Lucara Announces Q2 2023 Results

August 9, 2023

NEWS RELEASE

LUCARA ANNOUNCES Q2 2023 RESULTS

VANCOUVER, August 9, 2023 /CNW/ (LUC – TSX, LUC – BSE, LUC – Nasdaq Stockholm)

Lucara Diamond Corp. (“Lucara” or the “Company”) today reports its results for the quarter ended June 30, 2023.

Q2 2023 HIGHLIGHTS

 Guidance maintained.

 Revenue for the quarter ended June 30, 2023 totalled $41.1 million.

 The Q2 2023 operating cash cost of $27.97 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 on plan, with 0.7 million tonnes of ore and 0.9 million tonnes of waste mined,

0.7 million tonnes of ore processed, and 90,497 carats recovered from direct milled ore.

 Cash flow generated from operating activities was $9.2 million.

 An updated schedule and budget for the Karowe underground expansion project (“Karowe UGP”) was released.

The duration of the construction period increased, extending the anticipated commencement of production

from the underground from H2 2026 to H1 2028. The revised forecast of costs at completion is $683 million.

 The long-term outlook for diamond prices, combined with the potential for exceptional stone recoveries and

the continued strong performance of the open pit could mitigate the modelled impact on project cash flows due

to the schedule slippage.

 An investment of $22.5 million in the Karowe UGP in Q2 2023 focused on sinking and grouting programs in the

ventilation and production shafts.

Eira Thomas, President & CEO commented: “Karowe delivered another solid quarter against plan in Q2 and as we

returned to mining in the south lobe, the proportion of specials (diamonds greater than 10.8 carats) increased and

has so far included the recovery of 13 stones over 100 carats that will be polished and sold in the latter half of the

year. The rebased schedule and budget will delay production from the underground and has increased costs by

approximately 25%, however, sufficient surface stockpiles ensure that the mill will operate to capacity during this

period and the project remains economically robust. The expansion continues to have the support of our largest

shareholder.”

REVIEW FOR THE QUARTER ENDED JUNE 30, 2023

 Operational highlights from the Karowe Mine for Q2 2023 included:

o Ore and waste mined of 0.7 million tonnes (Q2 2022: 1.1) and 0.9 million tonnes (Q2 2022: 0.4),

respectively.

o 0.7 million tonnes (Q2 2022: 0.7) of ore processed.

o A total of 90,497 carats recovered (Q2 2022: 86,317) at a recovered grade of 12.6 carats per hundred

tonnes of direct milled ore (Q2 2022: 12.0).

(1) See “Non-IFRS Financial Performance Measures”

2

 A total of 162 Specials were recovered, with thirteen diamonds greater than 100 carats including

four diamonds greater than 200 carats in weight.

 Recovered Specials equated to 6.6% of the weight percentage of total recovered carats from ore

processed during Q2 2023 (Q2 2022 – 6.1%).

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 June 30, 2023 included:

o Revenues of $41.1 million (Q2 2022: $52.3 million) reflected a continuation of weaker diamond prices

and a planned change in product mix beginning in early 2023. During Q2 2023, 12% of the carats

processed were recovered from the Centre Lobe and 88% were recovered from South Lobe material

(Q2 2022: 100% South Lobe ore). Most of the carats recovered in the second quarter will be sold in

the third quarter of 2023.

o Operating margins of 59% were achieved (Q2 2022: 67%). A strong operating margin continues to be

achieved despite price softness in the rough diamond market.

o Karowe’s +10.8 production, sold through HB, accounted for 63% (Q2 2022: 65%) of total revenues

recognized in Q2 2023.

o Adjusted EBITDA(1) was $15.7 million (Q2 2022: $24.4 million), with the change directly attributed to a

decrease in revenues.

o Net income was $5.0 million (Q2 2022: $12.5 million), or $0.01 earnings per share (Q2 2022: $0.03).

 During Q2 2023, the Company invested $22.5 million into the Karowe UGP:

o Grouting programs were the focus in both the ventilation and production shafts. A grout cover was

completed in the ventilation shaft along with remedial grouting behind the concrete liner in previously

dry portions of the shaft. In the production shaft, a grout cover was initiated 10 metres earlier than

planned due to increased water inflows related to a water-making subvertical joint feature. Additional

grouting was required to seal off areas within an earlier grout cover.

o Shaft sinking in the ventilation shaft was comprised of 30 metres of vertical advance in April followed

by grouting. Sinking resumed in July 2023, 8 days ahead of schedule.

o In the production shaft, a total of 27 metres of vertical advance was achieved during Q2, with the

remainder of time dedicated to grouting.

o All components of the bulk power supply upgrade, including the Letlhakane and Karowe Substations

and 132 kV power line, were handed over to Botswana Power Corporation.

o Mobilisation for civil works related to construction of the bulk air cooler contractor commenced in late

June.

o A contract for fabrication of the permanent men and materials winder was signed during the quarter,

representing the last major component for the permanent winders.

