Lucara Announces Q 3 2023 Results ; Strong Revenue Supports Continued Development of the Underground Expansion
November 10, 2023
NEWS RELEASE
LUCARA ANNOUNCES Q 3 2023 RESULTS ; STRONG REVENUE SUPPORTS CONTINUED
DEVELOPMENT OF THE UNDERGROUND EXPANSION
VANCOUVER, November 10, 2023 /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,
2023.
Q3 2023 HIGHLIGHTS
• Revenue for the quarter ended September 30, 2023 totalled $56.9 million, a 14% increase from Q3 2022.
• The Q3 2023 operating cash cost of $28.62 per tonne of ore processed (1) was well below the expected annual
operating cash cost range of $32.50 to $35.50 per tonne of ore processed.
• All key operational metrics were achieved against plan, with 0.9 million tonnes of ore and 1.0 million tonnes of
waste mined, 0.7 million tonnes of ore processed, and 98,311 carats recovered from direct milled ore.
• Cash flow generated from operating activities was $15.9 million.
• A 1,080 carat Type IIA white gem quality diamond was recovered from Karowe in August . The fourth +1,000
carat stone recovered from the Karowe Mine. A 692 carat Type IIA diamond was also recovered later that month.
• An investment of $20.3 million in the Karowe Underground Project (“UGP”) in Q3 2023 focused on sinking and
grouting programs in the ventilation and production shafts. Grouting progressed well in both shafts during the
quarter and sinking rates were significantly higher than in previous quarters.
• Changes were made to 2023 guidance for revenue, diamond sales, ore and waste tonnes mined, and total
operating cash costs per tonne processed.
William Lamb , President & CEO commented: “The third quarter results for the Company were very good when
considering market dynamics and the current state of the diamond sector. During this period of market weakness,
the Company is focusing on operational efficiency and key management positions, starting with the promotion of
Jennifer Harmer to VP Finance. Jennifer’s knowledge and understanding of the Company’s operations and projects
will be invaluable as we move f orward.” William further added, “ Lessons learned in previous quarters of
underground shaft sinking and development have been successfully converted into knowledge which is delivering
weekly sinking rate records. Good progress has been made with the Company’s Lenders on the Rebase Amendment.
A progress update will be provided before the end of the fourth quarter.”
REVIEW FOR THE QUARTER ENDED SEPTEMBER 30, 2023
• Operational highlights from the Karowe Mine for Q3 2023 included:
o Ore and waste mined of 0. 9 million tonnes ( Q3 2022: 0.9) and 1.0 million tonnes ( Q3 2022: 0. 5),
respectively.
o 0.7 million tonnes (Q3 2022: 0.7) of ore processed.
o A total of 98,311 carats recovered (Q3 2022: 78,879) at a recovered grade of 13.6 carats per hundred
tonnes (“cpht”) of direct milled ore (Q3 2022: 11.4 cpht).
(1) See “Non-IFRS Financial Performance Measures”
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▪ A total of 189 Specials were recovered, with six diamonds greater than 100 carats including three
diamonds greater than 300 carats in weight.
▪ Recovered Specials equated to 6.8% of the weight percentage of total recovered carats from ore
processed during Q3 2023 (Q3 2022 – 7.1%).
o The Karowe Mine has operated continuously for over two and a half years without a lost time injury.
• Financial highlights for the three months ended September 30, 2023, included:
o Revenues of $56.9 million (Q3 2022: $49.9 million) were achieved despite a weaker rough diamond
market. The strong performance reflects the weighting of Lucara’s revenue to larger goods where
pricing was observed to be stable. During Q3 2023, 16% of the carats processed were recovered from
the Centre Lobe and 84% were recovered from South Lobe material (Q3 2022: 100% South Lobe ore).
o Operating margins of 63% were achieved (Q3 2022: 48%). A strong operating margin continues to be
achieved through cost reduction initiatives, a strong U.S. dollar and despite price softness in the rough
diamond market.
o Karowe’s +10.8 carat production, sold through HB, accounted for 67% (Q3 2022: 58%) of total
revenues recognized in Q3 2023.
o Adjusted EBITDA (1) was $21.9 million (Q3 2022: $13.8 million), with the change attributed to an
increase in revenues, partially offset by higher administrative expenses in the current quarter.
o Net income was $10.5 million (Q3 2022: $1.8 million), resulting in earnings per share of $0.02 (Q3
2022: $0.00).
