4 million (US$8.0 million), fully
utilised at the end of the period;
The principal balance is repayable as follows in
February 2022;
Interest is payable at 9.75% (previously 10%) pa;
The loan is secured by way of a General Security
Deed granted by Lucapa in favour of the lender over
collateral consisting of all of the Company’s present
and after acquired property, undertaking and rights,
excluding the Company’s investment in and loan to
Mothae.
• The loan is secured by way of a General Security
Deed granted by Lucapa in favour of the lender over
collateral consisting of the Company’s investment in
and loan to Mothae Diamonds (Pty) Ltd.
59 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
61
Notes to the consolidated financial statements
for the year ended 31 December 2020
7e. Borrowings (continued)
7e.
Borrowings (continued)
EEmmbbeeddddeedd ddeerriivvaattiivvee
EEqquuiiggoolldd – embedded derivative in relation to last two
quarterly payments
(US$2.5 million) has been
recognised at fair value, using a Black Scholes valuation
with the following inputs:
•
LOM share price at measurement date: A$0.057
(2019: A$0.12);
• Exercise price: A$0.054 (2019: A$0.113);
• Estimated volatility: 67% (2019: 60%);
• Expiry date: 1 April 2023/1 July 2023;
• Risk-free interest rate: 1.01% (2019: 1.21%).
interest rates, with all other variables held constant
through the impact on floating rate interest rates.
A change of 100 basis points in interest rates at the
reporting date would have an estimated impact of
US$0.4 million (2019: US$0.2 million) before tax on the
statement of profit of loss and other comprehensive
income. There would be no effect on the equity reserves
other than those directly related to the statement of
profit of loss and other comprehensive income. The
analysis is performed on the same basis as for the prior
period.
Cash flow sensitivity analysis for variable rate
instruments
A sensitivity analysis has been prepared to demonstrate
the sensitivity to a reasonably possible change in
8. Inventories
8.
Inventories
Overview 60
Diamond inventory
Diamond inventory
Ore stockpiles
Ore stockpiles
Consumables and other inventory
Consumables and other inventory
31 Dec 2020
31 Dec 2020
US$000
US$000
31 Dec 2019
US$000
31 Dec 2019
US$000
4,129
-
836
4,129
-
836
1,254
1,254
25
25
742
742
4,965
4,965
2,021
2,021
Further information
During the year, US$1.7 million (2019: US$2.0 million)
was recognised as an expense under cost of sales for
inventories carried at net realisable value.
first-in first-out principle, and includes expenditure
incurred in acquiring the inventories, production or
conversion costs and other costs incurred in bringing
them to their existing location and condition.
Accounting policy
Inventories are measured at the lower of cost and net
realisable value. The cost of inventories is based on the
Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs of
completion and selling expenses.
60 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
62
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D
Lucapa Diamond Company Limited Annual Report
Notes to the consolidated financial statements
for the year ended 31 December 2020
9. Property plant and equipment (continued)
9.
Property plant and equipment (continued)
Further information
Deferred exploration and evaluation costs
Deferred exploration and evaluation costs represent the
cumulative expenditure incurred in relation to the Lulo,
Mothae, Orapa Area F and Brooking projects on diamond
exploration and evaluation
including plant and
equipment. The Company continues to explore for the
primary kimberlite sources of the alluvial diamonds
being recovered on the Lulo concession, evaluate the
neck and other areas of the Mothae kimberlite resource,
explore for kimberlite in Botswana and for lamproite in
Australia.
The Group has a 39% interest in the Project Lulo Venture
(“the JV”), an unincorporated entity classified as a joint
operation that operates under the terms of a Mineral
Investment Contract entered into between the partners.
Accordingly, the Group’s interest in the assets, liabilities,
revenues and expenses attributable to the JV have been
included in the appropriate line items in the consolidated
financial
statements. Deferred exploration and
evaluation costs of US$18.5 million (31 December 2019:
US$17.1 million) in the schedule above are related to the
JV.
Other assets
Other assets comprise vehicles, computer equipment,
furniture & fittings and office equipment.
Accounting policy
Recognition and measurement
Items of property plant and equipment are measured at
cost less accumulated depreciation and accumulated
impairment losses.
Cost includes expenditure that is directly attributable to
the acquisition of the asset. The cost of self-constructed
assets includes the cost of materials and direct labour,
any other costs directly attributable to bringing the asset
to a working condition for its intended use, and the costs
of dismantling and removing the items and restoring the
site on which they are located.
When parts of an item of property plant and equipment
have different useful lives, they are accounted for as
separate items (major components) of property plant
and equipment.
Gains and losses on disposal of an item of property plant
and equipment are determined by comparing the
proceeds from disposal with the carrying amount of
property plant and equipment and are recognised net
within “other income” in the statement of profit or loss
and other comprehensive income.
Subsequent costs
The cost of replacing part of an item of property plant
and equipment is recognised in the carrying amount of
an item if it is probable that the future economic
benefits embodied within the item will flow to the Group
and the cost of the item can be measured reliably. The
carrying amount of the replaced part is derecognised. All
63
other costs are recognised in the statement of profit or
loss and other comprehensive income as an expense
incurred.
Depreciation
Depreciation is recognised in the statement of profit or
loss and other comprehensive income on a reducing
balance basis over the estimated useful lives of each part
of an item of property plant and equipment.
The estimated useful
comparative periods are as follows:
lives
in the current and
• Computer equipment: 3-5 years
• Office equipment : 5-10 years
• Mine development: Lesser of life of mine or
period of lease
• Mine infrastructure and plant facilities: Based
on resources on a unit of production basis
Depreciation methods, useful lives and residual values
are reviewed at each reporting date.
viable
technically
Mine development
Once a mining project has been established as
feasible,
and
commercially
expenditure other than that on land, buildings, plant and
equipment
is capitalised as Mine development.
Development includes previously capitalised exploration
and evaluation costs, pre-production development
costs, certain mining assets, development studies and
other subsurface expenditure pertaining to that area of
interest. On completion, development cost is deprecated
If, after having commenced the
as per above.
development activity, a judgement is made that a
development asset is impaired, the appropriate amount
is written off to profit and loss.
Deferred exploration and evaluation
Exploration and evaluation expenditure incurred is
accumulated in respect of each identifiable area of
interest. These costs are only carried forward to the
extent that the right to tenure of each identifiable area
of interest are current, and either the costs are expected
to be recouped through successful development of the
area, or activities in the area have not yet reached a stage
that permits reasonable assessment of the existence of
economically recoverable reserves. Exploration assets
that are not available for use are not amortised.
Exploration and evaluation assets are initially measured
at cost and include acquisition of mining tenements,
studies, exploratory drilling, trenching and sampling and
associated activities and an allocation of depreciation of
in exploration activities. General and
assets used
administrative costs are only
the
measurement of exploration costs where they are
related directly to operational activities in a particular
area of interest.
included
in
62 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
64
Notes to the consolidated financial statements
for the year ended 31 December 2020
9. Property plant and equipment (continued)
9.
Property plant and equipment (continued)
Deferred exploration and evaluation costs in relation to
an abandoned area are written off in full against profit or
loss in the period in which the decision to abandon that
area is made.
ratio over the average life of the area being mined is used
to amortise the stripping activity. As a result, the
stripping activity asset
less
amortisation and any impairment losses.
is carried at cost
A regular review is undertaken of each area of interest to
determine the appropriateness of continuing to carry
forward costs in relation to that area of interest.
Stripping activity assets
Costs associated with removal of waste overburden are
classified as stripping costs. Stripping activities that are
undertaken during the production phase of a surface
mine may create two benefits, being either the
production of inventory or improved access to the ore to
be mined in the future.
