Lucara Announces Q1 2019 Results
May 9, 2019
PRESS RELEASE
LUCARA ANNOUNCES Q1 2019 RESULTS
VANCOUVER, May 9, 2019 /CNW/ - (LUC – TSX, LUC – BSE, LUC – Nasdaq Stockholm)
Lucara Diamond Corp. (“Lucara” or the “Company”) today reports its results for the quarter
ended March 31, 2019.
HIGHLIGHTS FOR THE QUARTER ENDED MARCH 31, 2019
• Q1 2019 was characterized by a continuation of the strong operating performance observed
during the latter half of 2018, having met or exceeded guidance with respect to all mining
and processing activities including:
o A record 0.76 million tonnes of ore processed, the best quarter in Karowe’s
history
o Ore and waste mined of 1.0 million tonnes and 2.5 million tonnes respectively
o Carats recovered of 132,336 ( including 10,899 carats recovered from re -
processing historic recovery tailings from previous milling) achieving a
recovered grade of 15.9 carats per hundred tonnes processed (direct milling
carats)
o Recoveries of a 240 carat top white gem and a 223 carat high white gem
o 170 Specials were recovered during the first quarter, representing 4.1% weight
percentage of total recovered carats, in line with mine plan expectations; 7
diamonds were recovered greater than 100 carats in weight
• In April 2019, the largest diamond to be mined at Karowe to date, an unbroken 1,758 carat
near gem quality diamond was recovered. This recovery is the largest diamond recovered
in Botswana and one of the largest diamonds in recorded history, superseding the spot held
by the 1,109 carat Lesedi La Rona recovered from Karowe in 2015
• Several large, high-value Specials (single diamonds larger than 10.8 carats) were sold in the
Company’s first tender of 2019 which resulted in quarterly sales revenue of $48.7 million
(Q1 2018: $25.4 million) or $512 per carat (Q1 2018: $401 per carat) recognized during the
quarter, consistent with management expectations
• The operating cash cost(1) for the three months ended March 31, 2019 was $30.52 per tonne
processed (Q1 2018: $39.97 per tonne processed) compared to the full year forecast cash
cost of $32 -$37 per tonne processed. Operating cash cost per tonne processed was
positively impacted by a reduction in waste mined and an increase in tonnes processed
during the first quarter
• Q1 2019 Adjusted EBITDA (1) of $23.4 million (Q1 2018: $1.4 million) reflects the move to a
blended tender process . Goods sold include both regular stones and exceptional stones
which previously may have been set aside for separate tender events
(1) Non IFRS measure
2
• Net income for the three months ended March 31, 2019 was $7.4 million ($0.02 per share)
as compared to a net loss of $7.0 million ($0.02 loss per share) in the comparative quarter
of 2018
• As at March 31, 2019, the Company had cash and cash equivalents of $17.9 million. The funds
drawn on the credit facility were repaid in full during Q1 2019, leaving the $50 million facility
fully available at March 31, 2019
• The Company accrued a quarterly dividend of CA$0.025 per share on the record date of
March 22, 2019 and paid the dividend on April 11, 2019
• Clara has continued to focus on building its customer base through the first quarter after
its inaugural sale in Q4 2018. Two sales were completed during Q1 2019 with rough diamond
sales of $1.4 million transacted through the platform. Clara expects to continue to grow its
supply and demand concurrently through 2019 by adding third- party production to the
platform as well as increasing the number of manufacturers who are buying on the platform
Eira Thomas, Pre sident & CEO commented: “ Lucara’s focus on operational excellence has
delivered another strong quarter, having met or exceeded guidance with respect to ore mined
and processed as well as carats produced. Costs were significantly down quarter over quarter
and the first sale of the year delivered revenues in excess of US$ 47 million, in line with
expectations. In April, Lucara’s technologically advanced, XRT diamond recovery circuit
delivered one of the largest diamonds in recorded history, the largest diam ond recovered in
Botswana, and the largest diamond to be mined at Karowe to date. The unbroken 1 ,758 carat
diamond is a testament to the remarkable nature of the Karowe resource and the strong
operating environment prevailing at the mine.”
