2022 Guidance ON-Track Following Strong Operational Performance IN Third Quarter as Underground Shaft Sinking Continues
November 2, 2022
NEWS RELEASE
2022 GUIDANCE ON-TRACK FOLLOWING STRONG OPERATIONAL PERFORMANCE IN THIRD
QUARTER AS UNDERGROUND SHAFT SINKING CONTINUES
VANCOUVER, November 2, 2022 /CNW/ (LUC – TSX, LUC – BSE, LUC – Nasdaq Stockholm)
Lucara Diamond Corp. (“Lucara” or the “Company”) today reports its results for the quarter ended September 30,
2022.
Q3 2022 HIGHLIGHTS:
Revenue for the three and nine months ended September 30, 2022 totalled $49.9 million and $170.5 million,
respectively.
For the nine months ended September 30, 2022, a total of 245,764 carats were sold from Karowe at an average
price of $528 per carat, generating revenue of $129.9 million before top-up payments of $33.8 million.
A strong U.S. Dollar helped to mitigate increases in input costs, resulting in an operating cash cost of $29.33 per
tonne of ore processed(1) for the three months ended September 30, 2022.
A strong year-to-date operational performance supports the Company’s 2022 revenue guidance of $195 million
and $225 million. Operating cost per tonne on an annualized basis is expected to be at the low-end of 2022
Guidance ($29.50 to $33.50).
Rough and polished diamond prices continued to exceed prices from 2021, despite growing global economic
uncertainties.
On Clara, more than 40% of sales came from third-party goods transacted, reflecting a positive trend towards
increased diversification of supply and less reliance on Karowe production. Revenue from sales transacted on
Clara during the three months ended September 30, 2022 totalled $8.3 million.
Production metrics remained in line with 2022 guidance, with 0.9 million tonnes of ore and 0.5 million tonnes
of waste mined, and 0.7 million tonnes of ore processed during the three months ended September 30, 2022.
The main sink phase for the production shaft commenced at the end of September; sinking of the ventilation
shaft continued.
A total project investment of $23.9 million into the Karowe UGP during the current quarter focused on the
transition to main sink activities for both shafts, procurement of underground mobile equipment and
construction of the upgraded transmission line and related substations.
Eira Thomas, President & CEO commented: “Lucara remains on track for another solid year, with sales from our
large, high value diamonds continuing to achieve consistent, healthy polished prices under our committed supply
agreement with HB, despite recent market softening. Clara also continued to make good progress during the
quarter, adding third party supply from both producer trials and secondary market sources, to positive results.
Importantly, third party supply now accounts for more than 40% of sales on Clara. It was also a busy and productive
period for the underground project. Main sinking commenced on the production shaft and mitigations implemented
during the third quarter in response to operational start-up challenges are beginning to take effect, with progress
made to reduce cycle times for both production and ventilation shafts."
(1) See “Non-IFRS Financial Performance Measures”
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REVIEW FOR THE QUARTER ENDED SEPTEMBER 30, 2022
Operational highlights from the Karowe Mine for the three months ended September 30, 2022 included:
o Mined 0.9 million tonnes (Q3 2021: 1.2) and 0.5 million tonnes (Q3 2021: 0.7) of ore and waste,
respectively.
o Processed 0.7 million tonnes of ore (Q3 2021: 0.7) and recovered 78,879 carats (Q3 2021: 95,907
carats), achieving a recovered grade of 11.4 carats per hundred tonnes (Q3 2021: 13.0 cpht).
o A total of six diamonds greater than 100 carats including one stone greater than 200 carats were
recovered during the quarter.
o The year-to-date Total Recordable Injury Frequency Rate ("TRIFR") of 0.32 (Q3 2021: zero) at the end
of Q3 2022 reflects four medical treatment cases reported during the third quarter of 2022.
Financial highlights for the three months ended September 30, 2022 included:
o Revenues from the sale of 99,301 carats recovered from the Karowe Mine were $46.5 million. The
sales agreement with HB Trading BV (“HB”) accounted for 58% of total Karowe revenue recognized in
the quarter.
o Operating cash costs of $29.33 per tonne processed(1) on plan reflect the impact of higher input costs,
partially offset by a comparatively stronger U.S. Dollar.
o Adjusted EBITDA(1) of $13.8 million and net income for the quarter of $1.8 million ($0.00 basic earnings
per share).