Where the benefits are realised in the form of inventory
produced in the period, the production stripping costs
are accounted for as part of the cost of producing those
inventories. Where production stripping costs are
incurred and where the benefit is the creation of mining
flexibility and improved access to ore to be mined in the
future, the costs are recognised as a non-current asset,
referred to as a ‘stripping activity asset’ and included as
a separate category of Property plant and equipment, if:
•
•
•
improved
future economic benefits (being
access to the orebody) are probable;
the component of the orebody for which access
will be improved can be accurately identified;
and
the costs associated with the improved access
can be reliably measured.
If all the criteria are not met, the production stripping
costs are charged to the statement of profit or loss as
operating costs. The stripping activity asset is initially
measured at cost, which is the accumulation of costs
directly incurred to perform the stripping activity that
improves access to the identified component of ore, plus
an allocation of directly attributable overhead costs. If
incidental operations are occurring at the same time as
the production stripping activity, but are not necessary
for the production stripping activity to continue as
planned, these costs are not included in the cost of the
stripping activity asset. If the costs of the stripping
activity asset and the inventory produced are not
separately identifiable, a relevant production measure is
used to allocate the production stripping costs between
the inventory produced and the stripping activity asset.
The stripping activity asset is subsequently amortised
over the expected useful life of the identified component
of the orebody that became more accessible as a result
of the stripping activity. The expected average stripping
The average life of area cost per tonne is calculated as
the total expected costs to be incurred to mine the
orebody divided by the number of tonnes expected to be
mined. The average life of area stripping ratio and the
average life of area cost per tonne are recalculated
annually in light of additional knowledge and changes in
estimates. Changes in the stripping ratio are accounted
for prospectively as a change in estimate.
at
assets
recognised
Right-of-use assets
Right-of-use
the
are
commencement date of a lease (i.e., the date the
underlying asset is available for use) and are measured
at cost,
less any accumulated depreciation and
impairment losses, and adjusted for any remeasurement
of lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or
lease
before the commencement date
incentives received. Right-of-use assets are depreciated
on a straight-line basis over the shorter of the lease term
and the estimated useful lives of the assets.
less any
Joint operations
A joint arrangement in which the Group has direct rights
to underlying assets and obligations for underlying
liabilities is classified as a joint operation.
Interests in joint operations are accounted for by
recognising the Group’s assets (including its share of any
assets held jointly); its liabilities (including its share of
any liabilities incurred jointly); its revenue from the sale
of its share of the output arising from the joint
operation; its share of the revenue from the sale of the
output by the
its expenses
(including its share of any expenses incurred jointly).
joint operation; and
judgements, estimates and
Significant accounting
assumptions
AAsssseett uusseeffuull lliivveess aanndd rreessiidduuaall vvaalluueess
Property, plant and equipment are depreciated over its
useful life taking into account residual values where
appropriate. The actual useful lives of the assets and
residual values are assessed annually and may vary
depending on a number of factors. In re–assessing asset
useful lives, factors such as technological innovation,
product life cycles and maintenance programmes are
taken
Residual value assessments
consider issues such as future market conditions, the
remaining life of the asset and projected disposal values.
into account.
63 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
65
Notes to the consolidated financial statements
for the year ended 31 December 2020
9. Property plant and equipment (continued)
9.
Property plant and equipment (continued)
VVaalluuaattiioonn ooff mmiinneerraall pprrooppeerrttiieess
The Group carries the acquisition of
its mineral
properties at cost less any provision for impairment. The
Group undertakes a periodic review of the carrying values
of mineral properties and whenever events or changes in
circumstances indicate that their carrying values may
exceed their fair value. In undertaking this review,
management of the Group
is required to make
significant estimates. These estimates are subject to
various risks and uncertainties, which may ultimately
have an effect on the expected recoverability of the
carrying values of the mineral properties and related
expenditures.
EExxpplloorraattiioonn aanndd eevvaalluuaattiioonn aasssseettss
The Group assesses the carrying value of exploration and
evaluation assets in accordance with the accounting
policy noted above. The basis of determining the
involves numerous estimates and
carrying value
judgements resulting from the assessment of ongoing
exploration activities, as per the accounting policy note.
DDeevveellooppmmeenntt
Development activities commence after commercial
viability and technical feasibility of the project is
established. Judgement is applied in determining when a
project is commercially viable and technically feasible. In
exercising this judgement, management is required to
make certain estimates and assumptions, with inherent
uncertainty, as to the future events.
MMiinneerraall rreessoouurrccee,, oorree rreesseerrvveess aanndd pprroodduuccttiioonn ttaarrggeett**
eessttiimmaatteess
Ore reserves and production target estimates are
estimates of the amount of ore that can be economically
and legally extracted from the mineral resources of the
Group’s mining properties. An ore reserve
is the
economically mineable part of a measured and/ or
indicated resource. A production target may include
lower confidence
inferred resources under certain
circumstances and if there are reasonable grounds to do
so. Such production target estimates and changes to
them may impact the company’s reported financial
position and results, in the following way:
•
The
carrying value of exploration and
evaluation assets, mine properties, property
plant and equipment, and goodwill may be
affected due to changes in estimated future
cash flows;
• Depreciation and amortisation charges in the
loss and other
statement of profit or
comprehensive income may change where such
charges are determined using the unit of
production method, or where the useful life of
the related assets change;
Capitalised stripping costs recognised in the
statement of financial position, as either part
of mine properties or inventory or charged to
•
profit or loss, may change due to changes in
stripping ratios;
• Provisions for rehabilitation and environmental
provisions may change where reserve estimate
changes affect expectations about when such
activities will occur and the associated cost of
these activities;
The recognition and carrying value of deferred
income tax assets may change due to changes
in the judgements regarding the existence of
such assets and in estimates of the likely
recovery of such assets.
•
The Group estimates its mineral resource, ore reserves
and production targets based on information compiled
by appropriately qualified persons relating to the
geological and technical data on the size, depth, shape
and grade of the ore body and suitable production
techniques and recovery rates. Such an analysis requires
complex geological judgements to interpret the data.
The estimation of ore reserves and production targets
are based upon factors such as estimates of foreign
exchange rates, commodity prices, future capital
requirements and production costs, along with
geological assumptions and
in
estimating the size and grade of the ore body.
judgements made
The Group estimates and reports ore reserves and
mineral resources in line with the principles contained in
the Australian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves (2012) published by
the Joint Ore Reserves Committee of the Australasian
Institute of Mining and Metallurgy, the Australian
Institute of Geoscientists and Minerals Council of
Australia (“JORC Code”).
*The term “production target” is defined to mean a projection or
forecast of the amount of mineral to be extracted from a particular
mining tenement or tenements for a period that extends past the
current year and the forthcoming year.
64 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
66
Notes to the consolidated financial statements
for the year ended 31 December 2020
10. Investment in associate
10.
