Lucara Announces Karowe Underground Expansion Project Update
August 10, 2021
PRESS RELEASE
LUCARA ANNOUNCES KAROWE UNDERGROUND EXPANSION PROJECT UPDATE
VANCOUVER, August 10, 2021 /CNW/ - (LUC – TSX, LUC – BSE, LUC – Nasdaq Stockholm)
Lucara Diamond Corp. (“Lucara” or the “Company”) is pleased to provide a n 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 forecast ed to contribute approximately $4 billion in
additional revenues, using conservative diamond prices , starting in 2026 . Management will be prov iding 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 pa ndemic. 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
2
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 procure ment. 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.
Please refer to the aerial images of the UG expansion project area ( image attached) for an overview of the site
general arrangement and construction activity to early June 2021.
Mining Method
The Karowe Mine is an exist ing conventional drill and blast open pit operation, with diesel excavators and trucks
providing an average annual 2.6 million tonnes of kimberlite feed to the mill. The open pit mine operation is expected
to terminate mid-2026, ending at an elevation of approximately 700 metres above sea level (“masl”).
The Karowe UGP is targeting the substantial resources remaining below the economic extents of the open pit in the
South Lobe . A 7,200 tonne per day shaft operation utilizing long hole shrinkage ( “LHS”) mining will provide an
additional 13 years of mine life to the Karowe operation after a five year construction period. The mine will be
accessed from a 767 metre deep production shaft, 8.5 metres in diameter, driven from surface and will be equipped
with two 21- tonne skips for production hoisting and a service cage for man and material movement through the
mine. This shaft will also serve as the main fresh air intake to the mine. A second shaft, 6.0 metre in diameter, driven
733 metres deep from surface, will form the main ventilation exhaust pathway.
The LHS method is planned to systematically drill and blast the entire lobe on a vertical retreat basis. In LHS, a
significant proportion of the blasted muck is left in the stope during blasting and stoping to stabilize the host rock
with only the swell extracted during the drill and blast phase. Mucking will take place from draw points from the
310L (310 masl) extraction level. Once the column is fully blasted, the stope will be drawn empty by mucking the
draw points. The bottom -up approach of the LHS mining method takes advantage of the higher value EM/PK(S)
kimberlite unit at depth in the South Lobe at Karowe, and balances high initial capital costs with low operating costs
while de-risking the project with respect to the geotechnical and hydrogeological aspects of the host rocks.
LHS Benefits: Early Access to High Value EM/PK(S) Feed
Selection of the LHS mining method brings several advantages during the first years of undergr ound operations at
Karowe, namely: i) access to the highest value portion of the lower South Lobe, ii) minimal dilution as mining occurs
in competent granite host rock, and iii) underground development can be done simultaneously with open pit
operations. Volumetrically the EM/PK(S) unit forms the dominant rock type that will be extracted during the early
stage of the underground operations. Over 90% of the recoverable carats between the 310 and 400 l evels are
attributable to the EM/PK(S) which has a demonst rably coarse diamond size frequency distribution and is a
significant source of large high value diamonds from current open pit operations.
Karowe has produced 3 diamonds in excess of 1 ,000 carats, each of which has been recovered from processing of
the EM/PK(S) kimberlite (1 ,109 carat Lesedi La Rona, Nov. 2015; 1,758 carat Sewelô, April 2019; 1,174 carat June
2021) in addition to top white gem diamonds (549 carat Sethunya, Feb 2020, 813 carat Constellation, Nov 2015).
3
Production runs of EM/PK(S) have exceeded the modelled weight percent of +10.8 carat diamonds for the FS 2019
SFD model (7.9% weight percent +10.8 carat). In 2021, two production runs of EM/PK(S) have exceeded 12% weight
percent +10.8 carat diamonds, along with the recovery of large gem quality diamonds of 470 carats (June 7, 2021)
and 1 ,174 carats (June 22, 2021 ) as well as numerous +50 carat white gems. The continued strong res ource
performance and recovery of large diamonds reinforces the significance of the EM/PK(S) as an important economic
driver for the underground mine at Karowe.