Cash position and liquidity:
o As at September 30, 2022, the Company had cash and cash equivalents of $34.8 million.
o Drawn $65.0 million from the $170.0 million project loan facility.
o The working capital facility of $50.0 million was undrawn as at September 30, 2022.
(1) See “Non-IFRS Financial Performance Measures”
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2022 OUTLOOK
This section of the press release provides management's production and cost estimates for 2022. These are
“forward-looking statements” and subject to the cautionary note regarding the risks associated with forward-looking
statements. No changes were made to the Company’s 2022 Guidance as of Q3 2022. In February 2022, based on
updated expectations for revenue in 2022, the diamond revenue guidance issued was increased to between $195.0
million and $225.0 million (from $185.0 million to $215.0 million). Diamond revenue guidance does not include
revenue related to the sale of exceptional stones (an individual rough diamond which sells for more than $10
million), or the Sethunya.
Karowe Diamond Mine Full Year – 2022
In millions of U.S. dollars unless otherwise noted
Diamond revenue (millions) (revised as of February 2022) $195 to $225
Diamond sales (thousands of carats) 300 to 340
Diamonds recovered (thousands of carats) 300 to 340
Ore tonnes mined (millions) 3.1 to 3.5
Waste tonnes mined (millions) 1.5 to 2.1
Ore tonnes processed (millions) 2.6 to 2.8
Total operating cash costs (1) including waste mined(2) (per tonne processed) $29.50 to $33.50
Botswana general & administrative expenses including marketing costs (per tonne
processed)
$3.50 to $4.00
Tax rate(3) 0%
Average exchange rate – USD/Pula 11.0
(1) Operating cash costs are a non-IFRS measure. See “Non-IFRS Financial Performance Measures”.
(2) Includes ore and waste mined cash costs of $5.75 to $6.25 (per tonne mined) and processing cash costs of $12.00 to $13.00 (per tonne
processed).
(3) The Company is subject to a variable tax rate in Botswana based on a profit and revenue ratio which increases as profit as a percentage of
revenue increases. The lowest variable tax rate is 22% while the highest variable tax rate is 55% (only if taxable income were equal to revenue).
Capital expenditures are deductible when incurred. With planned capital expenditures of up to $110 million for the UGP, a tax rate of 0% is
forecast for 2022. Should capital expenditures vary from plan, the Company could be subject to current tax.
DIAMOND SALES
Diamond sales in Q3 2022 continued through HB under the sales agreement for those gem and near-gem diamonds
greater than 10.8 carats which are to be manufactured and sold as polished. Other diamonds continued to be sold
through a combination of the Clara platform and regular tenders.
The Company recognized total revenues of $49.9 million in Q3 2022. This included $46.5 million from the sale of
99,301 carats from Karowe, top-up payments of $9.0 million as well as $3.4 million from the sale of third-party goods
on the Clara platform. In the comparative quarter, the Company achieved revenues of $72.7 million which included
$72.5 million from the sale of 117,162 carats from Karowe, top-up payments of $2.7 million as well as $0.2 million
in revenue from third-party goods sold through the Clara platform.
HB SALES AGREEMENT FOR +10.8 CARAT DIAMOND PRODUCTION FROM KAROWE
Karowe’s large, high value diamonds have historically accounted for approximately 60% to 70% of Lucara’s annual
revenues. In 2020, Lucara announced a partnership agreement with HB, entering into a definitive sales agreement
for diamonds recovered that exceed +10.8 carats from the Company’s 100% owned Karowe Diamond mine in
Botswana. This agreement was subsequently amended and extended to December 31, 2022. The mechanisms of
the agreement result in complete transparency within the value chain and create important alignment between the
producer and the manufacturer for the first time.