Investment in associate
Overview 65
Summarised financial information of SML
Summarised financial information of SML
Current assets
Current assets
Non-current assets
Non-current assets
Current liabilities
Current liabilities
Non-current liabilities
Non-current liabilities
Equity
Equity
Group’s carrying amount of the investment
Group’s carrying amount of the investment
Revenue
Revenue
Cost of sales
Cost of sales
Administrative and selling expenses
Administrative and selling expenses
Fair value adjustments
Fair value adjustments
(Loss)/ profit before tax
(Loss)/ profit before tax
Income tax expense
Income tax expense
(Loss)/ profit for the period
(Loss)/ profit for the period
31 Dec 2020
31 Dec 2020
US$000
US$000
31 Dec 2019
31 Dec 2019
US$000
US$000
16,340
16,340
22,598
22,598
10,648
10,648
22,739
22,739
5,551
5,551
12,658
12,658
30,181
30,181
12,683
12,683
23,933
23,933
6,223
6,223
4,472
4,472
28,449
28,449
(21,736)
(21,736)
(8,366)
(8,366)
349
349
4,741
4,741
39,985
39,985
(23,629)
(23,629)
(9,858)
(9,858)
(3,028)
(3,028)
(1,304)
(1,304)
633
633
(671)
(671)
3,470
3,470
(3,035)
(3,035)
435
435
Total comprehensive (loss)/ income for the period
Total comprehensive (loss)/ income for the period
(671)
(671)
435
435
Group’s share of (loss)/ profit for the period
Group’s share of (loss)/ profit for the period
SML EBITDA
SML EBITDA
SML contingent liabilities
SML contingent liabilities
SML Capital commitments
SML Capital commitments
Payable within one year
Payable within one year
- Approved, not yet contracted
- Approved, not yet contracted
- Approved and contracted
- Approved and contracted
Further information
The Group has a 40% ownership in SML and has
recognised its share of SML’s results since its formal
incorporation in May 2016. In accordance with the
Group's accounting policy the 2019 dividend declared by
SML of US$1.6 million has been set off the carrying
amount of the investment. The earnings of SML include
fair value adjustments in relation to the discounting of
the financial asset of Lucapa reflected under note 7c.
Accounting policy
Associates are those entities over which the Group is
able to exert significant influence, but which are not
subsidiaries. A joint venture is an arrangement that the
Group controls jointly with one or more other investors,
and over which the Group has rights to a share of the
arrangement’s net assets rather than direct rights to
underlying assets and obligations for underlying
liabilities.
(268)
(268)
6,194
6,194
-
-
173
173
12,927
12,927
-
-
10,592
-
10,592
-
554
3,128
554
3,128
Any goodwill or fair value adjustment attributable to the
Group’s share in the associate or joint venture is not
recognised separately and is included in the amount
recognised as investment.
The carrying amount of the investment in associates and
joint ventures is increased or decreased to recognise the
loss and other
Group’s share of the profit or
comprehensive
joint
venture, adjusted where necessary to ensure consistency
with the accounting policies of the Group.
income of the associate and
its associates and
Unrealised gains and losses on transactions between the
Group and
joint ventures are
eliminated to the extent of the Group’s interest in those
entities. Where unrealised losses are eliminated, the
underlying asset is also tested for impairment.
Investments
accounted for using the equity method.
in associates and
joint ventures are
65 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
Notes to the consolidated financial statements
for the year ended 31 December 2020
11. Non-current provisions
11. Non-current provisions
Overview 66
Provision for environmental rehabilitation
Provision for environmental rehabilitation
At 1 January
At 1 January
Increase/ (decrease) during the year
Increase/ (decrease) during the year
Unwinding of discount rate
Unwinding of discount rate
Foreign exchange difference
Foreign exchange difference
At end of period
At end of period
Further information
The provision for rehabilitation has been recognised in
respect of the Mothae kimberlite project. It is based on
an independent expert’s report produced in 2019 of the
expected rehabilitation cost over the life of the mine and
discounted back to present value using a pre-tax
discount rate that reflects current market assessments.
Assumptions include an estimated rehabilitation timing
of 12 to 18 years, an annual inflation rate of 5.6% (2019:
4.6%) and a discount rate of 8.9% (2019: 7.96%). The
assumptions of the independent expert’s report were
updated internally during 2020 as there were minimal
additional disturbance created due to the suspension of
operations.
Accounting policy
A provision is recognised if, as a result of a past event,
the Group has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an
outflow of economic benefits will be required to settle
the obligation. Provisions are determined by discounting
the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of
money and, when appropriate, the risks specific to the
liability.
Asset retirement obligations
The Group recognizes a liability for an asset retirement
obligation on long-lived assets when a present legal or
constructive obligation exists, as a result of past events
and the amount of the
reasonably
determinable. Asset retirement obligations are initially
recognized and recorded as a liability based on estimated
future cash flows discounted at a credit adjusted risk
free rate. This is adjusted at each reporting period for
liability
is
67
31 Dec 2020
31 Dec 2020
US$000
US$000
31 Dec 2019
31 Dec 2019
US$000
US$000
1,064
1,064
10
10
69
69
(38)
(38)
860
860
95
79
30
95
79
30
1,105
1,105
1,064
1,064
changes to factors including the expected amount of
cash flows required to discharge the liability, the timing
of such cash flows and the credit adjusted risk free
discount rate. Corresponding amounts and adjustments
are added to the carrying value of the related long-lived
asset and amortised or depleted to operations over the
life of the related asset.
Environmental liabilities
Environmental expenditures that relate to current
operations are expensed or capitalised as appropriate.
Expenditures that relate to an existing condition caused
by past operations and which do not contribute to
current or future revenue generation are expensed.
Liabilities
environmental
recorded when
assessments and/ or remedial efforts are probable, and
the costs can be reasonably estimated.
are
Significant accounting judgements, estimates and
assumptions
Included in liabilities at the end of each reporting period
is an amount that represents an estimate of the cost to
rehabilitate the land upon which the Group has carried
out its exploration and evaluation for mineral resources.
Provisions are measured at the present value of
management's best estimate of the costs required to
settle the obligation at the end of the reporting period.
Actual costs incurred in future periods to settle these
obligations could differ materially from these estimates.
Additionally, future changes to environmental laws and
regulations, life of mine estimates, and discount rates
could affect the carrying amount of this provision.
66 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
68
Notes to the consolidated financial statements
for the year ended 31 December 2020
12. Share capital and share-based payments
Share capital and share-based payments
12.
Overview 67
LISTED SECURITIES
LISTED SECURITIES
Movement in ordinary shares (ASX code: LOM)
Movement in ordinary shares (ASX code: LOM)
On issue at beginning of period
On issue at beginning of period
Issue of shares
Issue of shares
Issue of shares on exercise of options and performance rights
Issue of shares on conversion of interest on loans, debt re-structuring
Transaction costs
and placement fees
Issue of shares on exercise of options and performance rights
On issue at end of period
Transaction costs
Movement in listed options (ASX code: LOMOC)
On issue at end of period
On issue at beginning of period
Movement in listed options (ASX code: LOMOC)
Issue of options
On issue at beginning of period
Exercise of options
Issue of options
Expiry of options
Exercise of options
On issue at end of period
Expiry of options
On issue at end of period
UNLISTED SECURITIES
UNLISTED SECURITIES
Movement in unlisted options (A$0.08 exercise price; expire 18 December 2022)
Movement in unlisted options (A$0.08 exercise price; expire 18 December 2022)
On issue at beginning of period
On issue at beginning of period
Issue of options
Issue of options
Exercise of options
Exercise of options
Expiry of options
Expiry of options
On issue at end of period
On issue at end of period
Further information
Terms and conditions
The holders of ordinary shares are entitled to receive
dividends as declared from time to time and are entitled
to one vote per share at meetings of the Company.