 Cash position and liquidity at June 30, 2023:

o Cash and cash equivalents of $26.7 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 second quarter.

o The outstanding balance on the WCF increased from $23.0 million to $35.0 million through Q2 2023,

resulting in available liquidity of $15.0 million.

(1) See “Non-IFRS Financial Performance Measures”

3

o The Company has near-term commitments under its Facilities, including the maturity date of the WCF

on September 1, 2023 and the requirement to fund a cost overrun facility. Due to these near-term

commitments, there is concern regarding the Company’s ability to meet its commitments 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” of the Company’s MD&A for the quarter ended June 30, 2023 and refer to Note 1

of the condensed interim consolidated financial statements for the three and six months ended June

30, 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.

Following on the record high diamond prices achieved in early 2022, a softer diamond market emerged in the latter

half of 2022 which has persisted into the second quarter of 2023, the result of global economic concerns combined

with geopolitical uncertainty, including the ongoing conflict in Ukraine. Prices continued to show signs of

stabilization, however, as China continues to open-up post-Covid. Sales of lab-grown diamonds increased during the

period. Intense competition combined with improvements in technology continue to drive prices of lab grown

diamonds down. 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 remain unchanged

and positive, pointing to strong 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 2023. 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.

No changes were made to the Company’s 2023 Guidance (released in December 2022).

Karowe Diamond Mine Full Year – 2023

In millions of U.S. dollars unless otherwise noted

Diamond revenue (millions) $200 to $230

Diamond sales (thousands of carats) 385 to 415

Diamonds recovered (thousands of carats) 395 to 425

Ore tonnes mined (millions) 1.9 to 2.3

Waste tonnes mined (millions) 2.2 to 2.8

Ore tonnes processed (millions) 2.6 to 2.9

Total operating cash costs (1) including waste mined(2) (per tonne processed) $32.50 to $35.50

Botswana general & administrative expenses including marketing costs (per tonne

processed)

$3.50 to $4.50

Tax rate(3) 0%

Average exchange rate – USD/Pula 12.0

(1) Operating cash costs are a non-IFRS measure. See “Non-IFRS Financial Performance Measures”.

(2) Includes ore and waste mined cash costs of $7.00 to $8.00 (per tonne mined) and processing cash costs of $12.00 to $13.00 (per tonne

processed).

(3) The Company is subject to a variable tax rate in Botswana based on a profit and revenue ratio which increases as profit as a percentage of

revenue increases. The lowest variable tax rate is 22% while the highest variable tax rate is 55% (only if taxable income were equal to

4

revenue). Capital expenditures are deductible when incurred. With planned capital expenditures of up to $105 million for the UGP, a tax

rate of 0% is forecast for 2023. Should capital expenditures vary from plan, the Company could be subject to current tax.

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

For the three months ended June 30, 2023, the Company recorded revenue of $25.8 million from the HB agreement

(inclusive of top-up payments of $5.1 million), as compared to revenue of $32.4 million (inclusive of top-up payments

of $13.1 million). Lower revenue in Q2 2023 is reflective of an ore mix which included Centre Lobe material.

The decrease in revenue in Q2 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 in the current period. Top-up values will

typically increase as the more valuable stones move through production and are sold. The lower top-ups recognized

in Q2 2023 reflect the value of the stones delivered, consistent with the change in product mix during H1 2023.

Recovered Specials equated to 6.6% of the weight percentage of total recovered carats from ore processed during

Q2 2023 with 12% of the carats recovered from the Centre Lobe and 88% recovered from South Lobe material (Q2

2022: 100% South Lobe ore). Natural variability in the quality profile of the +10.8ct production in any production

period or fiscal quarter results in fluctuations in recorded revenue and associated top-ups. This result is consistent

with the resource model and expected.

Despite the overall decrease in revenue recognized in Q2 2023, diamond market fundamentals continued to support

healthy prices from the multi-year highs observed at the peak in Q1 2022.