FINANCIAL HIGHLIGHTS
Three months ended March 31
In millions of U.S. dollars, except carats or otherwise noted 2018 2017
Revenues $ 48.7 $ 25.4
Net (loss) income for the period 7.4 (7.0)
Earnings per share (basic and diluted) 0.02 (0.02)
Cash on hand 17.9 43.6
Average price per carat sold ($/carat)* 512 401
Operating expenses per carat sold ($/carat)* 169 231
Operating margin per carat sold ($/carat)* 343 170
(*) Average price per carat sold, operating expenses per carat sold and operating margin per carat sold are Non-IFRS
measures, see Non-IFRS measures.
The Company achieved revenues of $48.7 million or $512 per carat for its sales in the first
quarter, yielding an operating margin of $343 per carat. In Q1 2019, the Company held a blended
tender in which diamonds recovered in the period December 2018 – February 2019 were sold.
The blended tender process decreases the inventory time to market of higher value diamonds.
A total of 95,057 carats were sold (Q1 2018: 63,317 carats) achieving a strong first quarter
average price of $512 and with 50% more carats sold than Q1 2018.
3
Historically, Lucara has sold diamonds through both regular stone tenders (RSTs) and
exceptional stone tenders (ESTs). In September 2018, the Company modified its tender sales
to a blended tender process, combining the sale of exceptional stones with the balance of run
of mine production into one sale. This change was made to decrease th e inventory time for
large, high value diamonds and to generate a smoother revenue profile that better supports
price guidance on a per sale basis. Beginning in December 2018, certain stones from the Karowe
production were offered for sale through the Clara platform.
As the number of carats increases from better recovery in the smaller, lower value sizes, the
average sales price per carat is reduced accordingly. The significant increase in carats is due to
continued strong performance in the plant which had a record quarter of production of 0.76
million tonnes and an improved mine call factor. The plant also achieved record high availability
during Q1 2019. The increase in the number of carats available for sale in the Q1 2019 tender
follows commissioning o f the sub -middles circuit in Q3 2017 and increased efficiency in
diamond recovery in the smaller sizes and improved mill throughput. The number of carats
recovered in Q1 2019 (121,437 carats) processed from the mine was 60% higher than the number
of carats recovered in Q1 2018 (75,698 carats).
Operating expenses increased from $14.6 million in Q1 2018 to $16.1 million in Q1 2019 due to a
combination of higher volumes of ore mined and processed and an increase in the average cost
per tonne mined.
Depletion and amortization expense increased from $5.1 million in Q1 2018 to $11.6 million in Q1
2019 due to the 50% higher volume of carats sold during the period. Depletion and
amortization expense has increased significantly as compared to prior periods for several
reasons: an increasing number of fine diamonds recovered following improvements to the
processing circuit implemented in late 2017, a larger mineral property balance from the waste
stripping campaign between 2017 and 2018, and a corresponding increase in the rate of unit of
production depletion from an update to the reserve base of the mine plan in Q3 2018.
Net income and earnings per share performance were as expected and reflect the stronger
carat recoveries being achieved due to the investments in the plant as well as the transition to
a blended sales tender process in 2019 creating a smoother revenue profile.
4
QUARTERLY RESULTS OF OPERATIONS – KAROWE MINE, BOTSWANA
FIRST QUARTER OVERVIEW – KAROWE MINE
Safety: Karowe had no lost time injuries during the three months ended March 31, 2019 resulting
in a twelve-month rolling Lost Time Injuries Frequency Rate (“LTIFR”) of 0. As of April 30, 2019,
the mine has achieved 713 days Lost Time Injury free.
Production : Ore and waste mined during the three months ended March 31, 2019 totaled 1.0
million tonnes and 2.5 million tonnes respectively. Tonnage processed was a mine quarterly
record at 0.76 million tonnes, with a total of 13 2,336 carats recovered. Included in the total
132,336 carats recovered were 10,899 carats recovered from the re -processing of material
previously milled. During Q1 2019, ore processed was blended from the North, Central and
South lobes. During Q1 2019, a total of 170 Specials were recovered including 7 diamonds
greater than 100 carats in weight. Recovered Specials equated to 4.1% weight percentage of
total recovered carats during the quarter, in line with expectations.