Share-based payments
Weighted average remaining contractual life of share options and
Weighted average remaining contractual life of share options and
performance rights in issue (years)
performance rights in issue (years)
Weighted average Lucapa share price during the period/ year (A$)
Weighted average Lucapa share price during the period/ year (A$)
Share-based payments recognised
Share-based payments recognised
Profit or Loss
Profit or Loss
Director and employee options
Director and employee options
Non-cash financing and investing activities
Non-cash financing and investing activities
Share issue expenses
Share issue expenses
Loan funding
Loan funding
Deferred exploration and evaluation costs
Deferred exploration and evaluation costs
31 Dec 2020
Number
Number
31 Dec 2020
US$000
US$000
499,122,427
312,820,620
499,122,427
333,562,881
490,267
-
20,742,261
116,888
116,888
12,821
13,591
57
770
(820)
833,175,575
490,267
57
129,716
-
(820)
833,175,575
-
113,971,605
-
-
113,971,605
-
-
113,971,605
129,716
-
-
-
-
-
-
-
-
-
-
-
113,971,605
-
-
54,824,075
-
54,824,075
-
-
-
-
54,824,075
54,824,075
-
-
-
-
-
-
-
-
-
-
31 Dec 2020
31 Dec 2020
31 Dec 2019
31 Dec 2019
1.63
1.63
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3,390
-
3,390
2
3,662
2
3,662
67 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
69
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N
Lucapa Diamond Company Limited Annual Report
70
Notes to the consolidated financial statements
for the year ended 31 December 2020
12. Share capital and share-based payments (continued)
12.
Share capital and share-based payments (continued)
Accounting policy
Share capital
Equity instruments, including preference shares, issued
by the Company are recorded at the proceeds received.
Incremental costs directly attributable to the issue of
equity instruments are recognised as a deduction from
equity, net of any tax effects.
Share based payments
The fair value of options and rights granted is measured
using the Black-Scholes or binomial option pricing
models, taking into account the terms and conditions
upon which the instruments were granted. The fair value
is recognised in employee benefits expense together
with a corresponding increase in equity (share-based
payment reserve), over the period in which the service
and, where applicable, the performance conditions are
fulfilled. The cumulative expense recognised at each
reporting date until the vesting date reflects the extent
to which the vesting period has expired and the Group’s
best estimate of the number of equity instruments that
will ultimately vest. The expense or credit in profit or loss
for a period represents the movement in cumulative
expense recognised as at the beginning and end of that
period.
Service and non-market performance conditions are not
taken into account when determining the grant date fair
value of awards, but the likelihood of the conditions
being met is assessed as part of the Group’s best
estimate of the number of equity instruments that will
ultimately vest. Market performance conditions are
reflected within the grant date fair value.
Any other conditions attached to an award, but without
an associated service requirement, are considered to be
non-vesting conditions. Non-vesting conditions are
reflected in the fair value of an award and lead to an
immediate expensing of an award unless there are also
service and/ or performance conditions.
No expense is recognised for awards that do not
ultimately vest because non-market performance and/
or service conditions have not been met. Where awards
include a market or non-vesting condition, the
transactions are treated as vested
irrespective of
whether the market or non-vesting condition is satisfied,
provided that all other performance and/ or service
conditions are satisfied.
Where the terms of an equity-settled award are
modified, as a minimum an expense is recognised as if
the terms had not been modified. In addition, an
expense is recognised for any increase in the value of the
transaction as a result of the modification, as measured
at the date of modification.
Where an equity-settled award is cancelled, it is treated
as if it had vested on the date of cancellation, and any
expense not yet recognised for the award is recognised
immediately. However, if a new award is substituted for
the cancelled award and designated as a replacement
award on the date that it is granted, the cancelled and
new award are treated as if they were a modification of
the original award, as described
in the previous
paragraph.
The amounts carried under share-based payment
reserves are allocated to share capital when underlying
shares are issued upon the conversion of options or
rights, and to accumulated income/ losses upon the
expiry of option or rights.
price
share
inputs
include
DDeetteerrmmiinnaattiioonn ooff ffaaiirr vvaalluueess
The fair value of options issued is measured using the
Black-Scholes or binomial option pricing models.
on
Measurement
measurement date, exercise price of the instrument,
expected volatility (based on weighted average historic
volatility adjusted for changes expected due to publicly
available information), weighted average expected life of
the instruments (based on historical experience and
general option holder behaviour), expected dividends,
and the risk-free interest rate (based on government
bonds). Service and non-market performance conditions
attached to the transactions are not taken into account
in determining fair value.
SSiiggnniiffiiccaanntt aaccccoouunnttiinngg jjuuddggeemmeennttss,, eessttiimmaatteess aanndd
aassssuummppttiioonnss
The Company measures the cost of equity-settled
transactions by reference to the fair value of the equity
instruments at the date at which they are granted.
Where required, the fair value of options granted is
measured using valuation models, taking into account
the terms and conditions as set out above. The
accounting estimates and assumptions relating to
equity-settled share-based payments would have no
impact on the carrying amounts of assets and liabilities
within the next annual reporting period, but may impact
expenses and reserves.
69 | P a g e
LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
Notes to the consolidated financial statements
for the year ended 31 December 2020
13. Commitments and contingencies
13.
Commitments and contingencies
70
Operating lease commitments iro mining and exploration
Operating lease commitments iro mining and exploration rights
rights
Minimum lease payments under non-cancellable operating lease
Minimum lease payments under non-cancellable operating
agreements
lease agreements
Payable within one year
Payable within one year
Payable after one year but less than five years
Payable after one year but less than five years
Payable after more than five years
Payable after more than five years
Capital commitments
Capital commitments
Payable within one year
Payable within one year
Approved, not yet contracted
Approved, not yet contracted
Approved and contracted
Approved and contracted
71
31 Dec 2020
31 Dec 2020
US$000
US$000
31 Dec 2019
31 Dec 2019
US$000
US$000
153
641
230
1,024
153
641
230
1,024
108
108
484
484
319
319
911
911
2,234
932
2,234
932
1,709
1,709
-
-
Contingencies
Contingencies
The Group did not have any contingent liabilities as at 31 December 2020 (2019: Nil).
The Group did not have any contingent liabilities as at 31 December 2020 (2019: Nil).
14. Parent entity information
14.
Parent entity information
70
Current assets
Current assets
Total assets
Total assets
Current liabilities
Total liabilities
Current liabilities
Total liabilities
Share capital
Reserves
Share capital
Accumulated losses
Reserves
Accumulated losses
(Loss)/ profit for the period
Total comprehensive (loss)/ income for the period
(Loss)/ profit for the period
Total comprehensive (loss)/ income for the period
31 Dec 2020
US$000
31 Dec 2020
US$000
31 Dec 2019
31 Dec 2019
US$000
US$000
3,674
103,690
2,285
16,371
3,674
103,690
2,285
16,371
129,716
(4,824)
129,716
(4,824)
(37,573)
87,319
(37,573)
(1,944)
(1,944)
87,319
792
792
93,294
20,246
93,294
16,843
20,246
16,843
116,888
(4,581)
116,888
(35,856)
(4,581)
76,451
(35,856)
1,518
1,518
76,451
(1,944)
(1,944)
1,518
1,518
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72
Notes to the consolidated financial statements
for the year ended 31 December 2020
15. Related party disclosures
15. Related party disclosures
Overview 71
31 Dec 2020
31 Dec 2020
US$
US$
31 Dec 2019
US$
31 Dec 2019
US$
Key management personnel compensation
Key management personnel compensation
Short-term employee benefits
Short-term employee benefits
Post-employment benefits
Post-employment benefits
Share-based payments
Share-based payments
597,393
597,393
31,222
2,763
31,222
2,763
631,378
631,378
902,067
902,067
46,845
46,845
35,309
35,309
984,220
984,220
Other related party transactions
Other related party transactions
The following payments, relating to office rent and associated costs were
The following payments, relating to office rent and associated costs were
made to entities associated with director Miles Kennedy:
made to entities associated with director Miles Kennedy:
Kennedy Holdings (WA) Pty Ltd
Kennedy Holdings (WA) Pty Ltd
115,559
115,559
115,150
115,150
Loan facility agreement with an entity associated with non-executive
Director Ross Stanley:
Loan facility agreement with an entity associated with non-executive
Director Ross Stanley:
Amount due to New Azilian Pty Ltd (refer Note 7)
Amount due to New Azilian Pty Ltd (refer Note 7)
Finance cost for period
Finance cost for period
8,036,262
774,961
8,036,262
774,961
7,182,635
7,182,635
551,541
551,541
regarding
Further information
Individual Directors’ and executives’ compensation
disclosures
Information
individual Directors' and
executives' compensation and some equity instruments
disclosures as required by Corporations Regulations
2M.3.03 is provided in the remuneration report section of
the Directors’ report. Apart from the details disclosed in
this note, no Director has entered into a material
contract with the Company since the end of the previous
financial year and there were no other material contracts
involving Director’s interests at period-end.
