Lucara Announces Strong Q2 2022 Financial and Operational Results as Underground Shaft Sinking Commences
August 10, 2022
NEWS RELEASE
LUCARA ANNOUNCES STRONG Q2 2022 FINANCIAL AND OPERATIONAL RESULTS AS
UNDERGROUND SHAFT SINKING COMMENCES
VANCOUVER, August 10, 2022 /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, 2022.
Q2 2022 HIGHLIGHTS:
• Revenue for the three months and six months ended June 30, 2022 totalled $52.3 million and $120.5 million,
respectively.
• Strong rough and polished diamond market fundamentals continue, despite growing global economic
uncertainties.
• Revenue from sales transacted on Clara during the three months ended June 30, 2022 totalled $9.4 million, a
13% increase from the $8.3 million in revenue earned in the comparative quarter.
• A third-party producer commenced a series of trial sales on Clara in Q2 of 2022, which are continuing into Q3
of 2022.
• Production metrics remained in line with 2022 guidance, with 1.1 million tonnes of ore and 0.4 million tonnes
of waste mined, and 0.7 million tonnes of ore processed during the three months ended June 30, 2022.
• A strong U.S. Dollar helped to mitigate increases in input costs, resulting in an operating cash cost of $28.78 per
tonne of ore processed(1).
• A total project investment of $29.1 million into the Karowe UGP during the current quarter focused on the
transition to main sink activities and construction of the upgraded transmission line and related substations.
Eira Thomas, President & CEO commented: “In Q2, Lucara celebrated 10 years of continuous operations at its 100%
owned Karowe Diam ond Mine and delivered production on plan in combination with healthy diamond sales,
reflecting stable polished diamond demand and a continued positive outlook for diamond prices longer term. Third
party volumes on Clara also continued to grow during the quarter, with Karowe goods reliably supplemented in each
completed sale . Momentum on the underground expansion continues to ramp up as we began the transition
towards the main shaft sinking phase; Lucara maintains access to ample liquidity to support of it s growth plans.”
REVIEW FOR THE QUARTER ENDED JUNE 30, 2022
• Operational highlights from the Karowe Mine for the three months ended June 30, 2022 included:
o Mined 1.1 million tonnes (Q2 2021: 0.9) and 0 .4 million tonnes (Q2 2021: 0.8) of ore and waste,
respectively.
o Processed 0.7 million tonnes of ore (Q2 2021: 0.7) and recovered 86,317 carats (Q2 2021: 101,330
carats), achieving a recovered grade of 12.0 carats per hundred tonnes (Q2 2021: 13.9 cpht).
o A total of five diamonds greater than 100 carats were recovered during the quarter.
o The year-to-date Total Recordable Injury Frequency Rate ("TRIFR") of 0.09 (Q2 2021: zero) at the end
of Q2 2022 reflects one medical treatment case reported during the first quarter of 2022.
(1) See “Non-IFRS Financial Performance Measures”
2
• Financial highlights for the three months ended June 30, 2022 included:
o Revenues from the sale of 66,167 carats recovered from the Karowe Mine were $50.0 million (Q2
2021: $45.9 million from the sale of 68,806 carats from Karowe). The sales agreement with HB Trading
BV (“HB”) accounted for 65% (Q2 2021: 67%) of total Karowe revenue recognized in the quarter.
o Operating cash costs of $28.78 per tonne processed(1) (Q2 2021: $27.51 per tonne processed) reflect
the impact of higher input costs, partially offset by a comparatively stronger U.S. Dollar.
o Adjusted EBITDA(1) of $24.4 million increased by 10% from $22.2 million for the same period in 2021,
attributed primarily to higher revenues.
o Net income for the quarter increased to $12.5 million ($0.03 basic earn ings per share) from $6.0
million ($0.02 basic earnings per share) in Q2 2021.