• During Q3 2023, the Company invested $20.3 million into the Karowe UGP:
o Sinking and grouting programs were the focus in both the ventilation and production shafts in Q3
2023.
o The ventilation shaft reached 268.8 metres below collar, completed two grouting events, and
advanced the shaft 55.7 metres in the reporting period. The ventilation shaft has completed sinking
through the water-bearing sandstone units.
o The production shaft reached 227 metres below collar, included completion of two grouting
campaigns and remedial grouting of previously dry sections of the shaft. By the end of September, the
shaft was sinking through the bottom portion of the water -bearing sandstones. An advance of 32.5
metres was achieved in Q3 2023.
• In September 2023, Lucara terminated the definitive sales agreement executed with HB in November 2022 (for
all +10.8 carat diamonds recovered from Karowe) due to HB’s material breach of its financial commitments.
• During Q3 2023, the Company announced management changes with the return of William Lamb as President
and CEO, replacing Eira Thomas. Zara Boldt, Chief Financial Officer and Corporate Secretary and Dr. John
Armstrong, VP, Technical Services, announced their departures with plans to step down in Q4 2023. Jennifer
Harmer has been promoted to VP, Finance, effective November 8, 2023.
• Cash position and liquidity at September 30, 2023:
o Cash and cash equivalents of $16.8 million.
o Cost overrun facility of $18.4 million.
o $90.0 million drawn on the $170.0 million Project Loan for the Karowe UGP, with no draws on the
facility during the third quarter.
(1) See “Non-IFRS Financial Performance Measures”
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o The outstanding balance on the working capital facility (“WCF”) was maintained at $35.0 million
through Q3 2023.
The Company is not permitted to make further draws from the WCF or the Project Loan until various amendments
to the terms of these loan agreements are negotiated with the Company’s Lenders (the “Rebase Amendments”). As
part of the Rebase Amendments, the Lenders have granted certain waivers and extensions to the Company.
The Company has near -term commitments under the Facilities, including the maturity date of the WCF and the
requirement to fund a cost overrun facility. Due to these near -term commitments, there is doubt regarding the
Company’s ability to meet its commitmen ts and discharge its obligations in the normal course of business. While
Management believes the Company will be able to resolve the noted items through its ongoing engagement with its
Lenders, there can be no assurance that those efforts will be successful. See further details in the section “Liquidity
and Capital Resources” and refer to Note 1 of the condensed interim consolidated financial statements for the three
and nine months ended September 30, 2023.
On October 31, 2023, the Company received a short-term extension of the maturity of the WCF and a deferral of the
requirement to place $52.9 million in a cost overrun facility (the “COF") to the earlier of the conclusion of discussions
with its Lenders or November 15, 2023 (the “Longstop Date”). An earlier extension granted by the Lenders on August
23, 2023, was due to expire on November 1, 2023.
DIAMOND MARKET
The longer-term outlook for natural diamond prices remains positive, anchored on improving fundamentals around
supply and demand as many of the world’s largest mines reach their natural end of life over the next decade. A slow
recovery of economic growth in China and a voluntary import ban on rough diamonds into India has muted the
recovery of rough diamond prices following a soft market in the first six months of 2023. Global economic concerns
combined with increasing geopolitical uncertainty have resulte d in a challenging market in Q3 2023 with demand
reduced and downward pressure on pricing, especially in the smaller size classes. With supply restricted by the
largest producers, it is possible that a floor in pricing will be established that will benefit the broader market,
including smaller producers, in late 2023.
Sales of lab-grown diamonds increased beginning in late 2022. Intense competition combined with improvements
in technology continue to drive prices of lab grown diamonds down. Signs are emerging of financial instability of
producers of lab-grown diamonds. This further differentiates this market segment from the natural diamond market
and highlights the unique nature and inherent rarity of natural diamonds. The longer-term market fundamentals for
natural diamonds remain unchanged and positive, pointing to st rong price growth over the next few years as
demand is expected to outstrip future supply, which is now declining globally.
