Lucara Diamond Corp Unveils Strategic 2018 Outlook for Karowe Mine: High-Value Production and Future Growth

Lucara Diamond Corp, a leading diamond producer with a track record of discovering and selling exceptionally large and high-quality diamonds, has released its highly anticipated production and revenue forecasts for 2018 from its world-renowned Karowe Mine in Botswana. The company projects robust performance, driven by strategic operational advancements and the continued extraction of high-value ore. This outlook underscores Lucara’s commitment to maximizing shareholder value through efficient mining practices and leveraging the unique geological characteristics of its flagship asset.

Dominant Production and Revenue Projections for 2018

For the fiscal year 2018, Lucara Diamond Corp anticipates an impressive production volume from its Karowe Mine, estimated to range between 270,000 to 290,000 carats. This substantial output is expected to translate into significant financial returns, with revenue forecasts set between US$170 million and US$200 million. These projections reflect a confident stance on the market for high-quality diamonds and the operational efficiency achieved at the Karowe site.

A key driver for these optimistic figures is the company’s strategic focus on mining robust volumes from the Karowe Mine’s highly prospective South Lobe. This particular geological zone is renowned for its exceptional diamond endowment. To facilitate this increased output, Lucara forecasts a substantial increase in ore mined, expected to reach between 2.5 million and 2.8 million tonnes in 2018. This represents a considerable boost from the 2017 forecast of 1.4 million to 1.6 million tonnes, highlighting the accelerated pace of operations and the deeper access to the valuable ore body.

The Strategic Importance of Karowe’s High-Value South Lobe

While the South Lobe grades, which are anticipated to constitute approximately 85% of the total output in 2018, are noted to be comparatively lower than those found in the Centre and North Lobes, resulting in lower overall diamond recoveries, Lucara emphasizes a crucial distinction. The overall higher diamond quality and intrinsic value characteristic of the South Lobe significantly outweigh the lower recovery rates. This unique attribute leads to substantially higher average sales prices for the diamonds recovered from this area, consequently driving superior revenues and stronger cash flows for the company.

This phenomenon is a testament to the exceptional nature of Karowe diamonds, particularly those from the South Lobe, which are frequently of Type IIa classification – a chemically pure and structurally perfect type of diamond that often yields large, high-value stones. The market for these premium diamonds is robust, allowing Lucara to achieve prices that compensate for, and indeed surpass, what might be expected from conventional grade-to-value metrics. This strategic focus ensures that Lucara is not just producing diamonds, but is extracting highly sought-after assets that command top-tier pricing in the global luxury market.

Exceptional Diamonds: An Upside to Revenue Forecasts

Lucara’s revenue forecast for 2018 holds an exciting caveat: it expressly excludes the potential sale of significant, high-quality exceptional stones. This exclusion is a strategic decision that acknowledges the inherently unpredictable, yet potentially monumental, impact that such rare finds can have on the company’s financial performance. Any high-value diamonds recovered throughout the year possess the potential to significantly enhance Lucara’s reported revenue, offering a substantial upside to the already strong base projections.

The Karowe Mine has a well-established history of unearthing world-class diamonds. To date, it has famously produced and sold the world’s two highest-value rough diamonds: the iconic Lesedi La Rona and the magnificent Constellation. These two extraordinary gems alone garnered a combined value of an astounding $116.1 million, showcasing the mine’s unparalleled capacity for yielding generational finds. Beyond these two titans, Karowe has also successfully sold an impressive seven other rough diamonds, each exceeding the $10 million mark. This proven track record solidifies Karowe’s reputation as a prolific source of truly exceptional diamonds, making the “exceptional stone” clause a critical aspect of Lucara’s financial narrative and investor appeal.

Paving the Way for Future Growth: The Underground Mine Project

Looking beyond current open-pit operations, Lucara Diamond Corp is actively pursuing long-term sustainability and growth through the potential development of an underground mine at Karowe. The Preliminary Economic Analysis (PEA) for this ambitious project, which aims to commence production shortly before the projected completion of the current open pit, has already yielded positive results. A PEA provides an initial assessment of the economic viability of a mining project, outlining potential capital costs, operating costs, and revenue streams.

Building on this positive foundation, Lucara is now diligently conducting a Pre-Feasibility Study (PFS). The PFS represents a more detailed and comprehensive evaluation than the PEA, involving more in-depth engineering, geological modeling, and cost estimation. This critical stage of project development is expected to be finalized and reported in the second quarter of 2018. The successful transition to underground mining would significantly extend the operational lifespan of the Karowe Mine, ensuring sustained production and revenue generation well into the future, and solidifying Lucara’s position as a long-term player in the high-value diamond sector.

Operational Efficiency and Cost Management at Karowe

Effective cost management is paramount to profitability in the mining sector. Lucara expects Karowe’s operating cash costs to range between $38.0 and $42.0 per tonne processed. This figure reflects the ongoing significant operational activities, particularly the continuous advancement of the major push-back strategy. This “push back” involves removing substantial volumes of waste rock to safely and efficiently access the deeper, high-value South Lobe ore body. It is a critical, capital-intensive phase designed to ensure the long-term viability and accessibility of the mine’s most valuable resources.

When considering operating cash costs excluding waste mining, which provides a clearer picture of the direct processing costs, the forecast narrows to an even more efficient range of $21 to $24 per tonne processed. This distinction highlights the significant investment required for waste removal as part of the mine’s overall development strategy, underscoring the scale of the earth-moving operations necessary to unlock the deep-seated diamond-bearing kimberlite. Lucara’s diligent management of these costs is crucial for maintaining healthy profit margins and ensuring the economic viability of extracting these precious stones.

A Strategic Vision for Sustainable Growth and Free Cash Flow

William Lamb, President and Chief Executive Officer of Lucara Diamond Corp, articulated the company’s overarching strategic vision, emphasizing the dual focus on immediate production and long-term development. “The Company is forecasting to mine robust volumes from the high-value South Lobe and continuing waste mining to complete the push back at the Karowe mine to fully access South Lobe ore,” he commented. This statement reinforces the core operational priorities for 2018.

Mr. Lamb also highlighted the sustained momentum in advancing internal growth projects throughout 2018, notably the pre-feasibility study for the potential underground mine at Karowe. Complementing this, Lucara continues to invest in its exploration portfolio, seeking to identify new diamondiferous kimberlite occurrences that could become future sources of value. Furthermore, he noted the successful completion of the MDR (Medium Density Recovery) and sub-middles projects, which likely enhance diamond recovery efficiency. With the expected completion of the cut 2 waste push back in early 2019, operating and capital costs are forecast to undergo significant reductions in subsequent periods. This strategic trajectory is specifically designed to contribute positively to free cash flow generation in future periods, ultimately enhancing long-term shareholder returns and ensuring Lucara’s sustainable leadership in the diamond industry.