Lucara to extend life of diamond mine to 2040

Lucara Diamond Corp. [LUC-TSX; LUCRF-OTC; Botswana, Sweden] on Tuesday November 5 released the results of a feasibility study for the planned underground portion of its 100%-owned Karowe mine in Botswana.

Karowe is one of the world’s most prolific producers of large, high-value Type 2A diamonds. It is the only diamond mine in recorded history to have produced two diamonds greater than 1,000-carats.

The underground expansion at Karowe is expected to extend the life of the mine beyond the open pit by about 13-15 years out to 2040, with potential upside at depth.

“Lucara is highly encouraged by the results of the Karowe underground feasibility study which has outlined a much larger economic opportunity than first envisaged in the 2017 PEA [Preliminary Economic Assessment] and represents an exciting, world class growth project for the company,” said Lucara President and CEO Eira Thomas.

Lucara shares declined on the study news, dropping 11.3% or 12 cents to 94 cents, likely because the pre-production capital cost of US$514 million for the underground project was higher than expected.

Lucara is a diamond producer and explorer focused on developing its portfolio of advanced stage assets in Africa. Its principal asset and current focus is the Karowe Mine, which is a single open pit mine, located on the northern fringe of the Kalahari Desert in one of the world’s most prolific diamond producing areas. It came into production in 2012 and produced a total of 366,086 carats in 2018 from 2.6 million tonnes of processed ore. That marked a record throughput for the Karowe plant.

“Diamond deposits are rare and getting rarer,” Thomas said. “In this context, we are extending a mine that is in a class of its own, having produced 15 diamonds in excess of 300 carats, including two greater than 1,000 carats in just seven years of production,” she said. “Further, we have sold ten diamonds for in excess of $10 million each, including the record setting 813-carat Constellation, which sold for $63.1 million.”

The study envisages life-of-mine production from underground and open pit operations of 7.8 million carats out to 2040, delivering US$5.25 billion in gross revenue and after-tax undiscounted net cash flow of US$1.2 billion, assuming no real diamond price escalation.

On the basis of a construction start mid-2020, ore from the underground mine will seamlessly integrate into current operations providing mill feed starting in 2020, with a ramp up to 2.7 million tonnes per annum to the processing plant by 2026, and the opportunity to increase throughput.

The underground mine is designed to access the South Lobe kimberlite resource below the current planned bottom of the open pit (which is expected to be at approximately 700 metres above sea level (MASL), to depth of 310 metres (MASL). Access to the South Lobe underground will be via two vertical shafts (production and ventilation) of approximately 765 and 715 metres deep respectively.

Lucara recently recovered a 123-carat gem quality top white Type 11 diamond from direct milling ore sourced from the EM/PK(S) geological domain in the South Lobe area of the mine.

The EM/PK(S) has also delivered several other high value diamonds, including the 1,109-carat Lesedi La Rona, the 813-carat Constellation and the 1,758-carat Sewelo, which ranks as the largest diamond ever to be recovered in Botswana. The Sewelo sale was announced in April, 2019.

The EM/PK(S) is an important economic driver for the underground feasibility study.

Lucara reported a net loss of US$4 million or $0.01 per share in the third quarter of 2019. That compared to a year ago profit of US$5.1 million or $0.01. The company said results in the third quarter were impacted by an increase in operating expenses and depletion and amortization.

During the third quarter, Lucara posted revenue of US$45.3 million from the sale of 116,200 carats at US$390 per carat compared to US$45.7 million in the year earlier period from the sale of 101,600 carats at US$450 per carat.