CLARA SALES PLATFORM

Total volume transacted on the platform was $5.7 million in Q2 2023, with non-Karowe goods representing 48% of

the total sales volume transacted, generating revenue of $5.5 million. The Company continues to be focused on

growing third party volumes through the platform in 2023, both from primary diamond producers and the secondary

market sources. The number of buyers on the platform reached 100 as at June 30, 2023.

During Q2 2023, the sales volume transacted decreased as volumes and lower valued goods were placed for sale

due to the shift in product mix from the Karowe Mine. A soft market was observed; however, prices have remained

fairly flat between Q1 2023 and Q2 2023 with strength in the stones between 5 to 10.8 carats in size.

QUARTERLY TENDER

A total of 67,673 carats were sold in the May 2023 tender, generating revenues of $9.8 million (Q2 2022 tender:

$10.5 million from the sale of 59,926 carats). Rough diamond prices remained near a multi-year high point at the

time of the Q2 2022 tender. The Q2 2023 tender reflected a 17% 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 (“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.

5

On July 16, 2023, an update to the Karowe UGP schedule and budget was announced. 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

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. As at June 30, 2023, capital expenditures of $264.5 million had been incurred and total capital

commitments of $369.7 million had been made, inclusive of incurred amounts. The Company has notified its lenders

of the expected increases to both the schedule duration and the projected cost to complete the Karowe UGP. The

Company’s debt package consists of a $170 million Project Loan to fund the development of an underground

expansion at the Karowe Mine, and a $50 million WCF.

The Karowe UGP remains technically and economically feasible, however, the impact of actual and modelled delays

changes the revenue profile due to the use of lower-grade, stockpiled ore for mill feed rather than high-grade ore

from the underground as previously planned. Sufficient surface stockpiles of South, Centre and North Lobe

kimberlite ore are available to maintain current, un-interrupted mill feed to the plant for the duration of the

anticipated delay. The long-term outlook for diamond prices, combined with the potential for exceptional stone

recoveries and the continued strong performance of the open pit could mitigate the modelled impact on project

cash flows due to the schedule slippage.

During the three months ended June 30, 2023, a total of $22.5 million was spent on the Karowe UGP development,

primarily in relation to ongoing construction activities, including:

 Main sinking in the production and ventilation shafts:

o In response to water inflows from the sandstones, cover grouting was the primary activity in both

shafts.

o While the existence of water-bearing sandstones layers was anticipated, grouting within the regional

Ntane and Mosolotane sandstone aquifers has required significantly more volumes of chemical grout.

In addition, some remedial grouting in previously dry portions of the sandstone horizons has been

required in the ventilation shaft. These factors account for most of the incurred delays to June 30, 2023.

o The ventilation shaft reached 213 metres below collar, with a planned final depth of 731 metres. The

production shaft reached 185 metres below collar, with a planned final depth of 765 metres.

 Mobilisation for civil works related to construction of the bulk air cooler contractor started in late June

 A contract for fabrication of the permanent men and materials winder was signed during the quarter,

representing the last major component for all of the permanent winders.

 All components of the bulk power supply upgrade, including the Letlhakane and Karowe Substations and 132

kV power line, were handed over to Botswana Power Corporation.

 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 six-month period with no reportable incidents delivering a six-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 Q3 2023 are expected to include the following:

6

 Sinking and grouting within the ventilation and production shafts is expected to continue.

 Planned grouting events to the base of the Mosolotane sandstone/mudstone transition are expected to be

completed early in Q4 2023. After completion of the current sandstone layer being grouted, one further grouting

event is planned in the ventilation shaft (213 metres below collar as of June 30, 2023). Two additional grouting

events are planned within the production shaft (185 metres below collar as of June 30, 2023). 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 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.

FINANCIAL HIGHLIGHTS – Q2 2023

Three months ended

June 30,

Six months ended

June 30,

In millions of U.S. dollars, except carats or otherwise

noted

2023 2022 2023 2022

Revenues $ 41.1 52.3 $ 83.9 120.5

Operating expenses (16.7) (17.0) (34.9) (34.9)

Net income for the period 5.0 12.5 6.0 31.5

Earnings per share (basic and diluted) 0.01 0.03 0.01 0.07

Operating cash flow per share (1) 0.04 0.05 0.07 0.13

Cash on hand 26.7 40.8 26.7 40.8

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 38.6 50.0 79.9 117.2

Carats sold 72,717 66,167 156,091 146,462

(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.

7

QUARTERLY RESULTS OF OPERATIONS – KAROWE MINE, BOTSWANA

CONFERENCE CALL

The Company will host a conference call and webcast to discuss the results on Thursday, August 10, 2023 at 7:00am

Pacific, 10:00am Eastern, 3:00pm UK, 4:00pm CET. To join the conference call please use the following link

https://emportal.ink/44C1eWS or the phone numbers listed below.

