Mr. William Lamb reports

LUCARA REPORTS STRONG DEMAND AND PRICING FOR ITS FIRST QUARTER DIAMOND SALE AND COMMENCES THE SALES PROCESS FOR THE LESEDI LA RONA DIAMOND

Lucara Diamond Corp. has released strong first quarter 2016 revenues of $50.6-million or $649 per carat and cash of $144.3-million (all dollar amounts are in U.S. dollars unless otherwise indicated).

Highlights:

Financial:

• Revenue for the period was $50.6-million or $649 per carat (first quarter 2015: $29.6-million or $278 per carat).
• Earnings before interest, taxes, depreciation and amortization for the period were $30.7-million (first quarter 2015: $11.9-million), with an EBITDA margin of 61 per cent.
• Net cash position was $144.3-million (first quarter 2015: $87.5-million and fiscal year 2015: $134.8-million).
• Year-to-date costs at $25 per tonne ore processed continue to be well controlled and below forecast.
• First quarter 2016 earnings per share were five cents per share (first quarter 2015: two cents per share).
• Following the end of first quarter, the first exceptional stone tender achieved $51.3-million, resulting in year-to-date revenue exceeding $100-million.
• The company completed the transfer of its shares of Mothae Diamonds Pty. Ltd. and the site bulk-sample plant to the government of Lesotho. In consideration, the company was released from any rehabilitation liability for the Mothae project, which had been accrued in the accounts for approximately $2-million.

Operational: Karowe mine:

• Mining of ore and waste stripping to open the pit at depth were largely in line with forecast.
• Diamond recovery remained strong with a total of 165 special stones (more than 10.8 carats) recovered during the period, including eight stones over 100 carats (first quarter 2015: six stones).

Exploration:

• Sampling progressed well with kimberlite processed from BK02. Excavation and shipping of the BK02 sample were completed (approximately 5,500 tonnes). Results for BK02 are expected to be available during the first half of 2016.
• Bulk-sampling activities at AK12 have commenced and will be followed by trenching at AK11 during second quarter.
• Deep drilling of the Karowe AK6 resource is planned to commence in the second quarter.

William Lamb, president and chief executive officer, commented: "Lucara's high-quality stones and production assortment has resulted in strong customer demand for our product, generating revenues of over $100-million this year. With management's focus on cost control, we continue to achieve high operating margins and returns. Lucara's exploration program continues to advance, and with the deep drilling of the Karowe resource due to commence in the second quarter, we are excited by the prospects for the remainder of 2016 and the potential organic growth opportunities.

"The sale of the Lesedi La Rona diamond, the 1,109-carat stone discovered in November, has commenced and is resulting in a great deal of interest and excitement for this magnificent, historic stone, culminating in an auction during the month of June."

Financial update

Cash flows and operating margins: The company achieved revenue of $50.6-million or $649 per carat, yielding a 79-per-cent operating margin or $513 per carat during the period. The company's earnings before interest, taxes, depreciation and amortization at the end of March, 2016, were $30.7-million (first quarter 2015: $11.9-million). Revenue is higher compared with the previous year largely due the sale of a larger volume of higher-quality South lobe production compared with North and Centre lobe in the prior year.

Net cash position: The company's quarter-end cash balance was $144.3-million compared with a cash balance of $87.5-million at March 31, 2015, and $134.8-million of cash at the end of 2015. The increase in cash during the period is primarily due to operating cash inflows of $16.6-million, which was partially offset by the company's final 2015 tax payment of $9.4-million, the 2016 quarterly tax instalment of $5.8-million and the payment of $4.4-million of dividends. The company's $50-million credit facility remains undrawn.

Earnings per share: Earnings per share were five cents for the three-month period ended March 31, 2016 (first quarter 2015: two-cent earnings per share).

Dividends: In 2016, the company introduced a progressive dividend with the aim to maintain or increase the Canadian-dollar dividends per share paid each year on a quarterly basis. The company paid its first quarterly dividend of 1.5 Canadian cents per share on March 31, 2016. Effective today's date, May 3, 2016, the company is declaring its second quarter dividend of 1.5 Canadian cents per share. The dividend is expected to be paid on June 16, 2016, to holders of securities on the record of the company's common shares at the close of business on June 3, 2016. The company anticipates that it will declare a further two payments of 1.5 Canadian cents per share in 2016 at the end of each quarter for a total yearly dividend of six Canadian cents per share; however, the declaration of all dividends remains in the discretion of the board of directors and is subject to the requirements of the company's dividend policy.