Mine performance during the first quarter is reflective of the significant operational
improvements being executed at the mine following the transition to a new mining contractor,
Trollope Mining Services Pty (“Trollope”), in Q3 2018. Plant performance is benefiting from an
improving mine call factor and increased recoveries of fine diamonds. Ore mining was stronger
UNIT Q1-19 Q4-18 Q3-18 Q2-18 Q1-18
Sales
Revenues US$M 48.7 40.6 45.7 64.53 25.4
Proceeds generated from sales tenders
conducted in the quarter are comprised of:
US$M 48.7 40.6 41.8 68.43 25.4
Sales proceeds received during the quarter US$M 48.7 40.6 45.7 64.5 25.4
Q2 2018 tender proceeds received post
Q2 2018
US$M - - (3.9) 3.9 -
Carats sold for proceeds generated during
the period
Carats 95,057 110,553 89,461 87,467 63,317
Carats sold for revenues recognized during
the period
Carats 95,057 110,553 101,600 75,329 63,317
Average price per carat for proceeds
generated during the period
US$ 512 367 467 7823 401
Average price per carat for proceeds
received during the period
US$ 512 367 450 8563 401
Production
Tonnes mined (ore) Tonnes 1,011,048 563,279 1,217,016 702,825 630,242
Tonnes mined (waste) Tonnes 2,485,548 2,743,586 3,850,225 4,416,361 3,991,648
Tonnes processed Tonnes 763,313 602,376 728,962 698,303 599,407
Average grade processed cpht (*) 15.91 13.32 17.4 11.7 12.6
Carats recovered Carats 132,3361 81,8502 127,031 81,507 75,698
Costs
Operating costs per carats sold (see page
12 Non-IRFS measures)
US$ 169 233 185 220 231
Capital expenditures US$M 2.4 6.5 2.4 2.7 3.9
(*) carats per hundred tonnes
(1) Carats recovered during the period included 10,899 carats recovered from re-processing historic recovery
tailings from previous milling and are excluded from the average grade processed.
(2) Carats recovered during the period included 1,505 carats recovered from re-processing historic recovery
tailings from previous milling and are excluded from the average grade processed.
(3) This includes one EST sale of $32.4 million in addition to an RST during the quarter
5
than expected in the first quarter due to resource gains in the North Lobe that offset planned
waste mining in the North Lobe. Due to the higher volume of ore mined in Q1 2019, no waste
stripping costs were capitalized during the first quarter. Total ore and waste mining volumes
are expected to be within guidance for the year , with ore mined expected to be at the higher
end of guidance. A higher than expected percentage of ore m ining will likely reduce the strip
ratio to near or below the life of mine average of 2.46 . As a result , capitalized stripping is
expected to be significantly lower in 2019 than previously expected.
Karowe’s operating cash cost: Karowe’s year to date operating cash cost (see page 10 Non-
IFRS measures) was $30.52 per tonne processed (2018: $39.97 per tonne processed) compared
to the full year forecast of $32 -$37 per tonne processed. The decrease in cost per tonne
processed compared to the three months ended March 31, 2018 reflects lower volumes of waste
tonnes mined during the quarter as the significant stripping campaign undertaken between
2017 and 2018 was largely completed in 2018, as well as an increase in tonnes processed from
ongoing plant improvements. Forecast costs for the 2019 fiscal year are expected to be within
guidance.
Labour relations update : In April 2019, the Botswana Mine Workers Union and Lucara
Botswana entered into a Memorandum of Agreement which governs the working relationship
between the two parties. The parties have entered into a period of formal wage negotiations
which should be concluded in 2019. In Botswana, a majority of currently operating mines are
unionized.