Key management personnel and director transactions
A number of key management persons, or their related
parties, hold positions in other entities that result in
them having control or significant influence over the
financial or operating policies of those entities. A
number of these entities transacted with the Company
in the reporting period. The terms and conditions of the
transactions with management persons and their
related parties were no more favourable than those
available, or which might reasonably be expected to be
available, on similar transactions to non-director related
entities on an arm’s length basis.
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Lucapa Diamond Company Limited Annual Report
Notes to the consolidated financial statements
for the year ended 31 December 2020
73
16. Group information
Group information
16.
72
The consolidated financial statements of the Group include the
The consolidated financial statements of the Group include the
following subsidiaries:
following subsidiaries:
Lucapa Diamonds (Botswana) (Proprietary) Limited
Lucapa Diamonds (Botswana) (Proprietary) Limited
Incorporated in Botswana
Equity interest held
Incorporated in Botswana
Equity interest held
Brooking Diamonds Pty Ltd
Incorporated in Australia
Brooking Diamonds Pty Ltd
Equity interest held
Incorporated in Australia
Mothae Diamonds (Pty) Ltd
Equity interest held
Incorporated in the Kingdom of Lesotho
Equity interest held
Mothae Diamonds (Pty) Ltd
Lucapa (Mauritius) Holdings Limited
Incorporated in the Kingdom of Lesotho
Incorporated in Mauritius
Equity interest held
Equity interest held
Lucapa (Mauritius) Holdings Limited
Incorporated in Mauritius
Equity interest held
31 Dec 2020
31 Dec 2020
%
%
31 Dec 2019
31 Dec 2019
%
%
100
100
100
100
70
70
100
100
100
100
100
70
70
100
100
100
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74
Notes to the consolidated financial statements
for the year ended 31 December 2020
17. Other significant accounting policies
17.
Other significant accounting policies
The financial statements have been prepared using
consistent accounting policies to those used for the prior
year, except as set out below. 73
New or revised accounting policies
The Group has applied the following standards and
amendments for the first time for the annual reporting
period commencing 1 January 2020:
• AASB 2018-7 Amendments to Australian
Accounting Standards Definition of Material
(AASB 101 and AASB 108);
• AASB 2018-6 Amendments to Australian
Accounting Standards Definition of a Business
(AASB 3);
• AASB 2019-3 Amendments to Australian
Accounting Standards Interest Rate
Benchmark Reform (AASB 7, AASB 9 and AASB
139);
• AASB 2019-5 Amendments to Australian
Accounting Standards Disclosure of the Effect
of New IFRS Standards Not Yet issued in
Australia (AASB 1054);
• AASB 1059 Service Concession Arrangements:
Grantors;
• AASB 2018-5 Amendments to Australian
Accounting Standards Deferral of AASB 1059;
• AASB 2019-2 Amendments to Australian
Accounting Standards Implementation of
AASB 1059;
• Revised Conceptual Framework for Financial
Reporting. AASB 2019-1 Amendments to
Australian Accounting Standards References
to the Conceptual Framework.
The adoption of these standards has not resulted in any
material changes to the Group’s financial statements.
The following new/ amended standards have been
issued, but are not yet effective:
• AASB 17 Insurance contracts. AASB 2020-5
Amendments
to Australian Accounting
Standards Insurance Contracts (AASB 4 and
AASB 17);
• AASB 2020-4 Amendments to Australian
Accounting Standards COVID-19-related Rent
Concessions (AASB 16);
• AASB 2020-7 Amendments to Australian
Accounting Standards COVID-19-related Rent
Concessions: Tier 2 Disclosures (AASB 16 &
AASB 1060);
• AASB 2020-8 Amendments to Australian
Accounting Standards Interest Rate Benchmark
Reform Phase 2 (AASB 9, AASB 139, AASB 7,
AASB 4 and AASB 16);
• AASB
1060 General Purpose Financial
Statements – Simplified Disclosures for For-
Profit and Not-for-Profit Tier 2 Entities;
• AASB 2020-2 Amendments to Australian
Accounting Standards Removal of Special
Purpose Financial Statements for Certain For-
Profit Private Sector Entities;
• AASB 2020-3 Amendments to Australian
Accounting Standards Annual Improvements
2018–2020 and Other Amendments (AASB 1,
AASB 3, AASB 9, AASB 116, AASB 137 & AASB
141);
• AASB 2020-3 Amendments to Australian
Accounting Standards Annual Improvements to
IFRS Standards
and Other
Amendments (AASB 1, AASB 3, AASB 9, AASB
116, AASB 137 & AASB 141);
2018–2020
Standards
Classification
• AASB 2020-1 Amendments to Australian
Accounting
of
Liabilities as Current or Non-current (AASB 101);
• AASB 2020-6 Amendments to Australian
of
Accounting
Liabilities as Current or Non-current – Deferral
of Effective Date (AASB 101);
Classification
Standards
• AASB 2014-10 Amendments to Australian
Accounting Standards: Sale or Contribution of
Assets Between an Investor and its Associate or
Joint Venture;
• AASB 2015-10 Amendments to Australian
Accounting Standards Effective Date of
Amendments to AASB 10 and AASB 128; and
• AASB 2017-5 Amendments to Australian
Accounting Standards Effective Date of
Amendments to AASB 10 and AASB 128 and
Editorial Corrections.
The requirements of these standards are currently being
reviewed, but it is not currently expected to have a
material impact on the Group’s financial statements.
Significant accounting judgements, estimates and
assumptions
requires
The preparation of financial statements
management to make
judgements, estimates and
assumptions that affect the application of accounting
policies and reported amounts of assets, liabilities,
income and expenses. Actual results may differ from
those estimates. Estimates and underlying assumptions
Revisions to
are reviewed on an ongoing basis.
accounting estimates are recognised in the period in
which the estimate is revised and in any future periods
affected.
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Lucapa Diamond Company Limited Annual Report
75
currencies at the reporting date are retranslated to the
functional currency at the foreign exchange rate at that
date.
Foreign exchange differences arising on
retranslation are recognised in the statement of profit or
loss and other comprehensive income.
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on
acquisition, are translated to US dollars at foreign
exchange rates ruling at the reporting date. The income
and expenses of foreign operations are translated to US
dollars at exchange rates approximating the foreign
exchange rates ruling at the dates of the transactions.
Foreign exchange differences arising on retranslation are
recognised directly in a separate component of equity.
When a foreign operation is disposed of in part or in full,
the relevant amount in equity is transferred to the
statement of profit or loss and other comprehensive
income.
Foreign exchange gains and losses arising from a
monetary item receivable from or payable to a foreign
operation, the settlement of which is neither planned
nor likely in the foreseeable future, are considered to
form part of the net investment in a foreign operation
and are recognised directly in equity.
Impairment
FFiinnaanncciiaall aasssseettss
A financial asset is assessed at each reporting date to
determine whether there a risk of default. A financial
asset is considered to be impaired if objective evidence
indicates that one or more events have had a negative
effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset
measured at amortised cost
is calculated as the
difference between its carrying amount, and the present
value of the estimated future cash flows discounted at
the original effective interest rate.