Cost and Schedule Update
A revised project cost and schedule has been developed that captures the detailed engineering and design work
through 2020 until May 2021, incorporating all changes, improvements, and COVID-19 related delays. Overall capital
expenditures, including contingency have increased marginally by approximately 4%, to $534 million, driven by the
increase to the production shaft diameter and additional mine development (s ee “Shaft and Mining” below).
Through 2020 to the end of Q2 2021, the Company has spent $51.4 million of the total budget (Table 1) on project
execution activities. Total expenditures on the UGP in 2021 are expected to be up to $120 million. The schedule to
75% of full production has increased by 1.3 years, driven mainly by COVID-19 related delays to commence the shaft
pre-sinking, and additional planned time for shaft station break- outs and ground support. The o pen pit mining
schedule has been adjusted to push the open pit to 2026, with mill throughput maintained at 2.6 million tonnes per
annum. Underground operation parameters with respect to waste and ore tonnes mined, processed tonnes,
recoverable diamond grade, recovered carats and diamond pricing assumptions are unchanged from the 2019 FS
study.
Table 1 – Comparison of 2019 FS vs 2021 Base Plan
2019 FS 2021 Base Case
Capital Costs Pre-Production
($ million)
Pre-Production
($ million)
Mining 321.7 309.4
Bulk Earthworks 18.98 18.1
Process Plant 0.1 0.1
Onsite Infrastructure 5.9 13.2
Buildings & Facilities 1.6 1.1
Offsite Infrastructure 19.6 23.2
Project Indirects 47.7 55.1
Owner's Costs 46.9 53.3
Subtotal 462.48 473.5
Contingency 51.4 60.5
Total Capital Costs 513.88 534.0
Table 2 – High Level Timetable
Item Start Complete
Camp Phase 1 (100 rooms) Q1 2021 Q2 2021
Bulk power supply Q3 2021 Q4 2022
Shaft Pre-sink Q3 2021 Q2 2022
Change over to Main sink Q2 2022 Q3 2022
Shaft Main Sink Q3 2022 Q3 2024
Mine development 310 level Q3 2024 Q1 2026
Excavate and Install Crush & Convey Q4 2024 Q4 2025
Mobilize LHDs to extraction level Q4 2025 Q1 2026
Start Mine ramp up Q1 2026 -
Full production - Q4 2026
4
Infrastructure
Shaft Civil Works
Civil works for the underground expansion progressed through detailed design, and construction activities ramped
up through Q1 2021 with completion of the construction area terraces, laydown areas, shaft pad preparations, along
with commencement of shaft collar box cut construction and blasting within the shaft columns in preparation of civil
works. Hoist houses, hoist foundations and shaft collars are now well advanced and on time for commencement of
pre-sinking which is planned during Q3 2021. To date, over 430 days have been worked LTI-free, on the project. As
construction and mining activities ramp up, focused attention will continue to be paid on the continuation of safe
operations.
Temporary Power Generation
Temporary power for shaft sinking is required until such time as the upgrade bulk power supply infrastructure is
commissioned in Q4 2022. A three phased ramp up of the generator capacity is planned to support the increasing
power requirements related to the shaft sinking activities. A power supply and services contract for the temporary
generators has been signed with Aggreko International Projects Limited. Mobilization has been initiated with the
generator pad established. Commissioning of Phase 1 is scheduled during Q3 2021 to support the start of pre-sink
activities.
Bulk Power Supply
During 2020, Lucara negotiated and signed a self-build agreement with the Botswana Power Corporation (“BPC”) for
the construction of two substations and a 29km long 132kv Transmission line from BPC’s newly established
Letlhakane substation to the Karowe mine. The planned route follows an existing regional 400kV line and then runs
parallel to the existing 11kV transmission line currently supplying bulk power to the Karowe mine. The new power
infrastructure will provide the required power for the current open pit, processing plant and the underground mine
expansion. Commissioning of and handover to BPC is scheduled for Q4 2022. Construction of substations is
scheduled to commence in Q3 2021 and power line construction in Q1 2022.
Camp Construction
A 200-person camp is required to support shaft sinking and underground mine development. The camp is contiguous
with an d within the Karowe Mine lease. Camp construction has been separated into two 100 -person phases,
construction of Phase 1 is complete with commissioning and occupa tion in July 2021. Phase 2 of the camp will
commence construction during Q3 2021, in line with the project schedule.