                           FINANCIAL HIGHLIGHTS
          (in millions of U.S. dollars unless otherwise noted)

                                                           Three months ended
                                                                 March 31,
                                                             2016        2015

Revenues (i)                                               $ 50.6      $ 29.6
Average price per carat sold (ii) ($/carat)                   649         278
Operating expenses per carat sold ($/carat)                   136         108
Operating margin per carat sold ($/carat)                     513         170
Net income for the period                                    17.1         6.0
Earnings per share (basic and diluted)                       0.05        0.02
Cash on hand                                                144.3        87.5
                                                                            
(i) Revenue is presented based on cash receipts received during the period
and excludes tender proceeds received after each quarter-end.
(ii) Average price per carat for proceeds generated during the period     
includes all sales tendered during the period, including proceeds received  
following the quarter-end.

Operations: Karowe mine

Karowe did not have any lost-time injuries during the first quarter of 2016, and all safety, health, environment and community relations indices were within target. Karowe was awarded the 2015 environmental and social responsibility award from the Prospectors and Developers Association of Canada (PDAC) for the company's stakeholder initiatives, community engagement, and focus on sustainable practices and long-term benefits at the Karowe mine.

Volume mined for the period was in line with expectation. Waste stripping to access the orebody at depth progressed well and in line with forecast.

The process plant performed well during the three months, as the tonnes milled were in excess of forecast and carats recovered were in line with expectation. During the quarter, a total of 165 special stones (more than 10.8 carats) were recovered, including eight stones over 100 carats (first quarter 2015: six stones).

The existing large diamond recovery circuit and the new megadiamond recovery circuit to recover large diamonds immediately following the primary crusher are both in detailed engineering design, with procurement of long-lead items completed.

Exploration and Mothae

Botswana prospecting licences

In 2014, the company was awarded two precious-stone prospecting licences (PL367/2014 and PL371/2014), which are known to host the kimberlites, BK02, AK11 and AK12, AK13, and AK14. The prospecting licences are located within a distance of 15 kilometres and 30 kilometres from the Karowe diamond mine. Ground geophysical surveys were conducted over the known kimberlite occurrences within the prospecting licences during fourth quarter 2014 and first quarter 2015. The geophysical results confirmed the kimberlite localities and have provided information that has been used to plan the company's core drilling and surface sampling programs. Additional geophysical surveys are planned for the second quarter of 2016.

Bulk-sampling activities at BK02 were completed in the first quarter, and processing of the surface sample was substantially completed during first quarter 2016 with audit work remaining outstanding at the end of the quarter. The BK02 diamond results will be released once processing of the sample is complete, which is expected to be in the first half of 2016, following the audit and reprocessing work, which are currently being undertaken. Bulk-sampling activities at AK12 commenced in the first quarter, and processing will begin in the second quarter of 2016 followed by trenching at AK11, which is expected to also commence in second quarter 2016. Environmental approvals for drilling campaigns on the prospecting licences are still pending with the Republic of Botswana Department of Environment Affairs.

Mothae diamond project, Lesotho

On March 31, 2016, the company completed the transfer of its shares of Mothae Diamonds Pty. Ltd. and the Mothae site bulk-sample plant to the government of Lesotho. As consideration, the government of Lesotho has released the company from all liabilities relating to the rehabilitation of the Mothae diamond project. Lucara has no remaining ownership in this project.

Outlook for 2016

Karowe mine, Botswana

Operating guidance

The company continues to forecast revenue between $200-million and $220-million for the year ending Dec. 31, 2016. This excludes the anticipated sale of the two high-value diamonds, the Lesedi La Rona and the 813-carat stone, held in inventory at March 31, 2016.

Karowe's operating cash costs for the year are expected to remain in line with guidance of between $33.50 and $36.50 per tonne of ore treated, and the mine is expected to process between 2.2 million and 2.4 million tonnes of ore, producing over 350,000 carats of diamonds in 2016.

Ore mined for the quarter is in line with previous guidance of between 3.0 million and 3.5 million tonnes, and waste mined is expected to be between 13.0 million and 14.0 million tonnes.

Capital and exploration guidance

The company's 2016 capital expenditure guidance remains unchanged for a total investment of between $15-million and $18-million for the modifications to the existing large diamond recovery (LDR) circuit and the installation of a megadiamond recovery (MDR) circuit.

The company maintains its forecast to spend approximately $3.7-million for deep drilling in the South lobe of the AK6 kimberlite with the goal of converting inferred resources below a 400-metre depth to an indicated resource. An exploration budget of up to $7.0-million is forecast for advanced bulk sampling and drilling work at the company's two Botswana prospecting licences.

The U.S. dollar/pula outlook foreign exchange rate is 10.

We seek Safe Harbor.