Mr. William Lamb reports

LUCARA REPORTS STRONG 2014 OPERATIONAL AND FINANCIAL RESULTS

Lucara Diamond Corp. had full-year revenues of $266-million and a year-end cash balance of $101-million.

Highlights

Revenues

During the year, the company had sales totalling 412,136 carats for gross proceeds of $265.5-million at an average price of $644 per carat. The increase in revenues of 47 per cent or $85.0-million compared with the prior year was due to higher prices received for the Karowe diamonds and a larger number of carats being sold in the large exceptional stone tenders, which contributed $135.6-million to revenues. The exceptional stone sales resulted in an average price of $32,471 per carat in 2014 (2013: $24,290 per carat), with the remaining tenders achieving $318 per carat (2013: $249 per carat).

Cash flows and operating margins

The company's EBITDA (earnings before interest, taxes, depreciation and amortization) for the year was $173.4-million compared with the previous year's EBITDA of $102.9-million. The strong operating margins were largely due to the exceptional stone sales and the company's focus on cost control, which resulted in a cost per tonne treated of $28 compared with guidance of $31 to $33 per tonne.

Net cash position

The company's year-end cash balance was $100.8-million compared with a cash balance of $49.4-million at the end of 2013. The increase in the company's cash balance was due to its strong operating cash flows, which more than financed the company's plant optimization expenditure of $35-million and its dividend payment to shareholders of $27-million during the year. The company's Scotiabank $50-million credit facility remains undrawn.

Karowe operating performance

Karowe's performance was in line with forecast for the year in terms of ore and waste mined, and carats recovered. Karowe recovered 815 special stones (greater than 10.8 carats; 2013 recovery of 732 specials) during the year. This included 27 stones greater than 100 carats (2013: 17 stones) and four stones over 200 carats (2013: four stones). The plant optimization program is advancing to plan, and the plant is expected be commissioned during second quarter 2015 within the $55-million forecast cost.

Adjusted earnings per share and return on capital employed

Adjusted earnings per share were 24 cents for the year ended Dec. 31, 2014 (2013: adjusted earnings per share were 17 cents), and five cents per share for the quarter ended Dec. 31, 2014 (2013: adjusted earnings per share were five cents).

The company's strong earnings have resulted in the company achieving a return on capital employed (ROCE) of 63 per cent during the year. ROCE increased from 37 per cent in 2013, following the increase in sales from the exceptional stone tender, and the company's operating and capital cost discipline.

Dividends

In 2014, the company paid a special dividend of four cents per share in addition to its regular dividend of four cents per share. The total dividend paid in 2014 by the company of $27-million (U.S.) was equivalent to a dividend yield of 3.7 per cent, based on the Toronto Stock Exchange closing price on Dec. 31, 2014, and a dividend cover of 3.4 times using adjusted net income.

Mothae divestment

On Dec. 22, 2014, the company announced it would divest of the Mothae project based on the company's development strategy and the extensive work conducted on understanding the economics of the asset. The company does not believe that sufficient shareholder value can be gained through expenditure of current cash reserves on further assessment and development of this project.

Botswana prospecting licences

The company was awarded two precious stone prospecting licences within the Orapa kimberlite field in close proximity to the Karowe diamond mine during the year. The company has ordered a bulk sampling plant and will commence work programs on the two prospecting licences during 2015.

William Lamb, president and chief executive officer, commented: "We are very pleased that our second full year of operations saw us deliver on our major commitments to our shareholders through operational delivery, which resulted in us selling over 412,000 carats for $266-million at an operating margin in excess of 80 per cent.

"We remain disciplined with our deployment of capital, focusing on completing our plant optimization program to enhance our recovery of diamonds from Karowe, advancing our exploration program in Botswana and making the decision to dispose of Mothae based on our strict investment criteria. Our focus on return on capital is driving the right behaviours, and at an average return on capital of 50 per cent over the past two years, we have built a strong balance sheet while rewarding shareholders with the payment of our first dividend during 2014. We are pleased that the continued recovery of exceptional diamonds at Karowe during the year allowed us to increase our return to shareholders with our special dividend.

"Following a period of weakening diamond prices during the end of 2014, we saw improved market conditions and firmer prices at our first sale of 2015. The long-term fundamentals for the rough diamond market continue to be strong. As a company, we remain focused on our delivery of optimal results at the Karowe mine and anticipate an exciting 2015, which will see us complete our plant optimization program during the second quarter. We will also be advancing into the higher-value South lobe on a sustainable basis during the second half of the year."