Procurement
Procurement of long lead items required for shaft sinking and for the bulk power supply are advancing on schedule.
Main sinking shaft hoist refurbishment is well underway with packing and shipping commenced for various
components. In the process of completion for the hoists are electrical components and the production shaft kibble
hoist’s gearbox currently in fabrication. All hoist components are estimated for completion in Q4 2021.
Shafts and Mining
Access to the underground mine is via two vertical shafts, the p roduction and ventilation shafts. The shafts will be
concrete lined with the production shaft acting as the main air intake and the ventilation shaft as the exhaust.
Detailed design and engineering work on the p roduction and ventilation shafts is now 9 0% complete , and ha s
resulted in the following changes to the 2019 FS: i) production shaft diameter has increased from 8.0 metres to 8.5
metres, ii) ventilation shaft permanent headframe, hoists and internal conveyances have been removed, iii) parallel
pre-sinking of both sh afts, iv) ventilation fans and coolers to be located on surface, v) in shaft grouting of water
strikes changed from grout curtain installation from surface, vi) planned development of an additional sublevel to
assist in drilling of drawbells, vii) removal of 670L de-watering galleries.
5
The number of s haft stations and nominal elevations remains the same as the 2019 FS. The planned depth of the
production shaft remains at approximately 767 metres (245masl), but final planned depth of the ventilation shaft
has increased marginally to 733 metres (285masl) from 716 metres.
In
creased schedule time related to shaft sinking has been a result of the following design changes : i ) increased
production shaft diameter, ii ) time allowances for in shaft grouting during sinking operations planned at known
water strike horizons, iii) holing through all shaft stations between shafts , iv) additional ground support for
underground stations/level breakouts.
Pre-sink construction contract and shaft sinking equipment procurement were awarded to UMS Botswana and UMS
South Africa respectively (“UMS”). METS International Limited, a subsidiary of UMS , was awarded the shaft
engineering contract. UMS is in the process of mobilizing crews to Karowe to initiate pre-sink works. Pre-sinking of
the two shafts will run in parallel and start with mobile cranes and then transition to Scott Derrick cranes with the
final depth of pre-sink at approximately 40 metres below surface (971 masl).
W
ith the exception of an additional sublevel (340L) to assist with drill and blast of drawbells, the design, layout and
infrastructure of the underground mine all remain aligned with the 2019 FS. Detailed engineering and design of the
underground infrastructure and layouts will commence in Q3 2021 and are expected to be competed in Q3 2022,
with no major changes from the 2019 FS plan anticipated. Underground mine development is scheduled to
commence in H2 2024 with underground production ramp up starting in 2026. Full production is scheduled for the
end of 2026.
Pe
rmitting
In January 2021, Lucara announced that its application for the renewal of Mining License No 2008/6L in respect of
the Karowe Mine had been approved by Botswana’s Minister of Mineral Resources, Green Technology and Energy
Security (link to news release). The renewal was effective January 4, 2021 for a period of 25 years, securing Lucara’s
mining rights to 2046. In Q2 2020, Lucara received approval of its Environmental Impact Statement and
Environmental Management Plan for the Underground project and remaining open pit life of mine. Wa y Leave
approval for construction of the transmission line has also been received.
Ta
ilings Management
Design work has been initiated for expansion to the Fine Residue dump that will align with industry best practices
including both the Mining Assoc iation of Can ada’s Toward Sust ainable Mining (TSM) initiative and the Global
Industry Standard on Tailings Management (GISTM) introduced in August 2020. Additionally, Lucara has completed
the Chu rch of England Pension Fund Tailings Safety Disclosure Response which has been posted to the Lucara
website (see link).
E
nvironment, Social, Governance
In addition to meeting applicable Botswana laws, regulations and requirements, Lucara has adopted the IFC
Performance Standards and the World Bank Group’s Environmental, Health and Safety Guidelines for Mining (2007).
The development of the UGP adheres to the Equator Principles. Lucara will continue to publish performance results
externally through the independently assured annual sustainability report, which is prepared in accordance with GRI
Standards (link to 2020 Sustainability Report ). Lucara is committed to upholding high standards while striving to
deliver long-term economic benefits to Botswana and the communities in which we operate.