• Cash position and liquidity:
o As at June 30, 2022, the Company had cash and cash equivalents of $40.8 million.
o The Company drew an additional $20.0 million from the $170.0 mi llion project loan facility for a total
drawn amount of $65.0 million.
o The outstanding balance on the working capital facility was reduced to zero during the quarter and
the full $50.0 million facility was unutilized as at June 30, 2022.
DIAMOND SALES
Diamond sales in Q2 2022 continued through HB under the sales agreement for those gem and near-gem diamonds
greater than 10.8 carats which are to be manufactured and sold as polished . Other diamonds continued to be sold
through a combination of the Clara platform and regular tenders.
The Company recognized total revenues of $52.3 million in Q2 2022. This included $50.0 million from the sale of
66,167 carats from Karowe, top -up payments of $13.1 million as well as $2.3 m illion from the sale of third -party
goods on the Clara platform. In the comparative quarter , the Company achieved revenues of $46.3 million which
included $45.9 million from the sale of 68,806 Karats from Karowe, top -up payments of $7.9 million as well as $0.4
million in revenue from third party goods sold through the Clara platform.
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 2020, Lucara announced a partnership agreement with HB, entering into a definitive sales agreement
for diamonds recovered that exceed +10.8 carats from the Company’s 100% owned Karowe Diamond mine in
Botswana. This agreement was subsequently amended and extended to December 31, 2022 . The mechanisms of
the agreement result in complete transparency within the value chain and create important alignment between the
producer and the manufacturer for the first time.
Under the amended sales agreement, +10.8 carat gem and near gem diamo nds from the Karowe Mine of qualities
that can directly enter the manufacturing stream are being sold to HB at prices based on the estimated polished
outcome of each diamond. The estimated polished value is determined through state -of-the-art scanning and
planning technology, with an adjusted amount payable on actual achieved polished sales, less a fee and the cost of
manufacturing. Following the extension of the HB Agreement in 2021, all +10.8 carat non-gem quality diamonds and
all diamonds less than 10.8 carats in weight which did not meet the criteria for sale on Clara are being sold as rough
through the quarterly tender. In the agreement extension, payment terms were amended to better reflect the timing
of mine production and the manufacturing process. T his unique pricing mechanism delivers regular cash flow for
this important segment of our production profile.
(1) See “Non-IFRS Financial Performance Measures”
3
For the three months ended June 30, 2022, the Company recorded revenue of $32.4 million from the HB agreement
(inclusive of top -up payments of $1 3.1 million), as compared to revenue of $30.7 million in Q2 2021 (inclusive of
top-up payments of $7.9 million). The increase in revenue in Q2 2022 is attributed to higher prices achieved, despite
lower overall sale volumes delivered to HB during the current quarter. Diamond market fundamentals continued to
support healthy prices as steady demand and some inventory shortages were reported. 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 between periods. This is expected and reflects a combination of current diamond
market prices as well as variability in the quality of Karowe’s production profile in any given period.
As a result of the sales agreement with HB, the Company also participated in polished diamond price increases during
Q2 2022 as rough diamonds sold to HB in previous quarters were polished and sold. In Q2 2022, top -up payments
of $13.1 million (Q2 2021: $7.9 m illion) were included in revenue for the quarter. At June 30, 2022 a number of
higher value and more technically complex stones that take longer to manufacture had not fully completed the
manufacturing and sales process. These stones were delivered to HB i n 2021 and the first six months of 2022. As
these stones finish the manufacturing process and are sold, the Company’s may record additional revenue in the
form of “top-up” payments from these sales.
CLARA SALES PLATFORM
Clara, Lucara’s 100% owned proprietary, secure, web -based digital sales platform, continues to gain scale and
interest. Interest in Clara continues to grow as the benefits of purchasing rough diamonds in an innovative way
become evident. In Q2 2022, five sales (Q2 2021: six sales) took place with a total sales volume transacted of $9.4
million, a 13% increase from the $8.3 million transacted in Q2 2021, continuing the strong price trends observed on
Clara during Q1 2022. The number of buyers on the platform remained stable during the quarter with the Company
maintaining a waiting list to manage supply and demand.
