Lucara Diamond Releases Positive Feasibility Study for Karowe

The results of a feasibility study from Lucara Diamond (TSX:LUC,OTC Pink:LUCRF) paint a hopeful picture for its Karowe underground expansion, promising to double the lifespan of the mine.

Since the mine opened in 2012, it has put out 2.5 million carats and generated US$1.5 billion in revenue. Monday’s (November 4) feasibility study shows the expansion will create US$5.25 billion in gross revenue and US$1.22 billion in cash flow, and estimates production of 7.8 million carats out to 2040. 

“Diamond deposits are rare and getting rarer. In this context, we are extending a mine that is in a class of its own, having produced 15 diamonds in excess of 300 carats, including 2 greater than 1,000 carats in just seven years of production,” CEO Eira Thomas said in a press release.

“Further, we have sold 10 diamonds for in excess of US$10 million each, including the record-setting 813 carat Constellation which sold for US$63.1 million,” she added.

Lucara CFO Zara Boldt shares this hope, and noted the resiliency of the company as oversupply and downtrodden economies affect the diamond industry.

“Lucara is weathering the current downturn in the diamond market better than most of our peers,” she said in the same press release. “Karowe’s high value deposit and unique production profile has allowed us to generate enough cash to operate our business, develop the Clara sales platform and to have been a steady dividend payer.”

The feasibility study confirms that ore from underground mining will easily integrate into current operations, providing mill feed starting in 2023. Current production rates should be maintained throughout the underground ramp-up period.

Pre-production capital costs for the underground expansion stand at US$514 million, with operation costs estimated at US$28.43 per tonne of ore processed. 

The combined open-pit and underground indicated resource now stands at 54.27 million tonnes at 15.3 carats per 100 tonnes for a contained diamond resource of 8.3 million carats, excluding stockpiles.

Lucara Diamond also announced its Q3 results on Monday, which show that the company lost money when compared to the previous year. The company reported revenue of US$4 million in the latest quarter, which is equivalent to a loss per share of US$0.01; in the year-ago quarter, it reported revenue of US$5.1 million, which came out to earnings per share of US$0.01.

Edward Sterck of BMO Capital Markets reflected on Lucara’s health after the releases, noting that the company will still suffer from the struggling diamond market, despite what its chief executives say. 

“With the diamond market remaining weak due to ongoing diamantaire liquidity constraints, we have reduced our Q3 EBITDA estimate to US$10.5 million from US$15 million on reduced diamond price expectations,” said Sterck in a note to clients.

As of 2:01 p.m. EST on Tuesday (November 5), Lucara’s share price was at C$0.94. 

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Securities Disclosure: I, Sasha Dhesi, hold no direct investment interest in any company mentioned in this article.