Under the amended sales agreement, +10.8 carat gem and near gem diamonds from the Karowe Mine of qualities
that can directly enter the manufacturing stream are being sold to HB at prices based on the estimated polished
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outcome of each diamond. The estimated polished value is determined through state-of-the-art scanning and
planning technology, with an adjusted amount payable on actual achieved polished sales, less a fee and the cost of
manufacturing. Following the extension of the HB Agreement in 2021, all +10.8 carat non-gem quality diamonds and
all diamonds less than 10.8 carats in weight which did not meet the criteria for sale on Clara are being sold as rough
through the quarterly tender. In the agreement extension, payment terms were amended to better reflect the timing
of mine production and the manufacturing process. This unique pricing mechanism delivers regular cash flow for
this important segment of our production profile.
For the three months ended September 30, 2022, the Company recorded revenue of $27.1 million from the HB
agreement (inclusive of top-up payments of $9.0 million), as compared to revenue of $50.5 million in Q3 2021
(inclusive of top-up payments of $2.7 million). The decrease in revenue in Q3 2022 versus the comparative quarter
can be attributed primarily to the number of high value diamonds delivered to HB in Q3 2021 (four pink diamonds
and two Type IIa top white gem diamonds (393.5 carats and 257.5 carats)) for which an initial MPV payment was
received in Q3 2021. In addition, more carats were delivered to HB in the comparative quarter (6,258 carats vs.2,412
carats). Despite the overall decrease in revenue recognized in Q3 2022, diamond market fundamentals continued
to support healthy prices as steady demand and some inventory shortages were reported. Natural variability in the
quality profile of the +10.8ct production in any production period or fiscal quarter results in fluctuations in recorded
revenue and associated top-ups between periods is expected. During Q3 2022, 7.1% weight percentage Specials of
total carats recovered was consistent with the Karowe resource model.
As a result of the sales agreement with HB, the Company also participated in polished diamond price increases during
Q3 2022 as rough diamonds sold to HB in previous quarters were polished and sold. In Q3 2022, estimated top-up
payments of $9.0 million (Q3 2021: $2.7 million) were included in revenue for the quarter. At September 30, 2022 a
number of higher value and more technically complex stones that take longer to manufacture had not fully
completed the manufacturing and sales process. These stones were delivered to HB in 2021 and the first nine months
of 2022. As these stones finish the manufacturing process and are sold, the Company’ may record additional revenue
in the form of “top-up” payments from these sales.
CLARA SALES PLATFORM
Clara, Lucara’s 100% owned proprietary, secure, web-based digital sales platform, continues to gain scale and
interest. Interest in Clara continues to grow as the benefits of purchasing rough diamonds in an innovative way
become evident. In Q3 2022, four sales (Q3 2021: four sales) took place with a total sales volume transacted of $8.3
million, a 26% increase from the $6.6 million transacted in Q3 2021, as Karowe goods were supplemented by growth
in supply from additional sources. The number of buyers on the platform remained stable during the quarter with
the Company maintaining a waiting list to manage supply and demand.
Additional supply is required to meet existing demand and drive the platform’s growth and the Company continued
trial sales on the Clara platform with a third-party producer in Q3 2022. The Company intends to continue to seek
additional supply in 2022, both from third-party producers and the secondary market.
KAROWE UNDERGROUND EXPANSION UPDATE
The Karowe UGP is expected to extend the mine life to at least 2040, with initial underground carat production
predominantly from the highest value EM/PK(S) unit and is forecast to contribute approximately $4 billion in
additional revenues, using conservative diamond prices. The updated estimated capital cost for the Karowe UGP is
$547 million (including contingency) and reflects expected pricing changes following execution of the main sink
contract in Q2 2022. Mine ramp up is expected in 2026 with full production from the Karowe UGP expected in H2
2026. The Company is using a combination of cash flow from operations and project debt for the investment in the
Karowe UGP, which is fully financed.
During the three months ended September 30, 2022, a total of $23.9 million was spent on the Karowe UGP
development, primarily in relation to ongoing construction activities and procurement of long lead items, including:
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Main sinking of the production shaft commenced at the end of September while main sinking in the ventilation
shaft continued. As main sinking activity ramped up in the ventilation shaft during the third quarter, several
operational issues arose resulting in sinking rates achieving less than plan due to longer cycle times. In response
to the operational challenges and longer duration cycle times, changes and mitigations were actioned during
the quarter. Observed cycle times and sinking rates are improving. The start of main sink activity in the
Production shaft was delayed due to longer than planned commissioning of the winders and hoisting plant.
