Lucapa Boosts Lulo Stake to 51% Amid 36% Revenue Surge and Promising Merlin Targets
Lucapa Diamond Company Limited reported a robust Q1 2025 with a 74% increase in diamond grade at Lulo and a 36% revenue rise, while advancing its stake in the Lulo JV to 51%. Exploration at Merlin in Australia revealed significant new targets, setting the stage for further growth.
- 74% increase in diamond grade recovered at Lulo despite local blockade
- 36% year-on-year revenue growth to US$12.8 million from 8,409 carats sold
- Lulo JV Mineral Investment Contract finalized, raising Lucapa’s stake to 51%
- Merlin project EM survey identifies two large base metal targets and 16 kimberlite targets
- Corporate capital raise of A$3.4 million completed alongside overhead reductions
Strong Operational Performance at Lulo Amid Challenges
Lucapa Diamond Company Limited (ASX: LOM) has delivered a compelling start to 2025, reporting a 74% increase in diamond grade recovered at its flagship Lulo alluvial mine in Angola. Despite a temporary mining shutdown caused by a blockade from local community leaders during the wet season, the company maintained operations in high-grade leziria floodplain areas, resulting in 6,027 carats recovered in Q1.
This operational resilience translated into a 36% year-on-year increase in revenue, reaching US$12.8 million from the sale of 8,409 carats at an average price of US$1,523 per carat. These figures underscore Lucapa’s ability to navigate seasonal and socio-political challenges while capitalizing on the premium pricing of Lulo’s large, high-value alluvial diamonds.
Strategic JV Stake Increase and Exploration Advances
A significant milestone was achieved with the finalization of the Project Lulo Joint Venture Mineral Investment Contract, which will see Lucapa increase its stake from 39% to 51%. This enhanced ownership position is expected to boost Lucapa’s share of any future exploration success and operational upside. The formal signing ceremony with the Angolan government and JV partners Endiama and Rosas & Petalas is anticipated in Q2 2025.
Meanwhile, exploration activities at the Merlin Diamond Project in Australia have yielded promising results. The first modern electromagnetic (EM) survey in 25 years identified two large base metal targets, one coinciding with a historical gravity high, and 16 additional kimberlite targets. Given Merlin’s proximity to the world-class McArthur River Mine, Lucapa plans follow-up ground-based geophysics, soil sampling, and surface mapping to refine these targets ahead of drilling campaigns.
Corporate Strengthening and Market Context
On the corporate front, Lucapa successfully completed a two-tranche placement and a Share Purchase Plan (SPP), raising a total of A$3.4 million. The capital raise was supported by both new and existing sophisticated investors, including contributions from the board. Concurrently, the company undertook a corporate expenditure review, resulting in a halving of corporate office staff to reduce overheads amid current market conditions.
The broader diamond market showed signs of recovery during the quarter, with rough diamond prices improving. However, the introduction of US tariffs post-quarter end has introduced short-term uncertainty, prompting a cautious stance among buyers. Lucapa’s premium product positioning and operational progress position it well to navigate these market dynamics.
Looking Ahead
Lucapa’s Q1 performance reflects a company balancing operational challenges with strategic growth initiatives. The pending formalization of the Lulo JV contract and the unfolding exploration story at Merlin will be key catalysts to watch. Meanwhile, market conditions remain fluid, with tariff impacts and global diamond supply dynamics shaping near-term demand and pricing.
Bottom Line?
Lucapa’s strengthened JV position and exploration pipeline set the stage for growth, but market headwinds warrant close monitoring.
Questions in the middle?
- When will the formal signing of the Lulo JV Mineral Investment Contract occur, and what immediate operational changes will follow?
- How will the US tariffs impact Lucapa’s diamond sales and pricing in the coming quarters?
- What are the timelines and expected outcomes for drilling and further exploration at the Merlin project?