While most of the stones transacted through the platform are supplied from the Karowe Mine, secondary market
stones continued to be offered fo r sale through the platform with good results. Additional supply is required to
meet existing demand and drive the platform’s growth and the Company launched a series of trial sales on the Clara
platform with a third -party producer in Q2 2022. The Compan y intends to continue to seek additional supply in
2022, both from third-party producers and the secondary market.
KAROWE UNDERGROUND EXPANSION UPDATE
The Karowe UGP is expected to extend the mine life to at least 2040, with underground carat production
predominantly from the highest value EM/PK(S) unit and is forecast to contribute approximately $4 billion in
additional revenues, using conservative diamond prices. The estimated capital cost for the Karowe UGP has
increased from $534 million (including contingency ) to $547 million to reflect expected pricing changes following
execution of the main sink contract. Mine ramp up is expected in Q1 2026 with full production from the Karowe
UGP expected in H2 2026. The Company is using a combination of cash flow from op erations and project debt for
the investment in the Karowe UGP, which is fully financed.
During the three months ended June 30, 2022, a total of $29.1 million was spent on the Karowe UGP development,
primarily in relation to ongoing construction activities and procurement of long lead items, including:
• Pre-sink activities for both the production and ventilation shafts were completed, including placement and
erection of headgear for the production shaft.
• The main sink contract for the production and ventilat ion shafts was executed and main sinking of the
ventilation shaft commenced. The transition from the pre -sink to the main sinking phase has been slower than
anticipated however, opportunities have been identified to decrease main sink cycle times and reduc e the
impact to the schedule.
• The production shaft stage winder was installed and roped -up.
4
• Procurement of shaft station underground mobile equipment and the mine bulk air cooler was initiated.
• Letlhakane and Karowe power substation construction continued. The transmission line towers were erected in
preparation for the stringing of the transmission lines.
Activities for the Karowe UGP in the upcoming quarters of 2022 are expected to include the following:
• Commencement of main sinking for the production shaft.
• Awarding of bulk air cooler tender and continued procurement of underground equipment.
• Continuation of detailed design and engineering of the underground mine infrastructure and layout.
• Commissioning of the 29 km 132kV bulk power supply powerline by the end of the year.
DIAMOND MARKET
The diamond market continued its strong performance during the second quarter of 2022 with minor price
corrections observed. Solid market fundamentals supported diamond prices despite growing concerns of a global
economic slowdown as high levels of reporte d inflation persisted and governments respond with increasingly
forceful measures in attempts to reduce it to sustainable levels.
A cautious economic outlook combined with the uncertainty caused by geopolitical events, including the conflict in
Ukraine and continuing implications of the COVID -19 pandemic (specifically in China where the demand for
diamonds has not yet recovered) remain a risk to diamond pricing trends in the short term but the longer-term price
outlook remains positive.
The benefits of the committed sales agreement with HB continued to be realized during the second quarter of 2022
as the Company participated in the upside to manufacturing polished diamonds for goods delivered in previous
quarters. The integrated approach, using state of the art scanning and planning technology has further enhanced
the final achieved polished outcome for very large (+50 carat polished) and high value diamonds, a critical production
segment for the Company.
FINANCIAL HIGHLIGHTS
Three months ended
June 30,
Six months ended
June 30,
In millions of U.S. dollars, except carats or otherwise
noted
2022 2021 2022 2021
Revenues 52.3 46.3 120.5 99.4
Operating expenses (17.0) (15.1) (34.9) (34.8)
Net income for the period 12.5 6.0 31.5 9.4
Earnings per share (basic) 0.03 0.02 0.07 0.02
Earnings per share (diluted) 0.03 0.01 0.07 0.02
Operating cash flow per share(1) 0.05 0.05 0.13 0.11
Cash on hand 40.8 13.7 40.8 13.7
Amounts drawn on working capital facility – 50.0 – 50.0
Amounts drawn on project finance facility 65.0 – 65.0 –
Karowe Revenue 50.0 45.9 117.2 98.9
Average price per carat sold ($/carat)(2) 557 552 631 510
Carats sold 66,167 68,806 146,462 160,540
(1) Operating cash flow per share before working capital adjustments is a non-IFRS measure. See “Use of Non-IFRS Performance Measures” below.