Cycle times are now improving.
Procurement of shaft station underground mobile equipment progressed with equipment deliveries expected
to commence in Q4 2022 and Q1 2023.
The Letlhakane and Karowe substation construction continued with focus on civil work and cable pulling for
control equipment installation. The transmission line towers were equipped with stringing hardware and safety
nets were installed over existing line crossings.
Activities for the Karowe UGP in the fourth quarter of 2022 are expected to include the following:
Sinking within both the ventilation and production shafts.
Procurement of underground equipment, including awarding the bulk air cooler tender.
Continuation of detailed design and engineering of the underground mine infrastructure and layout.
Commissioning the 29 km, 132kV bulk power supply powerline.
DIAMOND MARKET
After a strong start to the third quarter of 2022, diamond price softening was observed in late August and into
September, however, solid market fundamentals continue to support diamond prices despite growing concerns of
a global economic slowdown. High levels of reported inflation persisted, and governments responded with
increasingly forceful measures in attempts to reduce it to sustainable levels.
A cautious economic outlook combined with the uncertainty caused by geopolitical events, including the ongoing
conflict in Ukraine and continuing implications of the COVID-19 pandemic (specifically in China where the demand
for diamonds has not yet recovered) remain a risk to diamond pricing trends in the short term with demand from
the US a critical driver on prices of both rough and polished diamonds. The longer-term market fundamentals remain
unchanged and positive, however, pointing to strong price growth over the next few years as demand is expected
to outstrip future supply.
The benefits of the committed sales agreement with HB continued to be realized during the third quarter of 2022 as
the Company participated in the upside to manufacturing polished diamonds for goods delivered in previous
quarters. The integrated approach, using state of the art scanning and planning technology has further enhanced
the final achieved polished outcome for very large (+50 carat polished) and high value diamonds, a critical production
segment for the Company.
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FINANCIAL HIGHLIGHTS
Three months ended
September 30,
Nine months ended
September 30,
In millions of U.S. dollars, except carats or otherwise
noted
2022 2021 2022 2021
Revenues 49.9 72.7 170.5 172.1
Operating expenses (25.8) (23.2) (60.8) (58.0)
Net income for the period 1.8 12.8 33.3 22.2
Earnings per share (basic) 0.00 0.03 0.07 0.05
Earnings per share (diluted) 0.00 0.03 0.07 0.05
Operating cash flow per share (1) 0.03 0.08 0.17 0.19
Cash on hand 34.8 26.6 34.8 26.6
Amounts drawn on working capital facility – 30.0 – 30.0
Amounts drawn on project finance facility 65.0 25.0 65.0 25.0
Karowe Revenue 46.5 72.5 163.7 171.4
Average price per carat sold ($/carat) (2) 337 596 528 546
Carats sold 99,301 117,162 245,763 277,702
(1) Operating cash flow per share before working capital adjustments is a non-IFRS measure. See “Use of Non-IFRS Performance Measures” below.
(2) The Company’s revenue is primarily generated from the sale of Karowe diamonds. The average price per carat sold presented in this table relates
exclusively to the sale of Karowe diamonds and excludes top-up payments received during the quarter. Also excluded is the value of diamonds
purchased from third parties and sold by the Company through Clara. See Table 2 in the Q3 2022 MD&A for additional information.
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QUARTERLY RESULTS OF OPERATIONS – KAROWE MINE, BOTSWANA
CONFERENCE CALL
CONFERENCE CALL
The Company will host a conference call and webcast to discuss the results on Thursday, November 3, 2022 at 7:00
a.m. Pacific, 10:00 a.m. Eastern, 2:00 p.m. UK, 3:00 p.m. CET.
CONFERENCE CALL
Please call in 10 minutes before the conference call starts and stay on the line (an operator will be available to assist
you).