2023 OUTLOOK
This section of the press release provides management's production and cost estimates for 202 3. These are
“forward-looking statements” and subject to the cautionary note regarding the risks associated with forward-looking
statements. 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.
Changes were made to the Company’s 2023 Guidance for revenue, diamond sales, ore and waste tonnes mined, and
total operating cash costs per tonne processed which was released in December 2022 as indicated below.
Revisions to diamond revenue guidance reflect changes to the sales mechanism for the rough diamonds larger than
10.8 carats in size following the termination of the Company’s agreement with HB , combined with global rough
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diamond market impacts. Revenue is expected to be lower than initial guidance as the Company looks at the timing
of sales of its goods greater than 10.8 carats in size.
Karowe Diamond Mine Initial
2023
Revised
2023
In millions of U.S. dollars unless otherwise noted Full Year Full Year
Diamond revenue (millions) $200 to $230 $160 to $190
Diamond sales (thousands of carats) 385 to 415 365 to 385
Diamonds recovered (thousands of carats) 395 to 425 395 to 405
Ore tonnes mined (millions) 1.9 to 2.3 2.4 to 2.6
Waste tonnes mined (millions) 2.2 to 2.8 2.8 to 3.1
Ore tonnes processed (millions) 2.6 to 2.9 2.6 to 2.9
Total operating cash costs(1) including waste mined(2) (per tonne
processed)
$32.50 to $35.50 $28.00 to $30.50
(1) Operating cash costs are a non-IFRS measure. See “Non-IFRS Financial Performance Measures”.
(2) Includes ore and waste mined cash costs of $ 6.00 to $ 6.50 (per tonne mined) and processing cash costs of $ 9.00 to $1 0.00 (per tonne
processed).
Tonnes mined have been adjusted to reflect the acceleration of mining in the open pit which has been implemented
to access high value ore from the south lobe earlier in the mine plan as well as to optimize cost s. Following the
expected completion of processing of the ex-pit material , i n Q1 2026, the plant will transition to processing
stockpiled material until the delivery of ore from the underground expansion project begins in Q1 2028.
In 2023, capital costs expectations for the underground expansion remain at $105 million. As a result of the rebase
announced in July 2023, a review of sustaining capital and project expenditures related to the open pit mining
operations commenced. Sustaining capital and project expenditures may be up to $16 million in 2023, previously up
to $20 million.
DIAMOND SALES
Karowe diamonds are sold through three separate and distinct sales channels: through the HB sales agreement, on
the Clara digital sales platform and through quarterly tenders.
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 September 2023, Lucara terminated the definitive sales agreement executed with HB Antwerp (“HB”)
in November 2022 (for all +10.8 carat diamonds recovered from Karowe) due to HB’s material breach of its financial
commitments. The rough diamonds delivered to HB prior to the termination of the agreement will continue to be
manufactured and sold as polis hed diamonds. The Company retains a contractual right to receive “top -up”
payments from polished diamond sales for goods delivered prior to the termination of the agreement. The Company
plans to sell its +10.8 carat production through its established sale s channels, subject to pre -approval from the
Government of the Republic of Botswana.
For the three months ended September 30, 2023, the Company recorded revenue of $38.4 million from the HB
agreement (inclusive of top-up payments of $0.9 million), as compared to revenue of $27.1 million (inclusive of top-
up payments of $9.0 million) for the three months ended September 30, 2022 . The third quarter saw several high
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value stones recognized through the HB sales agreement accounting for much of the 107% increase in initial revenue
of $37.5 million. The remaining increase in revenue was due to the 26% increase in carats sold through the HB
agreement versus the comparable quarter. The product mix delivered in Q3 2023 was predominately from the South
Lobe ore body, with some contribution from the Centre Lobe (Q3 2022 – 100% South Lobe ore).
A decrease in top-up payments in Q3 2023 versus the comparative quarter can be attributed primarily to the number
of high value diamonds delivered to HB in preceding quarters which were sold during the comparative period. Top-
up values will typically increase as the more valuable stones move through production and are sold. The lower top-
ups recognized in Q3 2023 reflect the value of the stones delivered earlier in the year, consistent with the change in
product mix during H1 2023.
