LUCARA ANNOUNCES YEAR END 2023 RESULTS; CONTINUED DEVELOPMENT OF THE UNDERGROUND PROJECT

VANCOUVER, BC, Feb. 20, 2024 /CNW/ – (TSX:LUC) (BSE: LUC) (Nasdaq Stockholm: LUC)

Lucara Diamond Corp. (“Lucara” or the “Company”) today reports its results for the year and quarter ended December 31, 2023. All amounts are in U.S. dollars unless otherwise noted. View PDF

FISCAL 2023 HIGHLIGHTS

The recovery of a 1,080 carat Type IIA white gem quality diamond in August 2023, followed by a recovery of a 692 carat Type IIA diamond later in the month. The fourth +1000 carat stone recovered from the Karowe Mine.
The Karowe Mine recorded record plant throughput of 2.8 million tonnes milled for the year.
In January 2024, the successful execution of an amended project financing debt package of $220 million to amend the repayment profile in line with the rebase schedule released in July 2023 for the Karowe Underground Project (“UGP”).
On February 18, 2024, the Company announced the signing of a new definitive sales agreement (“NDSA”) with HB Trading BV (“HB”) in respect of all qualifying diamonds produced in excess of 10.8 carats in size from the Karowe Mine.
Total revenue of $177.4 million for 2023, in line with revised guidance.
Cash flow generated from operating activities of $63.4 million for 2023.
2023 operating cash cost of $28.75 per tonne of ore processed(1).
Investment of $101.3 million in the Karowe UGP in 2023. Significant sinking progress was made in both the production and the ventilation shafts during the second half of 2023.

William Lamb, President & CEO commented: “2023 was a challenging year for Lucara. Although mining activities in the open pit continued to show ongoing sustainable improvements, including record production through the mill, the development on the UGP experienced delays in the early part of the year. Positive progress was made in the sinking of both the production and the ventilation shafts resulting in both shafts starting lateral development at the 670 level at the end of the year. The Company has dedicated significant effort and resources to focus on the UGP as this project represents a very exciting and valuable future for Lucara.

The diamond market in general remains a volatile environment with market challenges coming from multiple areas. Lucara remains well positioned to meet these market challenges head on due to its unique high value production mix and its ability to provide provenance for its diamonds through its well-defined sales channels. Our sales strategy which focuses on gaining access to the upstream value chain from polished diamonds is well aligned to the strategies of the Government of the Republic of Botswana. The Company aims to continue working toward long-term sustainable business practices to provide value for all our stakeholders.” 

REVIEW FOR THE YEAR ENDED DECEMBER 31, 2023

Operational highlights from the Karowe Mine for 2023 included:

Ore and waste mined of 2.7 million tonnes (“Mt”) (2022: 3.3Mt) and 3.1 million tonnes (2022: 1.5Mt), respectively.
2.8 million tonnes (2022: 2.8Mt) of ore processed.
A total of 395,134 carats recovered, including 18,509 carats from the processing of historic recovery tailings, (2022: 335,769 carats) at a recovered grade of 13.2 carats per hundred tonnes (“cpht”) of direct milled ore (2022: 12.1 cpht).

A total of 602 Specials (stones larger than 10.8 carats in size) were recovered, with 22 diamonds greater than 100 carats including five diamonds greater than 300 carats.
Recovered Specials equated to 5.3% of the total recovered carats from ore processed during 2023 (2022 – 7.2%).

The Karowe Mine has operated continuously for over three years without a lost time injury.

Financial highlights for 2023 included:

Revenues of $177.4 million (2022: $212.9 million) achieved despite a weaker rough diamond market. Fourth quarter pricing stabilized in smaller goods and increases of 5% were observed compared to the third quarter of 2023, albeit approximately 19% below prices observed in the fourth quarter of 2022. Revenue reflects the weighting of Lucara’s revenue towards larger goods where pricing was observed to be more stable. The performance further reflects the increased volume of material processed from the North and Centre lobes in the first half of the year. During 2023, 26% of the carats processed were recovered from the Centre Lobe, 3% from the North Lobe and 71% were recovered from South Lobe ore (2022: 100% South Lobe ore). In comparison to the revenue earned in 2022, current year revenues reflected a more diverse product mix with a return to Centre and North Lobe processing during the year.
Operating margins of 56% were achieved (2022: 63%). A strong operating margin continues to be achieved through cost reduction initiatives assisted by a strong U.S. dollar.
Adjusted EBITDA(1) was $54.4 million (2022: $86.7 million), with the decrease attributable to the change in revenue.
Net loss was $20.2 million (2022: net income of $40.4 million), resulting in a loss per share of $0.04 (2022: earnings of $0.09). The change to a net loss is due to the decrease in revenue, an impairment of intangible assets, and a significant non-cash deferred tax expense as the investment in the underground expansion project continues.
The Company identified an impairment indicator for the Company’s Clara sales platform and completed an impairment test based on the fair value less cost of disposal expected to be derived from the platform. An impairment was recognized on the intangible asset by $11.2 million in Q4 2023.
Cash flow from operating activities was $63.4 million (2022: $96.2 million).

