LUCARA ANNOUNCES KAROWE UNDERGROUND EXPANSION PROJECT UPDATE

Lucara Diamond Corp. (“Lucara” or the “Company”) is pleased to provide an update on the Karowe Underground Expansion project (the “UGP”). The Karowe UGP is planned to extend the mine life to at least 2040 mining predominately from the highest value EM/PK(S) unit, and is forecasted to contribute approximately $4 billion in additional revenues, using conservative diamond prices, starting in 2026. Management will be providing a presentation on the Karowe UGP update during the Lucara Q2 2021 results conference call and webcast on Wednesday August 11 at 10:00am ET/3:00pm BST. All figures presented are in US dollars, unless otherwise stated.

HIGHLIGHTS:

• The Karowe UGP is in a fully financed position with the funds to be provided from the $220 million senior debt facilities package (July 12, 2021), the recently closed equity financing of C$41.4 million (July 15, 2021), and the projected cash flows from the Karowe open pit mine, during the underground construction period
• Although COVID-19 related delays have impacted the original schedule, no material variances between the 2019 feasibility study (“2019 FS”) and current project design have resulted following the completion of detailed design and engineering work undertaken in 2020 and 2021
• Total capital expenditures, including contingency have increased marginally by approximately 4%, to $534 million, due to the increase in the production shaft diameter and additional mine development
• $51.4 million has been spent to date out of the total budget, primarily on engineering and procurement of long lead items; total planned spend for 2021 is up to $120 million
• The schedule to 75% of full production has increased by 1.3 years, driven mainly by COVID-19 related delays to commence the shaft pre-sinking, and additional planned time for development
• Open pit mining operations have been adjusted to limit the risk of production shortfalls during the ramp up of the Underground mine operations in 2026
• Mobilization of shaft sinking teams commenced in late Q2 2021, with pre-sinking activities scheduled in Q3 2021
• Mine shaft civil works are underway at the shaft collar boxcuts, hoist houses and hoist foundations
• Construction completed of a generator pad for temporary diesel power generation to support shaft sinking in advance of a power line upgrade into the site
• A Self-build agreement has been signed with Botswana Power Corporation for construction of two substations and a 29 km 132kV transmission line upgrade; substation contracts have been awarded
• Phase 1 of the camp construction completed allowing for 100 of the 200 person camp
• All necessary permits, including a mining license extension to 2046 have been obtained to support all construction and production activities
• Lucara has adopted IFC performance Standards and the World Bank Group’s Environmental, Health, and Safety Guidelines: Mining; the development of the UGP adheres to Equator Principles

Eira Thomas, CEO commented: “Lucara has made tremendous progress on the Karowe underground expansion project over the last eighteen months, despite the challenges imposed by the global pandemic. The project is fully financed, allowing us to move into high gear during the second half of the year. Using conservative diamond price assumptions, the project delivers strong economics projected to pay back capital in under three years and add approximately $4 billion in revenues from an extended mine life out to at least 2040. The project also comes at a time when the 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.”

The COVID-19 pandemic has impacted the UGP project schedule, however, no material variances between the 2019 FS (link to news release) and the current execution plan have resulted. Rather, during this period in 2020 and 2021, all critical path items were addressed and a concerted effort was placed on detailed design, engineering and procurement which have helped to significantly de-risk the project. Out of the total capital budget, the Company has spent $51.4 million on project execution activities through 2020 until the end of June 2021, including shaft and geotechnical engineering, procurement of long lead time and essential shaft sinking items, surface infrastructure and construction activities, bulk power supply power line engineering and procurement. Mobilization of the shaft pre-sink team commenced in late Q2 2021 with shaft pre-sinking on track to commence in mid Q3 2021. Open pit mining operations have been adjusted to limit the risk of production shortfalls during the ramp up of the Underground mine operations commencing in H1 2026. The budgeted spend on underground expansion activities in 2021 is up to $120 million.

News in full

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