Recovered Specials equated to 6.8% of the weight percentage of total recovered carats from ore processed during
Q3 2023, with 84% of carats recovered coming from the South Lobe and 16% recovered from the Centre Lobe (Q3
2022: 7.1%; 100% South Lobe ore). Na tural 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. This result is
consistent with the resource model and expected.
The large stone diamond market fundamentals continued to support healthy prices from the multi -year highs
observed at the peak in Q1 2022, despite an overall softening of demand in the market.
CLARA SALES PLATFORM
During Q3 2023, the sales volume transacted was $4.4 million (Q3 2022: $8.3 million), as lower volumes and lower
valued goods were placed for sale (due to the shift in product mix from the Karowe Mine). Some sales are recognized
on a net revenue basis. A soft er market was observed; however, prices decreased in most size categories from Q3
2022. Price stability continues to be observed in stones between 5 to 10.8 carats in size.
QUARTERLY TENDER
A total of 106,148 carats were sold in the August 2023 tender, generating revenues of $14.1 million (Q3 2022 tender:
$14.5 million from the sale of 94,486 carats). Rough diamond prices began to soften in the third quarter of 2022
following a significant in crease that started in 2021. The Q3 2023 tender reflected a 16% decrease in the market
from the comparative quarter’s tender.
KAROWE UNDERGROUND EXPANSION UPDATE
The Karowe UGP is designed to access the highest value portion of the Karowe orebody, with initial underground
carat production predominantly from the highest value eastern magmatic/pyroclastic kimberlite (south)
(“EM/PK(S)”) unit. The underground expansion is expected to extend mine life to at least 2040 and is forecast to
contribute approximately $4 billion in additional revenues using conservative diamond price assumptions which are
un-escalated and exclude exceptional stone revenues.
On July 16, 2023, an update to the Karowe UGP schedule and budget was announced (Press Release). This update
was initiated 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. The revised forecast of costs at
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completion is $683 million (including contingency), a 25% increase to the May 2022 estimated capital cost of $547
million. The increase of $136.0 million in estimated capital to reach project completion is predominantly related to
increased schedule duration and related labour costs (about 56% of the total), grouting costs (approximately 20% of
the total capital increase), with the balance of the increase attributable to Owner’s costs, procurement, and indirect
project costs.
During the three months ended September 30, 2023, a total of $ 20.3 million was spent on the Karowe UGP
development, primarily in relation to ongoing shaft sinking activities, including:
• Main sinking in the production and ventilation shafts:
o The ventilation shaft reached 268.8 metres below collar, with a planned final depth of 731 metres. The
shaft is currently 22 metres ahead of the July schedule update. The production shaft reached 227
metres below collar, with a planned final depth of 765 metres.
o In response to water inflows from the sandstones, cover grouting continued as a primary activity in
both shafts. Backwall grouting programs were completed in the production shaft and ventilation shaft
as remedial work in areas of the shaft that were previously dry.
o Civil works related to construction of the temporary and permanent bulk air cooler contractor started
in September and detailed engineering was completed for these units.
• Contract for fabrication of the permanent men and materials winder was signed during the quarter,
representing the last major component for the permanent winders.
• Mining engineering advanced with a focus on supporting shaft sinking, underground infrastructure engineering
and finalizing level plans.
• The impact of implementing a behavioural-based safety training program in Q4 2022 has been evident in 2023.
Year-to-date, the UGP achieved a nine -month period with no reportable incidents delivering a nine -month
rolling Total Recordable Injury Frequency Rate of zero.
The capital cost estimate for the underground expansion in 2023 is $105 million – see “2023 Outlook”. Activities
for the Karowe UGP in Q4 2023 are expected to include the following:
• Sinking within the ventilation and production shafts is expected to continue.
o Excavation of the 718 level station in the ventilation shaft and sinking to the 670 level station and start
of station development
o Planned grouting events to the base of the Mosolotane sandstone/mudstone transition are expected
to be completed early in Q4 2023 for the production shaft.