MINERAL RESOURCE UPDATE AND BOTSWANA EXPLORATION
Karowe Resource (AK06 kimberlite) Update
During Q2 2018, an updated mineral resource was announced for the AK06 kimberlite. The
updated Mineral Resource Estimate was completed by Mineral Services Canada Inc. The
estimate is based on historical evaluation data combined with new sampling results
(microdiamond, bulk density and petrography) from recent deep core drilling and from
historical drill cores. New delineation drill coverage and review of historical drill cores
supported an update of the internal geological model. Production data (including a controlled
production run from the Eastern magmatic/pyroclastic kimberlite ((“EM/PK(S)”) unit) and
recent sales and valuation results have been incorporated into the grade and value estimates,
which have been made based on an updated model of process pla nt recovery efficiency. The
updated Mineral Resource is reported based on the Canadian Institute of Mining Definition
Standards for Mineral Resources and Reserves as incorporated by National Instrument 43 -101
Standards of Disclosure for Mineral Projects (“NI-43-101”).
In 2018, the Company embarked on a technical program to support a Feasibility Level study for
a potential underground operation at the Karowe Diamond Mine. This program included the
completion of the above noted mineral resource update, geo technical drilling of the country
rock and AK06 kimberlite, hydrogeological drilling and modelling, and mining trade off studies
to address risks and issues identified during the PEA. A total of $21.0 million was spent in 2018
in support of this work, which resulted in significant de-risking of the key technical components
associated with the potential underground development.
During 2018, 33 core holes totaling 20,283 metres were drilled representing approximately 83%
of the originally planned drilling. During Q1 2019, $4.2 million was spent to complete the
geotechnical drilling program, geotechnical and geological logging, downhole geophysical
survey, hyperspectral analysis of core, geotechnical modeling, hydrogeological drilling and
6
studies, and mine planning activities in support of the ongoing feasibility study. Results of the
Q1 2019 analyses will be incorporated into the feasibility study with a planned completion date
in Q4 2019.
Sunbird Exploration Generative Project:
The Company’s exploration program in 2019 is focused on the Sunbird generative project.
During Q2 2018, an agreement was signed with a Botswana company, Sunbird, to focus on the
discovery of new kimberlites within the country using a proprietary UAV magnetometer
platform to identify targets. Data acquisition commenced during Q2 2018 and continued
through Q4 2018 incorporating over 50,000 line kilometres of high resolution magnetics.
During Q1 2019, geophysical data interpretation continued and a total of 1,933 line km of high
resolution magnetics was flown, field season commencing in late March 2019. A total of 12
rotary air blast holes were drilled (613m) and no kimberlite was intersected. Sunbird will
continue to focus on identifying new targets through 2019.
CORPORATE UPDATE
Annual General and Special Meeting
The Company’s annual general and special meeting of shareholders will be held on Friday, May
10, 2019, at 2:00 p.m. Eastern Standard Time (11:00 am Pacific) at the offices of Blake, Cassels
& Graydon, LLP, Suite 4000, 199 Bay Street, Toronto, Ontario, M5L 1A9.
2019 OUTLOOK
This section of the press release provides management's production and cost estimates for
2019. These are “forward -looking statements” and subject to the cautionary note regarding
the risks associated with forward-looking statements. No changes have been made to our 2019
outlook previously provided.
Karowe Diamond Mine Full Year – 2019
In millions of U.S. dollars unless otherwise noted
Diamond revenue (millions) $170 to $200
Diamond sales (thousands of carats) 300 to 320
Diamonds recovered (thousands of carats) 300 to 330
Ore tonnes mined (millions) 2.5 to 2.8
Waste tonnes mined (millions) 6.0 to 9.0
Ore tonnes processed (millions) 2.5 to 2.8
Total operating cash costs(1) including waste mined(2) (per tonne processed) $32.00 to $37.00
Operating cash costs excluding waste mined (per tonne processed) $21.00 to $24.00
Botswana general & administrative expenses including marketing costs (per
tonne processed)
$2.00 to $3.00
Tax rate 22% to 29%
Average exchange rate – USD/Pula 10.5
(1) Operating cash costs are a non-IFRS measure. See “Non-IFRS Measures”.
(2) Includes ore and waste mined cash costs of $4.00 to $4.50; processing cash costs of $12.00 to $13.00 and mine -
site departmental costs (security, technical services, mine planning, health & safety, geology) of $5.00 to $6.00 (all
dollar figures in per tonne mined or processed).