(2) The Company’s revenue is primarily generated from the sale of Karowe diamonds. The average price per carat sold presented in this table relates
exclusively to the sale of Karowe diamonds and excludes top-up payments received during the quarter. Also excluded is the value of diamonds
purchased from third parties and sold by the Company through Clara. See Table 2 in the Q2 2022 MD&A for additional information.
5
QUARTERLY RESULTS OF OPERATIONS – KAROWE MINE, BOTSWANA
UNIT Q2-22 Q1-22 Q4-21 Q3-21 Q2-21
Sales
Revenues from the sale of Karowe diamonds US$M 50.0 67.2 56.5 72.5 45.9
Karowe carats sold Carats 66,167 80,295 102,791 117,162 68,806
Average price per carat - excluding top-ups(1) US$ 557 690 436 596 552
Production
Tonnes mined (ore) Tonnes 1,091,192 811,947 610,072 1,190,856 900,660
Tonnes mined (waste) Tonnes 357,764 482,104 276,263 696,907 787,227
Tonnes processed Tonnes 719,207 666,488 705,877 738,986 726,379
Average grade processed(2) cpht (*) 12.0 12.6 12.8 13.2 13.9
Carats recovered Carats 86,317 83,917 90,634 97,412 101,330
Costs
Operating expense per Karowe carat sold(3) US$ 221 212 200 193 211
Margin (mining operations) per Karowe carat sold US$ 336 478 236 403 341
Operating cost per tonne of ore processed(4) US$ 28.78 27.80 29.74 29.73 27.51
Capital Expenditures
Sustaining capital expenditures US$M 4.1 0.8 9.1 3.4 2.4
Underground expansion project(5) US$M 29.1 31.1 21.8 32.0 22.6
(*) carats per hundred tonnes
(1) Previously presented as $418 (Q4 2021), $588 (Q3 2021) and $522 (Q2 2021) per carat, respectively.
(2) Average grade processed is from direct milling carats and excludes carats recovered from re-processing historic recovery tailings
from previous milling.
(3) Previously presented as $224 (Q1 2022), $217 (Q4 2021), $198 (Q3 2021) and $219 (Q2 2021) per carat, respectively.
(4) Operating cost per tonne of ore processed is a non-IFRS measure.
(5) Excludes qualifying borrowing cost capitalized in each quarter since Q4 2021.
6
2022 OUTLOOK
This section of the press release provides management's production and cost estimates for 2022. These are
“forward-looking statements” and subject to the cautionary note regarding the risks associated with forward-looking
statements. No changes were made to the Company’s 2022 Guidance as of Q2 2022. In February 2022, b ased on
updated expectations for revenue in 2022, the diamond revenue guidance issued was increased to between $195.0
million and $225.0 million (from $185.0 million to $215.0 million). Diam ond 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.
Karowe Diamond Mine Full Year – 2022
In millions of U.S. dollars unless otherwise noted
Diamond revenue (millions) (revised as of February 2022) $195 to $225
Diamond sales (thousands of carats) 300 to 340
Diamonds recovered (thousands of carats) 300 to 340
Ore tonnes mined (millions) 3.1 to 3.5
Waste tonnes mined (millions) 1.5 to 2.1
Ore tonnes processed (millions) 2.6 to 2.8
Total operating cash costs(1) including waste mined(2) (per tonne processed) $29.50 to $33.50
Botswana general & administrative expenses including marketing costs (per tonne
processed)
$3.50 to $4.00
Tax rate(3) 0%
Average exchange rate – USD/Pula 11.0
(1) Operating cash costs are a non-IFRS measure. See “Non-IFRS Financial Performance Measures”.