• Thereafter, further grouting is not anticipated to be required until sinking reaches the granite basement
lithologies in late 2024. Grouting in the granite lithologies is expected to be localized, rather than formational
in nature.
• Procurement of underground equipment, including dewatering pumps, underground crush and convey systems
and the permanent stage winder.
• Construction and commissioning of the temporary bulk air cooler and construction of the permanent of the bulk
air cooler system.
• Preparation of tender documents for a request for proposal for the underground lateral development work;
and,
• Continuation of detailed design and engineering of the underground mine infrastructure and layout.
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FINANCIAL HIGHLIGHTS – Q3 2023
Three months ended
September 30,
Nine months ended
September 30,
In millions of U.S. dollars, except carats or otherwise
noted
2023 2022 2023 2022
Revenues $ 56.9 $ 49.9 $ 140.8 $ 170.5
Operating expenses (21.3) (25.8) (56.3) (60.8)
Net income for the period 10.5 1.8 16.5 33.3
Earnings per share (basic and diluted) 0.02 0.00 0.04 0.07
Operating cash flow per share(1) 0.04 0.03 0.11 0.17
Cash on hand 16.8 34.8 16.8 34.8
Cost overrun facility (restricted cash) 18.4 - 18.4 -
Amounts drawn on working capital facility(2) 35.0 - 35.0 -
Amounts drawn on project finance facility 90.0 65.0 90.0 65.0
Karowe Revenue 56.2 46.5 136.1 163.7
Carats sold 111,673 99,301 267,764 245,763
QUARTERLY RESULTS OF OPERATIONS – KAROWE MINE, BOTSWANA
UNIT Q3-23 Q2-23 Q1-23 Q4-22 Q3-22
Sales
Revenues from the sale of Karowe diamonds US$M 56.2 38.6 41.3 40.1 46.5
Karowe carats sold Carats 111,673 72,717 83,374 81,264 99,301
Production
Tonnes mined (ore) Tonnes 869,188 682,636 541,400 484,705 920,410
Tonnes mined (waste) Tonnes 954,226 907,051 761,295 199,385 453,860
Tonnes processed Tonnes 724,640 720,345 700,678 690,946 693,398
Average grade processed(1) cpht (*) 13.6 12.6 12.8 12.5 11.4
Carats recovered(1) Carats 98,311 90,497 89,640 86,655 78,879
Costs
Operating cost per tonne of ore processed(2) US$ 28.62 27.97 26.65 26.20 29.33
Capital Expenditures
Sustaining capital expenditures US$M 3.2 2.4 0.8 9.9 4.0
Underground expansion project(3) US$M 20.3 22.5 30.5 22.3 23.9
(*) carats per hundred tonnes
(1) Average grade processed is from direct milling carats and excludes carats recovered from re-processing historic recovery
tailings from previous milling.
(2) Operating cost per tonne of ore processed is a non-IFRS measure. See “Use of Non-IFRS Performance Measures” below.
(3) Excludes qualifying borrowing cost capitalized in each quarter.
(1) Operating cash flow per share before working capital adjustments is a non-IFRS measure. See “Use of Non-IFRS Performance Measures”
below.
(2) Excludes amounts drawn from the Clara revolving credit facility.
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CONFERENCE CALL
The Company will host a conference call and webcast to discuss the results on Monday, November 13, 2023 at
9:00am Pacific, 12:00pm Eastern, 5:00pm UK, 6:00pm CET. To join the conference call please use the following link
https://emportal.ink/45LcfFu or the phone numbers listed below.
Conference ID:
42548403 / Lucara Diamond
Dial-In Numbers:
Toll-Free Participant Dial-In North America (+1) 888 390 0605
UK Toll free 0800 652 2435
Local Toronto (+1) 416 764 8609
Webcast:
To view the live webcast presentation, please log on using this direct link: https://app.webinar.net/X7Z2M2wLaxW
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 20,
2023. The pass code for the replay is: 548403 #
Replay number (Toll Free North America) (+1) 888 390 0541
Replay number (Local) (+1) 416 764 8677
On behalf of the Board,
William Lamb
President and Chief Executive Officer
Follow Lucara Diamond on Facebook, 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 dia mond 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