Lucara Announces Positive Preliminary Economic Assessment FOR Karowe Underground
NEWS RELEASE
LUCARA ANNOUNCES POSITIVE PRELIMINARY ECONOMIC
ASSESSMENT FOR KAROWE UNDERGROUND
NOVEMBER 2, 2017 (LUC – TSX, LUC – BSE, LUC – Nasdaq Stockholm) Lucara Diamond Corp. (“Lucara” or the
“Company”) is pleased to announce the results of a Preliminary Economic Assessment (“PEA”) prepared in accordance
with National Instrument 43-101 (“NI43-101”) for the development of an underground mine to commence production, after
the completion of the current open pit mine, at its Karowe Mine (”Karowe Mine”) in Botswana. All dollar amounts in this
release are presented in US dollars unless otherwise stated.
Based on the positive PEA results, the Company has continued with the development of a pre-feasibility study (“PFS”), with
an anticipated release in Q2, 2018.
The results of the PEA represent forward-looking information that are subject to a number of risks, uncertainties and other
factors that may cause results to differ materially from those presented herein.
PEA Highlights (all figures apply to a stand-alone underground project and are additive to the current open pit operations):
§ After-tax undiscounted net cash flow of $820 million
§ After-tax NPV (5%) of $451 million and IRR of 38.9%
§ Total Life-of Mine (“LOM”) production of 2.72 million carats
§ Resource remains open at depth
§ Average LOM operation costs of $49.4 per tonne
§ Pre-production capital costs (including a 25% contingency, the costs of a pre-feasibility and feasibility study and
hydrogeology and geotechnical testing and modelling costs) of $195 million
Diamond price and exchange rate assumptions include a 2.5% per annum real diamond price increase, a US$/South Africa
Rand rate of exchange of US$/R13.00 and a Rand/Pula exchange rate of R1.3/BWP1.
William Lamb, President and CEO, stated, “The results of the PEA demonstrate the potential economic viability for the
development of an underground mine at Karowe. Underground operations are focused on the high value south lobe, which
remains open at depth below the current design, and is a further indication of the potential longevity of the resource and
cashflow generation at Karowe. We have seen on-going improvement in the value of diamonds from the south lobe and the
development of an underground mine has the potential to add significantly to the Life of Mine at Karowe.“
2
The Karowe Underground PEA presents a stand-alone scenario which does not incorporate the economics of the current
Karowe operations except where taxes are affected based on capital expenditures. The Karowe Underground PEA
evaluates the development of a Sub-Level Caving (“SLC”) operation to extract the AK06 kimberlite resource, with all
kimberlite being processed at the existing Karowe processing plant over a 10 -year period following the depletion of the
current open pit operations, which is expected to occur in 2026. The PEA is preliminary in nature and includes the use of the
Inferred Mineral Resource which is considered to be too speculative geologically to have the economic considerations
applied to it that would enable it to be categorized as a Mineral Reserve. Mineral Resources that are not Mineral Reserves
do not have demonstrated economic viability, therefore there is no certainty that the PEA will be realised.
Table 1: Economic Sensitivities and Key Operational Parameters1
Parameter Unit Base Case
Rough diamond price – South Lobe (2017) US$/carat $730
Rough Diamond Annual Real Diamond Price
Escalator % 2.5
After-Tax Undiscounted Net Cash Flow US$M $820
After-Tax NPV (5%) US$M $451
After-Tax NPV (8%) US$M $318
After-Tax IRR % 38.9%
Pre-Tax Undiscounted Net Cash Flow US$M $901
Payback Period (pre-tax) years 2.5
1 Financial metrics have been calculated taking into consideration the net tax benefit which the current operations will receive as a result of capital expenditures
on the development of an underground mine at Karowe
Tonnage and Grade
Tonnes milled (Millions) 24.7
Diamond grade (cpht) based on a 1.25mm bottom
cut-off size (“BCOS”) and inclusive of estimated
mining dilution
12.11
Average Recoveries
Estimated Mine Call Factor (%) 92%
Production Average Annual
Rough Diamonds (carats) 272,000
Operating Costs US$ per tonne treated
Kimberlite (US$/t treated)
Diamonds (US$/carat recovered)
$49.36
$407.70
All-In On-site Sustaining Costs2 US$ per tonne treated
Kimberlite (US$/t treated)
Diamonds (US$/carat recovered)