(2) Includes ore and waste mined cash costs of $5.75 to $6.25 (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 wer e equal to
revenue). Capital expenditures are deductible when incurred. With planned capital expenditures of up to $110 million for the UGP, a tax
rate of 0% is forecast for 2022. Should capital expenditures vary from plan, the Company could be subject to current tax.
In 2022, the Company's revenue forecast assumes that 100% of the carats recovered will come from the higher value
M/PK(S) and EM/PK(S) units within the South Lobe in accordance with the mine plan.
The assumptions for carats recovered and sold are consist ent with achieved performance in recent years. The
number of tonnes processed is also consistent with recent achievements, noting that actual tonnes processed in
2021 was about 6% higher than 2020 due to improving plant reliability because of the success of the preventative
maintenance plan that has been implemented.
Waste tonnes that were deferred in 2021 as other mining areas in the open -pit were prioritized are expected to be
caught up in between 2022 and 2024. The estimated processing cost per tonn e processed is higher than previous
years, reflecting expected inflationary pressure on labour and commodity costs.
In 2022, capital costs for the underground expansion are expected to be up to $110 million and will focus on the
commencement of main shaft sinking activities, the commissioning of the bulk power supply 132 kV line and
substations and detailed engineering for the underground development. Sustaining capital and project expenditures
are expected to be up to $17 million with a focus on completion of a community sports facility, dewatering activities
and an expansion of the tailings storage facility.
Lucara Botswana’s progressive tax rate computation allows for the immediate deduction of operating costs,
including capital expenditures, in the year in which they are incurred. Based on the updated 2022 revenue guidance
of $195 million to $225 million and assuming the underground development expenditures are incurred, the expected
tax rate will be 0% for 2022.
7
CONFERENCE CALL
CONFERENCE CALL
The Company will host a conference call and webcast to discuss the results on Thursday, August 11, 2022 at
7:00 a.m. Pacific, 10:00 a.m. Eastern, 3:00 p.m. UK, 4:00 p.m. CET.
CONFERENCE CALL
Please call in 10 minutes before the conference call starts and stay on the line (an operator will be available to assist
you).
Conference ID:
7733206 / Lucara Diamond
Dial-In Numbers:
Toll-Free Participant Dial-In North America (+1) 800 289 0720
UK Toll free 0 800 279 6877
Local (+1) 647 484 0258
Webcast:
To view the live webcast presentation, please log on using this direct link: https://app.webinar.net/OnWVxNl9gv0
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 conference call will be available two hours after the completion of the call until August 18, 2022.
Replay number (Toll Free North America) (+1) 888 203 1112
Replay number (Local) (+1) 647 436 0148
The passcode for the replay is: 7733206 #.
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:
Tetiana Konstantynivska 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]
8
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
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 10, 2022 at 3:30pm 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 dif fer 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 Com pany 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 three
months ended June 30, 2022 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",
"possible" and similar expressions, or statements that events, conditions or results "will", "may", "could" or "should"
occur or be achieved.
Forward-looking statements are based on the opinions and estimates of management as of the date such statements
are made, and they are subject to a number of known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the Company to be materially different from any future
results, performance or achievement expressed or implied by such forward -looking statements. The Company
believes that expectations reflected in this forward -looking information are reasonable, but no assurance can be
given that these expectations will prove to be accurate and such forward-looking information included herein should
not be unduly relied upon.
In particular, forward-looking information and forward-looking statements in this news release may include, but are
not limited to, information or statements with respect to the equity and project debt financings, the intended use
of proceeds, the Company’ s ability to comply with the terms of the Facilities which are required to construct the
Karowe UGP, that expected cash flow from operations, combined with external financing will be sufficient to
complete construction of the Karowe UGP, that the estimated timelines to achieve mine ramp up and full production
from the Karowe UGP can be achieved, the economic potential of a mineralized area, the size and tonnage of a