Conference ID:
9230878 / Lucara Diamond
Dial-In Numbers:
Toll-Free Participant Dial-In North America (+1) 888 204 4368
UK Toll free 0800 358 6377
Local Vancouver (+1) 604 449 6082
Local Toronto (+1) 647 794 4605
UNIT Q3-22 Q2-22 Q1-22 Q4-21 Q3-21
Sales
Revenues from the sale of Karowe diamonds US$M 46.5 50.0 67.2 56.5 72.5
Karowe carats sold Carats 99,301 66,167 80,295 102,791 117,162
Average price per carat - excluding top-ups(1) US$ 377 557 690 436 596
Production
Tonnes mined (ore) Tonnes 920,410 1,091,192 811,947 610,072 1,190,856
Tonnes mined (waste) Tonnes 453,860 357,764 482,104 276,263 696,907
Tonnes processed Tonnes 693,398 719,207 666,488 705,877 738,986
Average grade processed(2) cpht (*) 11.4 12.0 12.6 12.8 13.0
Carats recovered Carats 78,879 86,317 83,917 90,634 97,412
Costs
Operating expense per Karowe carat sold(3) US$ 227 221 212 200 193
Margin (mining operations) per Karowe carat sold US$ 150 336 478 236 403
Operating cost per tonne of ore processed(4) US$ 29.33 28.78 27.80 29.74 29.73
Capital Expenditures
Sustaining capital expenditures US$M 4.0 4.1 0.8 9.1 3.4
Underground expansion project(5) US$M 23.9 29.1 31.1 21.8 32.0
(*) carats per hundred tonnes
(1) Previously presented as $418 (Q4 2021) and $588 (Q3 2021) per carat, respectively.
(2) Average grade processed is from direct milling carats and excludes carats recovered from re-processing historic recovery tailings
from previous milling.
(3) Previously presented as $224 (Q1 2022), $217 (Q4 2021) and $198 (Q3 2021) per carat, respectively.
(4) Operating cost per tonne of ore processed is a non-IFRS measure.
(5) Excludes qualifying borrowing cost capitalized in each quarter since Q4 2021.
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Webcast:
To view the live webcast presentation, please log on using this direct link: https://app.webinar.net/oVQNzQ4mERL
The presentation slideshow will also be available in PDF format for download from the Lucara website ( Link to
presentation).
Conference Replay:
A replay of the telephone conference will be available two hours after the completion of the call until
November 10, 2022.
Replay number (Toll Free North America) (+1) 888 390 0541
Replay number (Local) (+1) 416 764 8677
The pass code for the replay is: 910144#.
On behalf of the Board,
Eira Thomas
President and Chief Executive Officer
Follow Lucara Diamond on Facebook, Twitter, Instagram, and LinkedIn
For further information, please contact:
Hannah Reynish Investor Relations & Communications
+1 604 674 0272| [email protected]
Sweden Robert Eriksson, Investor Relations & Public Relations
+46 701 112615 | [email protected]
UK Public Relations Charles Vivian / Jos Simson, Tavistock
+44 778 855 4035 | [email protected]
ABOUT LUCARA
Lucara is a leading independent producer of large exceptional quality Type IIa diamonds from its 100% owned
Karowe Diamond Mine in Botswana. The Karowe Mine has been in production since 2012 and is the focus of the
Company’s operations and development activities. Clara Diamond Solutions Limited Partnership (“Clara”), a wholly-
owned subsidiary of Lucara, has developed a secure, digital sales platform that uses proprietary analytics together
with cloud and blockchain technologies to modernize the existing diamond supply chain, driving efficiencies,
unlocking value and ensuring diamond provenance from mine to finger. Lucara has an experienced board and
management team with extensive diamond development and operations expertise. Lucara and its subsidiaries
operate transparently and in accordance with international best practices in the areas of sustainability, health and
safety, environment, and community relations. Lucara has adopted the IFC Performance Standards and the World
Bank Group’s Environmental, Health and Safety Guidelines for Mining (2007). Accordingly, the development of the
Karowe underground expansion project (“UGP”) adheres to the Equator Principles. Lucara is committed to upholding
high standards while striving to deliver long-term economic benefits to Botswana and the communities in which the
Company operates.
The information is information that Lucara is obliged to make public pursuant to the EU Market Abuse Regulation
and the Swedish Securities Markets Act. This information was submitted for publication, through the agency of the
contact person set out above, on November 2, 2022 at 4:30pm Pacific Time.