$54.18
$411.72
2 All-In costs include ongoing underground development of the sub-level cave rim and access tunnels.
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PEA Approach and Project Overview
The PEA for the Karowe Underground project (“Karowe Underground”) and together with the Karowe Mine, the “Karowe
Project”) presents a stand-alone scenario that does not factor in or modify in any way the economics of the open pit
operations of the Karowe Mine, except where taxes are affected based on capital expenditures. The PEA does, however,
assume that the Karowe Underground will seamlessly integrate into current operations with kimberlite sourced from
underground being stockpiled in the latter years of the open cast operations to ensure sufficient availability to the processing
facilities to maintain the current 2.5 million tonnes per annum (“mtpa”) throughput.
The Karowe Underground targets the South Lobe kimberlite resource below the current planned bottom of the open pit,
expected to be at approximately 690 meters above mean sea level (“mamsl”) (320 meters below surface (“mbs”)), to a depth
of 420mamsl (590mbs). The lower portion (200m vertical from 600 to 400mamsl is composed of Inferred Mineral Resource,
which the PEA considered to be too speculative geologically to have the economic considerations applied to them that would
enable them to be categorized as Mineral Reserves. The PEA is preliminary in nature and there is no certainty that the PEA
will be realised.
The Karowe Underground benefits from the brownfields nature of the existing operations at the Karowe Mine. Since
declaring commercial production in July 2012, the Karowe Mine has produced an average of 320,000 carats per annum from
three kimberlite lobes, from the treatment of 2.5mtpa. These open pit operations are scheduled to continue until 2026 with
the originally planned processing of low grade stockpiles in 2027 being moved to 2036, the end of the current planned
underground operations.
The Karowe Mine process plant and other site facilities and equipment required to support an underground mining operation
have recently been upgraded to accommodate the treatment of harder and higher density material at depth. Existing on-site
infrastructure includes offices, warehouses, laydown areas, maintenance facilities, a crushed kimberlite stockpile and
reclaim, access and service roads, an airstrip, explosives magazines, and water and electrical infrastructure.
The bulk underground mining method selected to mine the diamond kimberlite pipe measuring some 200m in diameter is
SLC. Initially the pipe will be partially offset from the pit bottom, resulting in the top four sublevels being slightly offset from
the pit bottom. These top levels plus two levels below the pit bottom will be mined by a derivation of Sub-Level Open
Stoping (“SLOS”) daylighting into the pit bottom.
For the purpose of the PEA, SLC was considered due to its lower initial capital cost. On completion of the current PFS
geotechnical program, further consideration will be given to a block caving option. This trade-off study will be completed as
part of the PFS initial pre-feasibility work programme.
The mine design for both the upper levels SLOS and the following SLC mining once general caving of the ho st rocks
commences, will be similar. The sublevel interval will be 25m, which is the international norm for the method. Owing to the
reported hardness and strength of the kimberlite at 156 Mpa, the mine design is intended to evaluate increasing the sub
level interval to 30m at the PFS stage. The assumed competence of the kimberlite also allows the size of the extraction
crosscuts to be developed 5.0m wide and 5.0m high. The spacing of the crosscuts skin to skin are set at 8.0m to optimise
the draw ellipsoids. The flexibility of the method allows adjustments to be made to the sub level intervals and crosscut
spacing to suit localised geotechnical conditions. This will apply particularly to the upper level SLOS access levels.
Access and ventilation will be provided by two ramps developed from surface boxcuts. The ramps will traverse poor ground
conditions over some 2000m each to reach the first underground mining levels. The mine design contemplates the
development of twin 6.0m wide and 6.3m high ramps to cater to larger haul trucks. The twin ramp system will be required to
facilitate the planned production rate of approximately 7,500 tonnes per day (“tpd”) of kimberlite and country rock.