                            FINANCIAL HIGHLIGHTS
              In millions of U.S. dollars unless otherwise noted

                                        Three months ended        Year ended
                                               Dec. 31,             Dec. 31,
                                           2014       2013      2014      2013

Revenues (1)                             $ 70.5     $ 58.7   $ 265.5   $ 180.5
Average price per carat sold
($/carat)                                   675        433       644       411
Operating expenses per carat sold
($/carat)                                    89        109       115       100
Operating margin per carat sold
($/carat)                                   586        324       529       311
Net income (loss) for the period (2)      (16.8)      21.3      45.7      65.2
Adjusted net income for the period                              90.8      65.2
Earnings per share (basic and diluted)                          0.13      0.17
Adjusted earnings per share                                     0.24      0.17
Cash on hand                                                   100.8      49.4

(1) Revenue is presented based on cash receipts received during the period and
    excludes tender proceeds received after each quarter-end. See results of 
    operations in management's discussion and analysis for reconciliation of 
    revenue and total proceeds for tenders received for each quarter.
(2) Net loss in fourth quarter 2014 was mainly generated by the Mothae 
    impairment and restoration charge: $21.2-million in the period.

Results of operations

The second full year of operations at Karowe was a success, with all operational and cost targets being either met or exceeded. Safety and health LTIFR (lost-time-injury frequency rate) for 2014 was 0.99 (measured per one million hours), and 500,000 LTI-free hours had been worked on the plant optimization project. At year-end, Karowe reported 1,064,481 LTI-free hours. No reportable environmental incidents occurred during the year.

Mining and process production at Karowe were in line with forecast for 2014. Tonnes of ore mined were in line with forecast and at a slightly higher grade. Waste stripping was also in line with the mine plan, achieving three months of exposed ore for plant feed at year-end. The process plant has dealt with processing the increasingly harder ore encountered at depth, and the plant upgrade project has progressed well, and delivered two new circuits and the large diamond recovery within 2014 as per schedule.

Review of projects

Mothae diamond project, Lesotho

The Mothae project is located in northeast Lesotho. On Dec. 22, 2014, the company announced it would divest of the Mothae project. The company does not believe that sufficient shareholder value can be gained through expenditure of current cash reserves on further assessment and development of this project.

The company's decision to cease development resulted in an impairment charge of $18.8-million in 2014, which is included in other expenses and reflects a writedown of the Mothae project's carrying value of $18.8-million. The company also incurred a $2.4-million restoration charge to increase its Mothae closure cost provisions to $2.9-million.

Karowe plant optimization project

The plant upgrade project to modify the process plant to treat harder, more dense ore at depth is well advanced. The company has spent approximately $35-million of the forecasted $55-million. A bleed-screen circuit and secondary gyratory crusher have been commissioned, along with the large diamond recovery circuit, which has been installed and in operation since September, 2014.

2015 outlook

The following provides management's production and cost estimates for 2015. These are forward-looking statements and subject to the cautionary note regarding the risks associated with forward-looking statements.

Karowe mine, Botswana

Karowe is forecast to process 2.3 million to 2.5 million tonnes of ore and to sell 400,000 to 420,000 carats of diamond in 2015. Revenue is forecast between $230-million and $240-million.

Ore mined is forecast between 2.5 million and 2.8 million tonnes, and waste mined is expected to be between 12.0 million and 12.5 million tonnes.

Karowe's operating cash costs are expected to be between $33 and $36 per tonne of ore treated.

Capital expenditures include the completion of the Karowe plant optimization project during the second quarter of 2015 for a total cost of $55-million, and sustaining capital expenditure is forecast between $7.5-million and $8.5-million in 2015. This includes a mill relining machine for a full cost of $5-million, of which $3-million was spent in 2014.

The company has also forecast exploration expenditures of $7.0-million to $8.0-million for work on its two Botswana prospecting licences, of which $2.0-million of a forecast total cost of $4.5-million on a bulk sample plant was spent in 2014.

A full copy of the company's financial statements, and management's discussion and analysis has been filed on its website, and under its profiles on SEDAR and the Botswana Stock Exchange website.

We seek Safe Harbor.