Individually significant financial assets are tested for
impairment on an individual basis. The remaining
financial assets are assessed collectively in groups that
share similar credit risk characteristics.
All impairment losses are recognised in the statement of
profit or loss and other comprehensive income.
An impairment loss is reversed if the reversal can be
related objectively to an event occurring after the
impairment loss was recognised. For financial assets
measured at amortised cost the reversal is recognised in
the statement of profit or loss and other comprehensive
income.
Notes to the consolidated financial statements
for the year ended 31 December 2020
17. Other significant accounting policies (continued)
17.
Other significant accounting policies (continued)
Judgements made by management in the application of
Australian Accounting Standards that have significant
effect on the financial statements and estimates with a
significant risk of material adjustment in the next year
are discussed where relevant in the individual notes
above.
discusses with
Management
the
development, selection and disclosure of the Group’s
critical accounting policies and estimates and the
application of these policies and estimates.
the Board
Principles of consolidation
The Group financial statements consolidate those of the
Company and all its subsidiaries as at the end of the
period. The Company controls a subsidiary if it is
exposed, or has rights, to variable returns from its
involvement with the subsidiary and has the ability to
affect those returns through
its power over the
subsidiary.
All transactions and balances between Group companies
are eliminated on consolidation, including unrealised
gains and
losses on transactions between Group
companies.
Where unrealised losses on intra-group asset sales are
reversed on consolidation, the underlying asset is also
tested for
impairment from a group perspective.
in the financial statements of
Amounts reported
subsidiaries have been adjusted where necessary to
ensure consistency with the accounting policies adopted
by the Group.
Profit or loss and other comprehensive income of
subsidiaries acquired or disposed of during the year are
recognised from the effective date of acquisition, or up
to the effective date of disposal, as applicable.
Non-controlling interests, presented as part of equity,
represent the portion of a subsidiary’s profit or loss and
net assets that is not held by the Group. The Group
attributes total comprehensive
loss of
subsidiaries between the owners of the parent and the
non-controlling interests based on their respective
ownership interests.
income or
Functional and presentation currency
An entity’s functional currency is the currency of the
primary economic environment in which it operates. All
items included in the financial statements of entities in
the Group are measured and recognised in the functional
currency of the entity. The Group’s presentation currency
is US dollars, which is also the functional currency of the
Company.
Foreign currency transactions and balances
Transactions in foreign currencies are translated to the
respective functional currencies of the Group at
exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign
74 | P a g e
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76
Notes to the consolidated financial statements
for the year ended 31 December 2020
17. Other significant accounting policies
17. Other significant accounting policies (continued)
NNoonn--ffiinnaanncciiaall aasssseettss
The carrying amounts of the Group’s non-financial
assets, other than inventories, are reviewed at each
reporting date to determine whether there is any
indication of impairment. If any such indication exists,
the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating
unit is the greater of its value in use and its fair value less
costs to sell. In assessing value in use, the estimated
future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks
specific to the asset. For the purpose of impairment
testing, assets are grouped together into the smallest
group of assets that generates cash inflows from
continuing use that are largely independent of the cash
inflows of other assets or groups of assets (the “cash-
generating unit”).
An impairment loss is recognised if the carrying amount
of an asset or its cash-generating unit exceeds its
recoverable amount. Impairment losses are recognised
loss and other
in the statement of profit or
comprehensive income. Impairment losses recognised
in respect of cash-generating units are allocated first to
reduce the carrying amount of any goodwill allocated to
cash-generating units (group of units) and then, to
reduce the carrying amount of the other assets in the
unit (group of units) on a pro rata basis.
Impairment losses recognised in prior periods are
assessed at each reporting date for any indications that
the loss has decreased or no longer exists.
An
impairment loss is reversed if there has been a change in
the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the
extent that the asset’s carrying amount does not exceed
the carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment
loss had been recognised.
SSiiggnniiffiiccaanntt aaccccoouunnttiinngg jjuuddggeemmeennttss,, eessttiimmaatteess aanndd
aassssuummppttiioonnss
The Group assesses impairment at the end of each
reporting year by evaluating specific conditions that may
impairment triggers. Recoverable
be
amounts of relevant assets are reassessed using
calculations which incorporate various key assumptions,
including estimating diamond prices.
indicative of
Future cash flows expected to be generated by the
assets are projected, taking
into account market
conditions and the expected useful lives of the assets.
The present value of these cash flows, determined using
an appropriate discount rate, is compared to the current
net asset value and, if lower, the assets are impaired to
the present value. If the information to project future
cash flows is not available or could not be reliably
established, management uses the best alternative
information available
impairment.
to
estimate a possible
Goods and services tax/ value added tax
Revenues, expenses and assets are recognised net of the
amount of goods and services tax (“GST”) or value added
tax (“VAT”), except where the amount of GST or VAT
incurred is not recoverable from the taxation authority, it
is recognised as part of the cost of acquisition of an asset
or as part of an item of expense. Receivables and
payables are stated with the amount of GST or VAT
included.
The net amount of GST and VAT recoverable from, or
payable to, the taxation authority is included as part of
receivables or payables.
Cash flows are included in the statement of cash flows
on a gross basis. The GST and VAT component of cash
flows arising from investing and financing activities
which is recoverable from, or payable to, the taxation
authority is classified as operating cash flows.
Determination of fair values
When an asset or liability, financial or non-financial, is
measured at fair value for recognition or disclosure
purposes, the fair value is based on the price that would
be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at
the measurement date; and assumes that the
transaction will take place either in the principal market
or, in the absence of a principal market, in the most
advantageous market.
Fair value is measured using the assumptions that
market participants would use when pricing the asset or
liability, assuming they act in their economic best
interests. For non-financial assets, the fair value
measurement is based on its highest and best use.
Valuation techniques that are appropriate
in the
circumstances and for which sufficient data are available
to measure fair value, are used, maximising the use of
relevant observable inputs and minimising the use of
unobservable inputs.
Assets and
liabilities measured at fair value are
classified into three levels, using a fair value hierarchy
that reflects the significance of the inputs used in
making the measurements. Classifications are reviewed
at each reporting date and transfers between levels are
determined based on a reassessment of the lowest level
is significant to the fair value
of
measurement.
input that
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Lucapa Diamond Company Limited Annual Report
Notes to the consolidated financial statements
for the year ended 31 December 2020
17. Other significant accounting policies (continued)
17. Other significant accounting policies (continued)
77
fair
and
recurring
non-recurring
value
For
measurements, external valuers may be used when
internal expertise is either not available or when the
valuation is deemed to be significant. Where there is a
significant change in fair value of an asset or liability
from one period to another, an analysis is undertaken,
which includes a verification of the major inputs applied
in the
latest valuation and a comparison, where
applicable, with external sources of data.
18. Events subsequent to reporting date
18.
Events subsequent to reporting date
On 4 January 2021 Lucapa announced the recovery by
SML of a 113 carat gem-quality white diamond, the 17th
+100 carat white diamond recovered to date.
On 11 January 2021 Lucapa announced the first sale of
diamonds in 2021 from Mothae. The parcel of 4,676
carats of rough diamonds were sold for a total of US$5.6
million or US$1,198/ carat and includes the 101 carat D
colour diamond recovered following re-opening of the
mine
(refer ASX
announcement 10 December 2020).
last quarter of 2020
in the
On 13 January 2021 Lucapa announced a decision has
been taken to temporarily suspend mining operations at
Mothae, following the announcement by the Lesotho
Prime Minister that due to a surge in COVID-19 cases in
the country the Lesotho Government has imposed a 14-
day nation-wide lockdown.
