Lucara progresses P6bn underground mine

Lucara Diamond Corporation expects to spend $110 million (P1.3 billion) this year in developing an underground operation at its Karowe Mine where full production is due by 2026.

Karowe, which is situated near Letlhakane, has become world-famous for large diamond discoveries such as Lesedi la Rona, the Constellation and Sewelo.

The underground mine represents Karowe’s future and is expected to yield additional revenues of $4 billion (P47 billion) up to at least 2040.

Progress at the underground operation was interrupted by COVID-19, with officials cautioning that budgets and equipment procurement could be affected.

Updating on the group’s financial results for the year ended December 31, 2021, Lucara Botswana managing director, Naseem Lahri said all development activities were proceeding at strength towards production in four years.

“The group expects this year’s capital costs for the underground expansions to be up to $110 million and will focus on the commencement of main shaft sinking activities, the commissioning of the bulk power supply 132kV line and substations as well as detailed engineering for the underground development,” she said.

Work has been ongoing on the underground project for more than 18 months and by December 2021, $86.3 million (P967 million) had been spent primarily in relation to engineering and procurement of long-lead items as well as the commencement of construction activities.

The underground mine is expected to cost $534 million (P6.2 billion) to develop, making it one of the most expensive investments in expansion in the country. Last year, Lucara directors announced that debt funding for the project had been fully secured with drawdowns commencing.

This year, expenses associated with sustaining capital and project expenditures at Karowe’s existing open pit mine are expected to be up to $17 million (about P200 million) with a focus on completion of a community sports facility, dewatering activities and an expansion of tailings storage facility.

Lucara recorded an 84% increase in revenues to $230.1 million (P2.7 billion) in the year to December 2021, with net incomes of $23.8 million (P277 million) compared to net losses of $26.3 million (P306 million) in 2020.

“Diamond price recovery began in the fourth quarter of 2020 and had largely improved to pre-pandemic levels by the end of 2021, owing to strengthening diamond jewellery demand against a backdrop of declining global diamond supply,” directors said in their financial results update last week.

“Importantly, this price strength has been broad-based, observed across a range of sizes, qualities and colours for both rough and polished diamonds, highlighting a return to a healthier, balanced supply chain and a positive outlook for sustained price strength going forward.”

Lucara expects revenues to reach as much as US$225 million (P2.6 billion) this year, a revision from the original forecast of US$215 million (P2.5 billion) due to the expected strength in rough and polished diamond markets.