Following extraction from the Karowe Underground sub-level, kimberlite will be trammed to the Karowe Mine process plant
where it will be processed at an average rate of 7,000tpd (~2.5mtpa) using existing crushing, milling, XRT, DMS
concentration and final recovery facilities.
Mineral Resources
In support of the PEA an updated Mineral Resource Estimate, see Table 2: Karowe Mine AK06 Updated Mineral Resource
Statement reflecting depletion as of December 25, 2016 , was prepared by Mineral Services Canada Inc. ( “MSC”)
representing the remaining Mineral Resource as of 25th December 2016. Grade and tonnage estimates are based on the
original geological model (as documented in the 2013 NI 43-101 Independent Technical Report on Karowe Diamond Mine,
effective date 31 December 2013) and an updated recoverable grade model generated by M SC in 2016. Diamond price
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estimates are based on diamonds recoverable with current process design at the Karowe Mine process plant and Lucara
2016 Rough Diamond Price Book and tender sales. .
The PEA considered an approximate 80m portion of the South Lobe Indicated Mineral Resource between the current open
pit LOM base (690mamsl / 320mbs) and the top of the current Inferred Mineral Resource (600mamsl / 410mbs) and the
south lobe Inferred Mineral Resource between 600 and 400mamsl (410mbs and 610mbs). Inferred Mineral Resources that
are not Mineral Reserves do not have demonstrated economic viability. Mineral Resources are reported inclusive of Mineral
Reserves. The intent of the PEA was not to re-state the Indicated or Inferred Mineral Resources. As previously announced,
the Company is in the process of updating the current Mineral Resource estimate following the completion of a 10,000m
deep drilling program to test the AK06 kimberlite at depth, below the current bottom of the Indicated Mineral Resource at
600mamsl (410mbs).
Table 2: Karowe Mine AK06 Updated Mineral Resource Statement reflecting depletion as of December 25, 2016
Mineral Resource
2017 Classification Resource
Tonnes Carats Grade Diamond
value
(Mt) (Mct) (cpht) (US $/ct)
Indicated (IND)
North Lobe 1.58 0.24 15.18 221
Centre Lobe 4.30 0.70 16.38 400
South Lobe 31.82 4.59 14.41 730
Working Stockpiles 2.30 0.25 10.65 437
LOM Stockpile 2.23 0.08 3.78 547
IND Total 42.23 5.86 13.88 655
Inferred (INF)
Centre Lobe 0.2 0.03 14.8 400
South Lobe 20.37 2.95 14.47 730
INF Total 20.57 2.98 14.48 727
Notes
§ Tonnage and grade estimates are based on updated Mineral Resource Estimate prepared by MSC under the
supervision of Dr. Tom Nowicki, of Mineral Services Canada Inc. a “Qualified Person” within the meaning of NI 43-
101 and independent of Lucara.
§ Diamond price estimates were prepared under the supervision of Dr. J.P. Armstrong, PhD, P.Geol., an employee of
the Company and a “Qualified Person” within the meaning of NI 43-101.
§ Resources were generated from historic drilling at Karowe AK06 and revisions in 2013 and 2016.
§ Grade estimates are based on a recoverable grade model at a Bottom Cut-Off Size (BCOS) of 1.25mm.
§ Working stockpiles are available for blending and supplementing feed to the process plant.
§ Mineral Resources are reported inclusive of Mineral Reserves.
§ Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
§ The AK06 mining licence (ML2008/6L) expires in May 2023. The mining licence will have to be renewed for the
underground development to progress.
§ An Environmental Impact Assessment will have to completed and approved by the Department of Environmental
Affairs, Republic of Botswana.
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Geotechnical
Geotechnical assessments of caveability, fragmentation, subsidence and ground support requirements were carried out
based on geotechnical characterizations developed from geological assessments and core logging data from the Karowe
underground resource extension drilling program, completed in Q1, 2017, and prior geomechanical studies of the Karowe
AK06 deposit.