On 18 January 2021 Lucapa announced the recovery by
SML of a 104 carat D-colour white diamond from MB46,
the 18th +100 carat white diamond recovered to date.
January 2021 Lucapa announced
the
On 29
recommencement of mining operations at Mothae
following the 14-day nationwide lockdown in Lesotho
initiated by the GoL.
On 2 February 2021 Lucapa announced the first sale of
diamonds in 2021 from SML. The parcel of 4,273 carats of
rough diamonds were sold for a total of US$5.9 million or
US$1,375/ carat.
On 24 February 2021 Lucapa announced the recovery by
Mothae of a 215 carat Type IIa D-colour white diamond,
the second +200 carat diamond and the fifth +100 carat
diamond recovered to date.
On 25 February 2021 Lucapa announced the second sale
of diamonds in 2021 from SML. The parcel of 1,040 carats
Rounding of amounts
The company is of a kind referred to in ASIC Legislative
Instrument 2016/191, relating to the ‘rounding off’ of
amounts in the financial statements. Amounts in the
financial statements have been
in
accordance with the instrument to the nearest thousand
dollars, or in certain cases, the nearest dollar.
rounded off
of rough diamonds were sold for a total of US$3.7 million
or US$3,525/carat.
On 26 February 2021 Lucapa announced the recovery by
SML of a 114 carat Type 11a D-colour white diamond, the
3rd from MB46 and 19th +100 carat white diamond
recovered to date.
On 22 March 2021 Lucapa announced the completion of
the expansion project at the Mothae, which is designed
to increase processing capacity by 45% from ~1.1Mtpa
to ~1.6Mtpa. The project was completed on-time,
within budget and with no safety incidents recorded.
On 23 March 2021 Lucapa announced an updated Lulo
Diamond, where in-situ resource carats increased 35%
to 135% to 135,900 at a modelled value of $1,440/carat.
On 24 March 2021 Lucapa announced the second sale of
diamonds in 2021 from Mothae. The parcel of 5,619
carats of rough diamonds was sold for US$5.9 million or
US$1,050/ carat and included the 215 carat D-colour
stone (213 carat post-boiling weight) and an 11 carat
pink diamond.
No other matters or circumstances have arisen since the
end of the financial period, which significantly affected
or may significantly affect the operations of the Group,
the results of those operations, or the state of affairs of
the Group in subsequent financial periods. 73
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78
Director’s declaration
for the year ended 31 December 2020
1.
In the opinion of the Directors of Lucapa Diamond
Company Limited: 74
(c)
(a)
the financial statements and notes, and the
remuneration report in the Directors’ Report,
as set out on pages 16 to 77, are in accordance
with the Corporations Act 2001, including:
Subject to the material uncertainty outlined
in the Directors’
report and basis of
measurement sections, there are reasonable
grounds to believe that the Group will be able
to pay its debts as and when they become
due and payable.
2.
The Directors have been given the declarations
required by section 295A of the Corporations Act
2001 for the financial year ended 31 December 2020.
Signed in accordance with a resolution of the Directors.
(i)
(ii)
giving a true and fair view of the
Group’s financial position as at 31
December
its
performance for the financial period
ended on that date; and
2020
and
of
complying with Australian Accounting
Standards (including the Australian
Accounting Interpretations) and the
Corporations Regulations 2001;
(b)
the financial report also complies with
International Financial Reporting Standards
as disclosed in the Statement of compliance
on page 36; and
MILES KENNEDY
Chairman
Dated this 26 March 2021
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Lucapa Diamond Company Limited Annual Report
Independent auditor’s report
for the year ended 31 December 2020
79
Independent Auditor’s Report
To the members of Lucapa Diamond Company Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Lucapa Diamond Company Limited (“Lucapa” or “the Company”) and its
subsidiaries (“the Group”), which comprises the consolidated statement of financial position as at 31 December 2020, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in
equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements,
including a summary of significant accounting policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Group's financial position as at 31 December 2020 and of its financial performance
for the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable
assurance about whether the financial report is free from material misstatements. Our responsibilities under those
standards are further described as in the Auditor's Responsibilities for the Audit of the Financial Report section of our
report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of
Ethics for Professional Accountants (“the Code”) that are relevant to our audit of the financial report in Australia. We have
also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors
of the Company, would be in the same terms if given to the directors as at the time of this auditor's report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to the Basis of Preparation note on page 40 of the financial report, which describes that the ability of
the Group to continue as a going concern is dependent on cash generation from its mining projects, cash management,
and/or the use of debt finance. Without such sources, further equity issues to the market may be required. As a result,
there is material uncertainty related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern, and therefore whether it will realise its assets and extinguish its liabilities in the normal
course of business and at the amounts stated in the financial report. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial report of the current period. These matters were addressed in the context of our audit of the financial report as a
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80
Independent auditor’s report
for the year ended 31 December 2020
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the
matter described under “Material uncertainty related to going concern” section, we have determined the matters described
below to be key audit matters to be communicated in our report.
Valuation of receivable from Sociedade Mineira do Lulo, Lda
Refer to Note 7c Financial Assets
Key Audit Matter
The Group has a balance receivable as at 31
December 2020 of US$22.73 million from its
associated entity, Sociedade Mineira do Lulo, Lda
(“SML”). This balance has been presented at its
fair value, in accordance with the provisions of
AASB 13 Fair Value Measurement. To take
account of this requirement, Management of the
Group has discounted the gross value receivable
at an annual discount rate of 12.85%, taking
account of the time value of money, based on
estimated dates of cashflows from SML to
Lucapa.
How our audit addressed the key audit matter
Our audit work included, but was not restricted to, the following:
• We obtained a loan confirmation of the gross value
receivable from SML to Lucapa;
• We obtained the Group’s calculation of the discounted
cashflows from SML to Lucapa, and re-tested the
workings to ensure the discounting process had been
accurately performed;
• We obtained third party verification of the discount rate
applied by Management, and evaluated the reliability of
the source data; and
• We evaluated the board’s application of estimates and
judgements, with reference to AASB 13, to ensure that
the accounting applied was fully compliant with
accounting standards.
Deferred Exploration and Evaluation Costs
Refer to Note 9 Property Plant and Equipment
Key Audit Matter
At 31 December 2020, the Group has significant
exploration and evaluation expenditure which has
been capitalised. As the carrying value of
expenditures
exploration
represents a significant asset of the Group, we
considered it necessary to assess whether facts
and circumstances existed to suggest that the
carrying amount of this asset may exceed its
recoverable amount. Management of the Group
considered whether there were any indicators of
impairment.
evaluation
and
The Group capitalises exploration and evaluation
expenditure in line with AASB 6 Exploration for
and Evaluation of Mineral Resources. The
assessment of each asset’s future perspectivity
requires significant judgement. There is a risk
that amounts are capitalised which no longer
meet the recognition criteria of AASB 6.
How our audit addressed the key audit matter
Our audit work included, but was not restricted to, the following:
• We obtained evidence that the Group has valid rights to
explore in the areas represented by the capitalised
exploration and evaluation expenditures by obtaining
valid contracts giving the Group rights to explore, for a
sample of capitalised exploration costs;
• We enquired with management and reviewed budgets to
ensure
further
that substantive expenditure on
exploration for and evaluation of the mineral resources in
the Group’s area of interest were planned;
• We
enquired
with management,
reviewed
announcements made and reviewed minutes of directors’
meetings to ensure that the company had not decided to
discontinue activities in any of its areas of interest; and
• We enquired with management to ensure that the Group
had not decided to proceed with development of a specific
area of interest, yet the carrying amount of the exploration
and evaluation asset was unlikely to be recovered in full
from successful development or sale.
