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Karowe expansion extends mine life to 2040

Publishing Date : 11 November, 2019

Author : AUBREY LUTE

This week Canadian conceived top gem producer,  Lucara Diamond Corporation reported positive  results from the underground Feasibility Study to expand its 100 % owed Karowe diamond mine, one of the world’s most prolific producers of large, high value type IIA diamonds and the only diamond mine in recorded history to have produced two +1000 carat diamonds.


A statement from Lucara states that  the underground expansion at Karowe is expected to double the mine life, and generate significant revenue and cash flow out to 2040, extending benefits to the Company, its employees, shareholders, communities surrounding the mine, and Botswana. The Underground mining operation combined with the current open pit mining is expected to yield production figures of upto 7.8 million carats out to 2040 and $5.25 billion in Gross Revenue at pre-production capital costs of $514 million for the underground project.


Lucara further revealed that After-tax undiscounted net cash flow of $1,220 million is projected to be gathered from this operation assuming no real diamond price escalation. Karowe Mine has produced 2.5 million carats since 2012 and generated $1.5 billion in revenue. According to findings from the study Long hole shrinkage underground bulk mining method selected will provide early access to higher value ore and allows for a short payback period of 2.8 years and low operating costs of $28.43 per tonne processed.


 On the basis of a construction start in mid-2020, ore from underground mining will seamlessly integrate into current operations providing mill feed starting in 2023 with a ramp up to 2.7Mtpa to the processing plant by 2026, and the opportunity to increase throughput. The Underground is designed to access the South lobe kimberlite resource below the current planned bottom of the open pit which is expected to be at approximately 700 meters above sea level (“masl”)), to a depth of 310 masl. Access to the South Lobe underground will be via two vertical shafts being production and ventilation of approximately 765 and 715 meters deep respectively.


The statement further states that Identified key focus areas of hydrogeology, geotechnical constraints of the kimberlite and host rocks have been addressed through an intensive set of work programs and data collection that commenced during the Preliminary Economic Assessment completed in November 2017 and were substantially updated and augmented by the FS study. Commenting on the findings Lucara Chief Financial Officer Zara Boldt, said the company was weathering the current downturn in the diamond market better than most of its peers.


“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,” he said. Based on the strong economics outlined in the feasibility study, Zara noted that Lucara was confident that external financing requirement will be modest and that attractive financing options are available to supplement the expected contribution of the company cash flow from operations to fund the underground project.


“We are optimistic about diamond prices recovering in the short to medium term as global supply decreases next year and we have also identified a number of optimization opportunities for the underground that could add additional value to the project in the near term,” he said.
Eira Thomas, Lucara President and CEO noted that her company is highly encouraged by the results of the Karowe Underground feasibility study which has outlined a much larger economic opportunity than first envisaged in the 2017 PEA and represents an exciting. “This is a world class growth project for our Company,” she said.


Thomas explained that a significant portion of the cost to expand Karowe Mines into an underground operation will be funded from cash flow, and the investment is expected to be paid back in less than 3 years. “The underground allows us to exploit the highest value part of the ore body first and generate more than $5.25 billion in gross revenue. What’s more, margins remain healthy despite the application of conservative diamond pricing models that reflect the current, difficult market environment,” she said. The CEO further said that they believe the market is now stabilizing with a view that the fundamentals are expected to strengthen in line with supply shortfalls from mature, depleting mines in Australia and Canada.

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