M
ineral Resource and Reserve Estimates
The 2019 Mineral Resource update for the Karowe Mine incorporated historical drilling and sampling data obtained
prior to 2018 , and additional drilling and sampling information obtained in 2018 and 2019 which targeted the
delineation of the deep extension of the South Lobe (deeper than approximately 600m from surface). The 2019
update also included geological information and production data derived from open pit mining to the end of June
6
2019. Historic and current geological data was used to develop an updated internal geology model for the South
Lobe and updates to the external contacts for the South, Centre and North Lobes.
The internal geology of the South Lobe is comprised of two dominant domains, identified as the M/PK(S) and
EM/PK(S) domains. A single diamond size frequency distribution (“SFD”) and diamond value model was used prior
to 2019 to evaluate the South Lobe. Increme ntal open pit production of EM/PK(S) material was initiated in early
2018 and sufficient data has since been amassed so that distinct SFD and diamond value distribution models are
now defined for both the M/PK(S) and EM/PK(S) domains in the 2019 Mineral Resource update.
The 2021 Mineral Resource update, effective December 25, 2020 (Annual Information Form ), i ncorporates
production since the 2019 Mineral Resource was completed. The 2021 Mineral Resources for the Karowe Mine have
been classified as either Indicated or Inferred Mineral Resources, according to CIM Guidelines. Mineral Resources
reported are inclusive of those portions of the Mineral Resources that have been converted to Mineral Reserves.
Mineral Resources
Karowe Mine2021 Mineral Resource Statement (effective date of December 25, 2020)
Classification Resource Tonnes (Mt) Carats (Mcts) Grade (cpht)
Indicated
South – M/PK(S) 25.51 2.74 10.7
South – EM/PK(S) 20.84 4.43 21.2
Centre 2.78 0.42 15.2
North 0.82 0.09 10.6
Total Indicated 49.96 7.67 15.4
Inferred South – M/PK(S) 0.31 0.03 10.5
South – EM/PK(S) 4.18 0.87 20.9
South – KIMB3 0.94 0.10 10.9
Total Inferred 5.43 1.01 18.6
Notes:
1. Prepared by Cliff Revering, P. Eng. of SRK Consulting
2. Mining Resources are not Mineral Reserves and do not have demonstrated economic viability. All numbers have been rounded to reflect accuracy of estimate.
Base of Indicated is 250masl, base of Inferred is 66masl.
3. Mineral Resources are in-situ Mineral Resources and are inclusive of in-situ Mineral Reserves.
4. Mineral Resources are exclusive of all mine stockpile material.
5. Mineral Resources are quoted above a +1.25 mm bottom cut-off and have been factored to account for diamond losses within the smaller sieve classes expected
within the current configuration of the Karowe Mine process plant.
6. Inferred Mineral Resources are estimated on the ba sis of limited geological evidence and sampling, sufficient to imply but not verify geological grade and
continuity. They have a lower level of confidence than that applied to an Indicated Mineral Resource and cannot be directly converted into a Mineral Reserve.
7. Average diamond value estimates are based on 2019 diamond sales data provided by the Company.
8. Mineral Resources have been estimated with no allowance for mining dilution and mining recovery.
A mine plan was developed to extract the economic portions of Indicated Mineral Resources of the Underground
Project (2019 FS). The South Lobe is planned to be mined through a combination of open pit and underground mining
methods. The North and Centre Lobes are planned for extraction by open pit mining m ethods only. All Mineral
Reserves in the table that follows are classified as Probable Mineral Reserves. The Qualified Person preparing the
Mineral Reserve Estimate, Gord Doerksen, P. Eng., did not identify any extraordinary risk, including legal, political or
environmental that would materially affect potential Mineral Reserves development.
