Ms. Eira Thomas reports

LUCARA PROVIDES KAROWE UNDERGROUND EXPANSION PROJECT UPDATE

Lucara Diamond Corp. has provided an update on the Karowe underground expansion project. The Karowe UGP is designed to reach the highest-value portion of the Karowe orebody, extend mine life to at least 2040, and deliver approximately $4-billion in additional revenues using conservative diamond price assumptions which are unescalated and exclude exceptional stone revenues.

Management initiated an update to the UGP schedule and budget in response to a slower-than-planned ramp-up to expected sinking rates and to account for time incurred to date, as well as for anticipated future grouting programs. Grouting programs took longer than anticipated due to a combination of high water volumes in the sandstone lithologies between 870 and 752 metres above sea level in depth (144 metres to 262 metres below the shaft collar) combined with technical challenges associated with the transition to main sinking. The updated schedule incorporates a 28-per-cent increase in the duration of construction, extending the anticipated commencement of production from the underground from second half 2026 to first half 2028. As a result, the revised forecast of costs at completion is $683-million, a 25-per-cent increase to the May, 2022, estimated capital cost of $547-million.

The project remains technically and economically feasible; however, the impact of actual and modelled delays changes the revenue profile due to the use of lower-grade, stockpiled ore for mill feed rather than high-grade ore from the underground as previously planned. Sufficient surface stockpiles of South, Centre and North Lobe kimberlite ore are available to maintain current, uninterrupted mill feed to the plant for the duration of the anticipated delay. The long-term outlook for diamond prices, combined with the potential for exceptional stone recoveries and the continued strong performance of the open pit, could mitigate the modelled impact on project cash flows due to the schedule slippage.

Eira Thomas, chief executive officer, commented: "Lucara has made tremendous progress on the Karowe underground expansion project despite many challenges over the last year as we transitioned into the main sink phase of the underground development. Schedule delays due to longer-than-anticipated grouting activity have impacted the project timeline; however, the grouting methodology selected has proven to be effective in controlling water inflows. As we transition out of the sandstones in early [fourth quarter] 2023, we look forward to meeting planned sinking rates. Despite these challenges, the project continues to deliver strong economics, paying back capital in under three years and adding approximately $4-billion in revenues from an extended mine life out to at least 2040, using conservative diamond price assumptions. The project also comes at a time when the long-term outlook for the diamond market is stronger than it has been for many years, representing an exciting growth opportunity for our shareholders and stakeholders in Botswana."

Lucara's major shareholder remains supportive of the Karowe asset and the long-term potential of the Karowe UGP.

Adam Lundin commented: "The Karowe underground mine expansion provides access to the highest-value portion of the orebody responsible for delivering numerous record-breaking diamonds in respect of size and value, including three diamonds in excess of 1,000 carats. The project remains highly economic, despite the delays incurred, and as Lucara's largest shareholder, we remain fully supportive of the company."

Highlights:

• While the existence of water-bearing sandstones layers was anticipated, grouting within the regional Ntane and Mosolotane sandstone aquifers has required significantly more volumes of chemical grout. In addition, some remedial grouting in previously dry portions of the sandstone horizons has been required in the ventilation shaft. These factors account for most of the incurred delays.
• Planned grouting events to the base of the Mosolotane sandstone/mudstone transition are expected to be completed early in fourth quarter 2023. After completion of the current sandstone layer being grouted, one further grouting event is planned in the ventilation shaft (currently 213 metres below collar). Two additional grouting events are planned within the production shaft (currently 185 metres below collar). Thereafter, further grouting is not anticipated to be required until sinking reaches the granite basement lithologies in late 2024. Grouting in the granite lithologies is expected to be localized, rather than formational in nature. Total depth of the final shaft bottoms is 765 metres and 731 metres below surface for the production and ventilation shafts, respectively.
• The project has been operating with an excellent safety record, including 1,244 days and greater than 3.3 million hours lost time injury free and a total recordable injury frequency rate of 0.59.
• The increase of $136-million in estimated capital to reach project completion is predominantly related to increased schedule duration and related labour costs (approximately 56 per cent of total) and grouting costs (approximately 20 per cent of total capital increase), which have been financed through contingency. The remaining cost increases are related to owner's costs, procurement and indirect project costs.
• As at June 30, 2023, capital expenditures of $264.5-million had been incurred, and capital commitments of $369.7-million had been made.
• The remaining forecast to complete construction of the project as of June 30, 2023, is $419-million, including unallocated contingency of $49.3-million (12 per cent).
• Karowe open-pit and processing units continue to perform to budget expectations, and the planned ore feed for the rest of 2023 has transitioned to a South Lobe dominant mill feed. As a result, the recovery of large high-value 100-plus-carat diamonds sourced from the M/PK(S) and EM/PK(S) units is in line with resource expectations and previous half-year recoveries.

Qualified persons

This press release has been reviewed and approved by Dr. John Armstrong, PhD, PGeol, vice-president, technical services, of the company, a qualified person for the purposes of National Instrument 43-101, and Gord Doerksen, PEng, of JDS Energy and Mining Inc., an independent qualified person under National Instrument 43-101.

About Lucara Diamond Corp.

Lucara is a leading independent producer of large exceptional-quality Type 2a diamonds from its 100-per-cent-owned Karowe mine in Botswana and owns a 100-per-cent interest in Clara Diamond Solutions, a secure, digital sales platform positioned to modernize the existing diamond supply chain and ensure diamond provenance from mine to finger. The company has an experienced board and management team with extensive diamond development and operations expertise. The company operates transparently and in accordance with international best practices in the areas of sustainability, health and safety, environment, and community relations.

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