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LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
Independent auditor’s report
for the year ended 31 December 2020
Impairment of PPE
Refer to Note 9 Property Plant and Equipment
Key Audit Matter
As at 31 December 2020, the group has property,
plant and equipment amounting to US$38.77
million related to it’s Mothae operations (Mothae
PPE). Loss of US$7.9 million was incurred from
Mothae operations during the year ended 31
December 2020 mainly because of temporary
curtailment in operations for most part of the
year due to COVID-19. We assessed this as
impairment indicator for the Mothae PPE and
recoverable amount was assessed to ensure
Mothae PPE is not impaired.
The assessment of the recoverable amount
requires significant
in particular
relating to estimated cash flow projections and
discount rates.
judgment,
81
How our audit addressed the key audit matter
Our audit work included, but was not restricted to, the following:
• Reviewed the management’s impairment assessment of
PPE in accordance with AASB 136.
•
Checked the mathematical accuracy of management’s
computation of the value in use.
• We
have
critically
evaluated management’s
methodologies in preparing impairment model and
documented basis for key assumptions.
• Assessed the reasonableness of the key assumptions
such as diamond price, Carat quantities, discount rate etc
by evaluating under-lying data and work on other audit
areas.
• Reviewed adequacy of the related disclosures in the
financial statements.
to
the
level of
Due
judgment, market
environment and significance to the Group’s
financial position, this is considered to be a key
audit matter.
Other Information
The directors are responsible for the other information. The other information comprises the Review of Operations and
Directors Report and other information included in the Group’s annual report for the year ended 31 December 2020 but
does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in
the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this auditor's report, we
conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.
Responsibilities of Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the
directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free
from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
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LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
82
Independent auditor’s report
for the year ended 31 December 2020
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian
Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s
internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether
the financial report represents the underlying transactions and events in a manner that achieves fair presentation.
• Obtained sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and
performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear
on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in the
audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse consequences
of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
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LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
Independent auditor’s report
for the year ended 31 December 2020
Report on the Remuneration Report
Auditor's Independence Declaration
Opinion on the Remuneration Report
To those charged with the governance of Lucapa Diamond Company Limited
83
We have audited the Remuneration Report included on pages 22-25 of the directors' report for the year ended 31 December
2020.
As auditor for the audit of Lucapa Diamond Company Limited for the year ended 31 December 2020, I declare
that, to the best of my knowledge and belief, there have been:
In our opinion the Remuneration Report of Lucapa Diamond Company Limited for the year ended 31 December 2020
complies with section 300A of the Corporations Act 2001.
i.
no contraventions of the independence requirements of the Corporations Act 2001 in relation to the
audit; and
Responsibilities
ii.
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
no contraventions of any applicable code of professional conduct in relation to the audit.
Elderton Audit Pty Ltd
Elderton Audit Pty Ltd
Rafay Nabeel
Audit Director
26 March 2021
Rafay Nabeel
Perth
Perth
Audit Director
26 March 2021
Perth
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LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
84
Definitions and abbreviations
_
A$
AIFRS
AGM
EBITDA
Endiama
Equigold
GoL
JIBAR
June half,
the Half or
H1 20
Lucapa,
the Company or
LOM
MB
Mothae
Mtpa
New Azilian
Rosas & Petalas
QX 20XX
Safdico
SFD
SML
SOE
Specials
the Board
the Group
the IDC
the Second Half or
H2 20
US$
VK
Z Star
ZAR, R or Rand
Australian dollar
Australian International Financial Reporting Standards
Annual general meeting of shareholders
Earnings before interest, taxation, depreciation & amortisation and other non-trading
items
Endiama E.P. (Angola’s national diamond mining company)
Equigold Pte Ltd (registered in Singapore)
Government of the Kingdom of Lesotho
Johannesburg Interbank Agreed Rate
The six months ended 30 June 2020
Lucapa Diamond Company Limited (ASX code: LOM)
Mining block
Mothae Diamonds (Pty) Ltd (Lucapa 70% subsidiary, GoL 30% and registered in the
Kingdom of Lesotho)
Million tonnes per annum
New Azilian Pty Ltd
Rosas & Petalas S.A. (Private venture partner in Lulo, registered in the Republic of
Angola)
Reference to one of the quarter periods in each of the calendar years of 2019 or 2020
Safdico International, a subsidiary of Graff International
Size frequency distribution
Sociedade Mineira Do Lulo Lda, (Lucapa 40% asscociate, Endiama 32% and Rosas &
Petalas 28% and registered in the Republic of Angola)
State of Emergency declared in Angola
Diamonds weighing in excess of 10.8 carats
The Lucapa Board of Directors
The Company and its subsidiaries and associates
the Industrial Development Corporation of South Africa Limited
The six months ended/ ending 31 December 2020
United States dollar
Volcaniclastic kimberlite
Z Star Mineral Resource Consultants Pty Ltd
South African rand
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LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
85
ASX additional information
Additional information current as at 16 March 2021 required by Australia Securities Exchange Limited Rules and not
disclosed elsewhere in this Report.
Capital structure
Capital structure
OOrrddiinnaarryy SShhaarree CCaappiittaall
833,175,575 ordinary fully paid shares held by 5,732 shareholders.
Spread
1
1,001
5,001
10,001
100,001 and above
to
to
to
to
1,000
5,000
10,000
100,000
Number of
Holders
128
1,476
1,002
2,340
786
Number of
Shares
33,922
4,599,342
8,051,595
84,957,527
735,533,189
As at 16 March 2021 there were 2,071 fully paid ordinary shareholders holding less than a marketable parcel.
LLiisstteedd $$00..1100 OOppttiioonnss eexxppiirriinngg 55 JJuunnee 22002222
113,971,605 listed options held by 984 shareholders.
Spread
1
1,001
5,001
10,001
100,001 and above
to
to
to
to
1,000
5,000
10,000
100,000
Number of
Holders
154
235
151
309
135
Number of
Shares
94,596
659,204
1,202,290
11,977,599
100,037,916
Voting rights
Voting rights
OOrrddiinnaarryy SShhaarreess
On a show of hands, every member present in person or by proxy shall have one vote and upon a poll each share shall
have one vote.
OOppttiioonnss aanndd PPeerrffoorrmmaannccee RRiigghhttss
Options and performance rights carry no voting rights and convert to one ordinary share upon exercise.
On-market buy-back
On-market buy-back
There is no current on-market buy back.
Substantial shareholders
Substantial shareholders
As at 16 March 2021, substantial shareholder notices had been lodged with ASX by the following shareholders:
Fully Paid Ordinary Shares
Name
Ilwella Pty Ltd
Equigold Pte Ltd
Tazga Two Pty Ltd as trustee For Tazga Two Trust
Safdico International Limited
Number Held % of Issued Capital
7.62%
6.84%
6.83%
5.95%
61,394,405
55,145,047
55,007,014
49,609,592
Note: The above details may not reconcile to the information in the Top 20 holders of quoted securities list as the
shares may be held across multiple associated holdings or if updated substantial shareholder notices have not been
required to be lodged with ASX.
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LUCAPA DIAMOND COMPANY LIMITED ABN 44 111 501 663
Lucapa Diamond Company Limited Annual Report
86
ASX additional information
Top 20 holders of quoted securities
Top 20 holders of quoted securities
Fully Paid Ordinary Shares
Name
CITICORP NOMINEES PTY LIMITED
TAZGA TWO
ILWELLA PTY LTD
SAFDICO INTERNATIONAL LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
PULLINGTON INVESTMENTS PTY LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD
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