7
Mineral Reserves
Karowe Mine 2021 Mineral Reserve Estimate (effective date of December 25, 2020)
Lobe Reserve Category Ore (Mt) Carats
(‘000s ct)
Grade
(cpht)
Open Pit
North Probable 0.4 38 9.5
Centre Probable 2.7 403 15.2
South – EM/PK(S) Probable 2.3 574 25.0
South – M/PK(S) Probable 7.8 828 10.5
Open Pit Total 13.2 1,843 13.9
Underground
South – EM/PK(S) Probable 16.3 3,246 19.9
South – M/PK(S) Probable 17.1 1,807 10.6
Underground Total 33.4 5,053 15.1
Stockpiles
Life of Mine Probable 3.8 161 4.3
Mixed Probable 3.5 381 10.8
Stockpile Total 7.3 542 7.4
Combined
All Total 53.9 7,438 13.8
Notes:
1. Prepared by Gord Doerksen, P. Eng., JDS Energy & Mining Inc.
2. CIM Guidelines were followed for Mineral Reserves.
3. Mineral Reserves are estimated based on an UG mining cost of $9/t, a processing cost of $16/t and a G&A cost of $6/t. Process recovery of the diamonds was
assumed to be 100% as the recoveries were included in the mineral resource block model assumptions and therefore have taken recoveries into account. All of
the kimberlite material in the South Lobe is above the cut-off value. Base of Probable Reserve is 310 masl.
4. Mineral Reserves are quoted above a +1.25 mm bottom cut-off and have been factored to account for diamond losses within the smaller sieve classes expected
within the current configuration of the Karowe Mine process plant.
5. Diamond valuation was derived from historical sales adjusted for current and estimated future values.
6. Tonnages are rounded to the nearest 100,000 tonnes; diamond grades are rounded to one decimal place. Tonnage and grade measurements are in metric units;
contained diamonds are reported as thousands of carats.
7. All numbers have been rounded to reflect accuracy of estimate.
COVID-19 Measures
The Karowe mine has established standard operating protocols for COVID -19 that all employees and workers must
adhere to, including: proof of negative test results for new contractors, temperature screening, sanitizing stations
throughout the operation, and the use of isolation pods in the event of a suspected case. The contractor camp for
the underground expansion has implemented COVID-19 protocols including availing a section of the camp for COVID-
19 positive residents who need to self-isolate.
Next Steps
Next steps on the Karowe Underground development will include the following: UMS mobilization to site and start
of pre-sink in Q3 2021, completion of early civil works in Q4 2021, continuation of detailed design and engineering
of the underground mine infrastructure and layout , commencement of bulk power supply infrastructure with
substation construction scheduled to s tart in Q3 2021 , and transmission line engineering in H2 2021. The start of
engineering on the tailings expansion and completion of other site related infrastructure will also take place in 2021.
JDS Energy & Mining Inc. is the Engineering Procurement Construction Manager for the ex ecution of the Karowe
UGP and is currently building up the onsite p roject team in conjunction with Lucara’s Owners team and working in
close cooperation with the Karowe Diamond Mine operations team.
CONFERENCE CALL
The Company will host a conference call and webcast to discuss the underground expansion on Wednesday, August
11, 2021 at 7:00 a.m. Pacific, 10:00 a.m. Eastern, 3:00 p.m. UK, 4:00 p.m. CET.
8
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:
03343101 / Lucara Diamond
Dial-In Numbers:
Toll-Free Participant Dial-In North America (+1) 888 390 0546
UK Toll free 0 800 652 2435
All Other International Participant Dial-In (+1) 778 383 7413
Webcast:
To view the live webcast presentation, please log on using this direct link:
https://produceredition.webcasts.com/starthere.jsp?ei=1483811&tp_key=0dc7900db8
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 August 18,
2021.
Replay number (Toll Free North America) (+1) 888 390 0541
Replay number (International) (+1) 416 764 8677
The pass code for the replay is: 343101 #.
This press release has been reviewed and approved by Dr. John Armstrong, Ph.D. P.Geol., Vice-President, Technical
Services of the Company and a "Qualified Person" for the purposes of National Instrument 43 -101 and Mr. Gord
Doerksen P.Eng of JDS Energy and Mining Inc. an Independent Qualified Person under National Instrument NI 43-
101.
Eira Thomas
President and Chief Executive Officer
Follow Lucara Diamond on Facebook, Twitter, Instagram, and LinkedIn
For further information, please contact:
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]