Hydrogeology
In order to de-water the underground areas, an extension to the existing pit dewatering systems is required. As the
kimberlite penetrates the Ntane sand stones at a depth of ~880mamsl and the Mosolotsane sand stones at ~800mamsl,
both of which are significant aquifers, deeper dewatering holes will be drilled and equipped to ensure the stability of the
mudstones and sandstones. An update to the local and regional hydrogeological model as well as a review of the structural
geology will be completed during the pre-feasibility phase of the project. This will include the drilling of test dewatering and
monitoring boreholes which will feed into the final dewatering system design.
Current water resources from the existing dewatering system are sufficient to supply the process plant. Discharge permits
will possibly be required when considering the full underground dewatering system.
Mining and Processing
The Karowe Underground SLOS and SLC design and schedule were derived using Datamine’s Studio 5D Planner software.
The main development ends were sequenced in 5D Planner and this information was sent to the EPS Scheduler for the
mine schedule. The design was also evaluated against the geological block model to determine the grade, tonnes and dollar
per tonne. Total LOM development requirements are estimated to be 43,700m lateral and 2,635m vertical development.
Appendix 1 shows the Karowe underground mine design. The graphic shows the twin declines, rim tunnels access cross-
cuts and SLOS and SLC areas.
Processing mined kimberlite at a rate of approximately 2.5mtpa will be achieved using the existing milling and diamond
recovery circuit. The existing crushing, milling, XRT, DMS conc entration and final recovery facilities will be used and
confirmatory metallurgical testwork will be conducted to confirm the applicability of the existing comminution circuit for the
processing of the harder kimberlite from depth.
Existing coarse and fine tailings facilities will need to be expanded to accommodate the additional volume of material
generated from the mining and processing of underground mined kimberlite.
Capital and Operating Costs
Due to the benefit of having existing infrastructure and processing facilities in place, additional capital requirements are
predominantly required for the purchase of underground equipment, the underground mine development and dewatering
systems. While the outright purchase of underground mine equipment is assumed for this study, the Company will also be
evaluating leasing alternatives during the PFS.
Pre-production capital expenditures are estimated to total $195 million, including the costs associated with the pre-feasibility
and feasibility studies, the required hydro and geotechnical testing and modelling work and a 25% contingency. This front-
end engineering design work is estimated at $26 million. The development period is approximately 5 years to first
production.
Ongoing development capital requirements are estimated at $178M.
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Table 3: Karowe Underground Capital Distribution
Area Capital (2018-2025)
($000’s)
Capital (2026-2037)
($000’s)
Area Totals
($000’s)
Development Capital $86,256 $77,416 $163,672
Engineering Capital $48,530 $14,474 $63,004
Tailings $20,920 $6,781 $27,701
Closure Costs $0 $20,400 $20,400
Capital Provisions $0 $27,000 $27,000
Sub Total $155,706 $146,071 $301,777
Contingency $38,926 $31,418 $70,344
Total Capital Costs $194,632 $177,489 $372,121
The total all-in on-site unit operating costs after the commencement of commercial production are estimated at $54.18/t
treated, comprising mining costs of $31.00/t, processing costs of $11.82/t and engineering costs of $2.05/t. A 10%
contingency was applied to the mining, processing and engineering costs. Ongoing underground development is estimated
at $4.82 per tonne processed.
Table 4: Summary of Underground Operating Costs
Description
Total Operating Costs LOM
($000’s)
Average Cost per Tonne
($/t processed)
Mining1 $766,532 $31.00
Processing $292,271 $11.82
Engineering $46,492 $2.05
Contingency (10%) $110,530 $4.49
Subtotal $1,215,825 $49.36
Sustaining Development
Capital2 $114,184 $4.82
All-in Sustaining Costs $1,550,927 $54.18
1
Note that the underground operating costs will commence in 2023 2
Contingency of 10% applied only to underground mining, processing and engineering
Project Enhancement Opportunities
The following opportunities have been identified as a result of carrying out the Karowe Underground PEA. However, these
opportunities require technical and economic evaluation and should therefore be considered speculative until the related
evaluation work has been completed as part of the PFS.