During 2023, the Company invested $101.3 million into the Karowe UGP, including capitalized borrowing costs:

Shaft sinking, lateral development and grouting programs were the focus in both the ventilation and production shafts in Q4 2023. At the end of 2023, the production and ventilation shafts were both at 348 metres below collar or 666 metres above sea level (“masl”) and the process of establishing the first shaft stations and lateral connection between the two shafts (670 level) had commenced.
During Q4 2023, the ventilation shaft sank 76 metres, the 718 slinging cubby was completed, the 670-level station catwalk was established and the lateral station development commenced. Total lateral development in Q4 2023 was 97 metres. During the quarter, development equipment, including a Kubota, a Sandvik DD321 boom jumbo drill and a Caterpillar R1300G 7-tonne load, haul, dump unit were mobilized at the 670-level for lateral development mining. Sinking and lateral development was in the Thlabala mudstones in dry conditions.
Production shaft activities included sinking a total of 114 metres and establishing the 670-level station catwalk and initiating lateral development. A total of 30 metres of lateral development was completed.
Commissioning of the temporary bulk air coolers at each shaft was completed and construction of the permanent bulk air coolers at the production shaft continued.
Detailed engineering and fabrication of the permanent men and materials winder commenced during the quarter, representing the last major component for the permanent winders.

Cash position and liquidity at December 31, 2023:

Cash and cash equivalents of $13.3 million.
Working capital deficit (current assets less current liabilities) of $16.6 million.
Cost overrun facility (“COF”) of $18.6 million.
$90.0 million drawn on the $170.0 million Project Loan (“Project Loan”) for the Karowe UGP.
$35.0 million drawn on the $50.0 million working capital facility (“WCF”).

On January 9, 2024, the Company announced that it had signed amended documentation in relation to the senior secured project financing debt package of $220.0 million (the “Facilities”) executed in July 2021 (the “Rebase Amendments”). The project facility portion had been increased from $170.0 million to $190.0 million, while the working capital facility had been decreased from $50.0 million to $30.0 million. While the total quantum of the Facilities has not changed, the repayment profile has been extended in line with the rebase schedule released on July 17, 2023, and the maturity of the WCF has been extended to June 30, 2031.
During 2023, the Company announced the appointment of William Lamb as Chief Executive Officer, effective August 17, 2023, and Glenn Kondo, as Chief Financial Officer, effective January 1, 2024. Eira Thomas and Zara Boldt departed during 2023.

DIAMOND MARKET

The long-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 end of life. Currently, slower than anticipated economic growth in China and a voluntary import ban on rough diamonds into India in Q4 2023 dampened the recovery of rough diamond prices towards the end of 2023. Changes in global economic conditions, consumer demand, geopolitical events, and industry-specific dynamics resulted in a challenging market in 2023 with reduced demand and downward pressure on both polished and rough diamond pricing, especially in the smaller size classes. Restricted supply by the largest producers towards the end of 2023, together with the Group of Seven discussions surrounding sanctions on rough diamonds from Russia, resulted in low levels of price recovery at the end of 2023.

Sales of lab-grown diamonds increased steadily through 2023 with many smaller retail outlets increasingly adopting these diamonds as a product. Lab-grown stones have established themselves in the marketplace and is expected to continue to take up increasing market share in the smaller to medium sized goods over time. The longer-term market fundamentals for natural diamonds remain positive, pointing to continued price growth as demand is expected to outstrip future supply, which is now declining globally.

2024 OUTLOOK

This section of the press release provides management’s production and cost estimates for 2024. 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 have been made to the Company’s Guidance which was released in November 2023.

DIAMOND SALES

Karowe diamonds are sold through three separate and distinct sales channels, namely through the HB sales agreement, on the Clara digital sales platform and through quarterly tenders.

SALES 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 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 continued to be manufactured and sold as polished diamonds. The Company …

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