Following the substantial completion of a significant waste stripping campaign in 2017 and
2018, total tonnes mined in 2019 are expected to be between 8.5 million and 11.8 million tonnes,
of which the Company expects to mine betw een 2.5 million to 2.8 million tonnes of ore and
between 6.0 and 9.0 million tonnes of waste. While guidance is unchanged, the average strip
7
ratio in 2019 is now expected to be lower than originally anticipated due to a higher percentage
of ore mined during the first quarter of 2019.
The 2019 estimated cash cost per tonne of ore processed is expected to be between $32.00
and $37.00 (2018: $38.00 to $42.00) while estimated operating cash costs, excluding waste
mining, are expected to be between $21.00 and $24.00 per tonne processed. The cost per
tonne mined is expected to be between $4.00 and $4.50 and the estimated processing cost
per tonne processed is expected to be between $12.00 and $13.00, mostly offsetting the
increase in cost per tonne mined which results from higher rates from the mining contractor
appointed in mid-2018.
In 2019, the Company forecasts revenues between $170 million and $200 million, consistent
with the forecast for 2018. In 2019, diamonds recovered are expected to be between 300,000
carats and 330,000 carats and diamonds sold are expected to be between 300,000 carats and
320,000 carats. These projections include “Specials” which are diamonds that are 10.8 carats
and larger but exclude the sale of any truly unique diamonds such as th e 1,109 carat LLR (sold
in 2017 for $53 million) and the 813 carat Constellation (sold in 2016 for $63.1 million). Specials
are consistently recovered from the Karowe Diamond Mine and those Specials which are gem-
quality contribute a significant percentage of the Company’s annual revenue.
Sustaining capital and project expenditures are expected to be up to $14.0 million in 2019,
including expenditures associated with the construction of an additional slimes dam,
improvements related to the XRT recovery circuit, and a provision for the imple mentation of
body scanning technology to enhance security. This does not include investments being made
on the underground development study noted below.
A budget of $14.8 million has been approved to complete a feasibility study that was initiated
in 201 8, evaluating the potential for an underground mining operation at Karowe. In 2019,
efforts will focus on follow up geotechnical and hydrogeological drilling and related studies.
Exploration expenditures are estimated to be up to $3.0 million for use of t he Sunbird remote
mapping technology, drilling of prospective targets identified by the technology and work on
Lucara Botswana Prospecting License. Please see “Mineral Resource Update and Botswana
Exploration” above.
CONFERENCE CALL
The Company will host a conference call and webcast to discuss the results on Friday, May 10,
2019 at 6:00 a.m. Pacific, 9:00 a.m. Eastern, 2:00 p.m. UK, 3:00 p.m. CET.
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:
69492463 / Lucara Diamond
Dial-In Numbers:
Toll-Free Participant Dial-In North America (+1) 888 390 0605
All International Participant Dial-In (+1) 778 383 7417
Webcast:
To view the live webcast presentation, please log on using this direct link:
https://event.on24.com/wcc/r/1987289/4F20B3CEB1F05A4FC3D6731CF3397D5F .
8
The presentation slideshow will also be available in PDF format for download from the Lucara
website www.lucaradiamond.com shortly prior to the conference call.
Conference Replay:
A replay of the telephone conference will be available two hours after the completion of the
call until May 17, 2019.
Replay number (Toll Free North America) (+1) 888 390 0541
Replay number (International) (+1) 416 764 8677
The pass code for the replay is: 492463 #
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:
Investor Relations & Public Relations +1 604 689 7842 [email protected]
Sweden: Ulrika Häggroth, Investor Relations +46 70 298 6001 [email protected]
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 international best practices in the
areas of sustainability, health and safety, environment and community relations.
ABOUT CLARA
Clara Diamond Solutions (Clara), wholly owned by Lucara Diamond Corp, i s 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.
The information in this release is accurate at the time of distribution but may be superseded or
qualified by subsequent news releases.
This information is information that Lucara is obliged to make public pursuant to the EU Market
Abuse Regulation and the Swedish Securities Markets Act. The information was submitted for
publication, through the agency of the contact person set out above on May 9, 2019 at 7:00
pm Pacific Time.