• consideration will be given to other mining methods (eg. block caving) to reduce operating costs, and reduce
dilution and tramp steel reporting to the plant.
• the potential exists to develop early access to the underground to de-risk mine dewatering, geotechnical work and
remove constraints to future production ramp-up.
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• Underground mining optimization opportunities exist at higher throughputs which are expected, if realized, to have
a positive impact on operating costs. Increased mined kimberlite delivery and plant upgrade requirements will be
investigated. Typical outputs for this type of mining method may be as high as 10,000 tpd
• Rim tunnel spacing is currently set at 25m vertical spacing. Should the geotechnical data show improved stability,
the distance between the rim tunnels may be increased to up to 30m, reducing ongoing development costs.
• The PEA assumes purchasing all mobile equipment. It is possible that this equipment may be leased resulting in
lowered costs.
• It may be possible to decrease the mine operating costs through the use of automated production load-haul-dump
equipment.
Next Steps and Expected Timing
Q4 2017: Updated resource statement for the Karowe AK06 kimberlite to support PFS
Q1 2018: Initiate hydrological and geotechnical drilling with updates to the structural and hydrological models
Q2 2018: Complete a NI 43-101 compliant PFS
Qualified Persons (“QPs”)
The PEA was prepared under the direction of Royal HaskoningDHV and by leading independent industry consultants, all
Qualified Persons under National Instrument 43-101. In addition to Dr. J.P. Armstrong, the Company’s VP Mineral Resource
and a Qualified Person under National Instrument 43-101, the following independent Qualified Persons have prepared or
supervised the preparation of the technical information relating to the PEA:
• Dr. Tom Nowicki – Mineral Services Canada
• Mr. Jody John Thompson – Royal HaskoningDHV
• Dr. Kym Lesley Morton – KLM Consulting
• Mr. John Anthony Cox – Royal HaskoningDHV
• Mr. Norman George Carroll Blackham – Royal HaskoningDHV
• Mr. Guillaume Johannes Oberholzer – Royal HaskoningDHV
The results of the Karowe Underground PEA will be summarized in a Technical Report prepared pursuant to Canadian
Securities Administrators’ National Instrument 43-101 that will be filed on SEDAR (www.sedar.com) within 45 days of this
press release and will also be available on the Company’s website (www.lucaradiamond.com).
Technical information in the press release has also been reviewed and approved by Mr Guillaume Johannes Oberholzer, Pr.
Eng., Manager Engineering of Royal HaskoningDHV, who is a Qualified Person for the Karowe Underground Project under
the definitions established by NI 43-101.
This press release has been reviewed and approved by Dr. John Armstrong, PhD, P.Geol., VP Mineral Resource of the
Company and a “Qualified Person” for the purposes of NI 43-101.
The reader is advised that the PEA summarized in this press release is intended to provide only an initial, high-level review
of the Karowe Underground potential and design options. The PEA mine plan and economic model include the use o f
Inferred Mineral Resources. Inferred Mineral Resources are considered to be too speculative geologically to be used in an
economic analysis except as allowed for by NI 43-101 in PEA studies. There is no guarantee that Inferred Mineral
Resources can be converted to Indicated or Measured Mineral Resources.
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Figure 1: Isometric View of Underground Design
On behalf of the Board,
William Lamb
President and CEO
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For further information, please contact:
Michelle Fyfe, Lucara Investor Relations +1 (604) 689-7842
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UK: Louise Mason, Citigate Dewe Rogerson +44 (0)20 7282 2932
About Lucara
Lucara is a leading independent producer of large exceptional quality Type IIa diamonds from its 100% owned
Karowe Mine in Botswana. The Company has an experienced board and management team with extensive
diamond development and operations expertise. The Company operates transparently and in accordance with