The Karowe UGP to extend LoM to 2040

Jul 28, 2023

Lucara Diamond Corp provides an update on the Karowe Underground Expansion project (UGP). The Karowe UGP is designed to access the highest value portion of the Karowe orebody, extend Life of Mine (LoM) to at least 2040 and deliver approximately $4 billion in additional revenues using conservative diamond price assumptions which are un-escalated and exclude exceptional stone revenues.

Management initiated an update to the UGP schedule and budget in response to slower than planned ramp up to expected sinking rates, and, to account for time incurred to date, as well as for anticipated future grouting programs. Grouting programs took longer than anticipated due to a combination of high-water volumes in the sandstone lithologies between 870 and 752 metres above sea level in depth (144 metres to 262 metres below the shaft collar) combined with technical challenges associated with the transition to main sinking.

The updated schedule incorporates a 28% increase in the duration of construction, extending the anticipated commencement of production from the underground from H2 2026 to H1 2028.  As a result, the revised forecast of costs at completion is $683 million, a 25% increase to the May 2022 estimated capital cost of $547 million.

The project remains technically and economically feasible, however, the impact of actual and modelled delays changes the revenue profile due to the use of lower-grade, stockpiled ore for mill feed rather than high-grade ore from the underground as previously planned.

Sufficient surface stockpiles of South, Centre and North Lobe kimberlite ore are available to maintain current, un-interrupted mill feed to the plant for the duration of the anticipated delay.  The long-term outlook for diamond prices, combined with the potential for exceptional stone recoveries and the continued strong performance of the open pit could mitigate the modelled impact on project cash flows due to the schedule slippage.

Eira Thomas, CEO commented: “Lucara has made tremendous progress on the Karowe underground expansion project, despite many challenges over the last year as we transitioned into the main sink phase of the underground development. Schedule delays due to longer than anticipated grouting activity have impacted the project timeline, however the grouting methodology selected has proven to be effective in controlling water inflows.

As we transition out of the sandstones in early Q4 2023, we look forward to meeting planned sinking rates. Despite these challenges, the project continues to deliver strong economics paying back capital in under three years and adding approximately $4 billion in revenues from an extended mine life out to at least 2040, using conservative diamond price assumptions.

The project also comes at a time when the long-term outlook for the diamond market is stronger than it has been for many years representing an exciting growth opportunity for our shareholders and stakeholders in Botswana.”

Lucara’s major shareholder remains supportive of the Karowe asset and the long-term potential of the Karowe UGP.  Adam Lundin commented: “The Karowe underground mine expansion provides access to the highest value portion of the orebody responsible for delivering numerous record-breaking diamonds in respect of size and value, including three diamonds in excess of 1,000 carats.

The project remains highly economic, despite the delays incurred, and as Lucara’s largest shareholder, we remain fully supportive of the company.”

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