One of the most anticipated diamond auctions in history turned out to be a big letdown.
Lucara Diamond Corp. said it will hold onto its legendary “Lesedi la Rona” diamond after it failed to achieve the reserve price at an auction in London on Wednesday. The highest bid was US$61 million, according to Bloomberg, which is far below the Vancouver-based miner’s expectations.
The stock dropped more than 12 per cent on the news on Wednesday afternoon.
Lesedi la Rona, which Lucara discovered in Botswana last November, is the second-largest gem-quality diamond ever found, weighing in at 1,109 carats. The only stone known to be bigger is the legendary Cullinan diamond, which was recovered in South Africa in 1905 and weighed 3,106.75 carats.
Last month, Lucara sold an 813-carat diamond (the sixth largest ever found) for US$63 million. Analysts and investors were expecting Lesedi la Rona (which translates to “Our Light”) to fetch significantly more money.
“We estimated a minimum price of US$86 million. There were some market expectations of an even higher price, potentially in excess of US$100 million,” BMO Capital Markets analyst Edward Sterck said in a note.
He said the disappointing auction result “potentially calls into question the sales method chosen.” He also noted street forecasts for Lucara’s 2016 earnings will likely be trimmed.