Conference ID:

88318539 / Lucara Diamond

Dial-In Numbers:

Toll-Free Participant Dial-In North America (+1) 888 390 0605

UK Toll free 0800 652 2435

Local Vancouver (+1) 416 764 8609

Webcast:

To view the live webcast presentation, please log on using this direct link: https://app.webinar.net/5XdGxGqNErz

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 17,

2023. The pass code for the replay is: 318539#.

Replay number (Toll Free North America) (+1) 888 390 0541

Replay number (Local) (+1) 416 764 8677

UNIT Q2-23 Q1-23 Q4-22 Q3-22 Q2-22

Sales

Revenues from the sale of Karowe diamonds US$M 38.6 41.3 40.1 46.5 50.0

Karowe carats sold Carats 72,717 83,374 81,264 99,301 66,167

Production

Tonnes mined (ore) Tonnes 682,636 541,400 484,705 920,410 1,091,192

Tonnes mined (waste) Tonnes 907,051 761,295 199,385 453,860 357,764

Tonnes processed Tonnes 720,345 700,678 690,946 693,398 719,207

Average grade processed(1) cpht (*) 12.6 12.8 12.5 11.4 12.0

Carats recovered(1) Carats 90,497 89,640 86,655 78,879 86,317

Costs

Operating cost per tonne of ore processed(2) US$ 27.97 26.65 26.20 29.33 28.78

Capital Expenditures

Sustaining capital expenditures US$M 2.4 0.8 9.9 4.0 4.1

Underground expansion project(3) US$M 22.5 30.5 22.3 23.9 29.1

(*) 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.

8

On behalf of the Board,

Eira Thomas

President and Chief Executive Officer

Follow Lucara Diamond on Facebook, Twitter, Instagram, and LinkedIn

For further information, please contact:

Hannah Reynish Investor Relations & Communications

+1 604 674 0272| [email protected]

Sweden Robert Eriksson, Investor Relations & Public Relations

+46 701 112615 | [email protected]

UK Public Relations Charles Vivian / Jos Simson, Tavistock

+44 778 855 4035 | [email protected]

ABOUT LUCARA

Lucara is a leading independent producer of large exceptional quality Type IIa diamonds from its 100% owned

Karowe Diamond Mine in Botswana. The Karowe Mine has been in production since 2012 and is the focus of the

Company’s operations and development activities. Clara Diamond Solutions Limited Partnership (“Clara”), a wholly-

owned subsidiary of Lucara, has developed a secure, digital sales platform that uses proprietary analytics together

with cloud and blockchain technologies to modernize the existing diamond supply chain, driving efficiencies,

unlocking value and ensuring diamond provenance from mine to finger. Lucara has an experienced board and

management team with extensive diamond development and operations expertise. Lucara and its subsidiaries

operate transparently and in accordance with international best practices in the areas of sustainability, health and

safety, environment, and community relations. Lucara has adopted the IFC Performance Standards and the World

Bank Group’s Environmental, Health and Safety Guidelines for Mining (2007). Accordingly, the development of the

Karowe underground expansion project (“UGP”) adheres to the Equator Principles. Lucara is committed to upholding

high standards while striving to deliver long-term economic benefits to Botswana and the communities in which the

Company operates.

The information is information that Lucara is obliged to make public pursuant to the EU Market Abuse Regulation

and the Swedish Securities Markets Act. This information was submitted for publication, through the agency of the

contact person set out above, on August 9, 2023 at 2:30pm Pacific Time.

NON-IFRS FINANCIAL PERFORMANCE MEASURES

This news release refers to certain financial measures, such as adjusted EBITDA, adjusted operating earnings,

operating cash flow per share, operating margin per carat sold and operating cost per tonne of ore processed, which

are not measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS. These

measures may differ from those made by other corporations and accordingly may not be comparable to such

measures as reported by other corporations. These measures have been derived from the Company’s financial

statements, and applied on a consistent basis, because the Company believes they are of assistance in the

understanding of the results of operations and financial position. Please refer to the Company’s MD&A for the

quarter ended June 30, 2023 for an explanation of non-IFRS measures used.

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

Certain of the statements made and contained herein and elsewhere constitute forward-looking statements as

defined in applicable securities laws. Generally, these forward-looking statements can be identified by the use of

forward-looking terminology such as "expects", "anticipates", "believes", "intends", "estimates", "potential",