Ms. Eira Thomas reports

LUCARA ANNOUNCES Q2 2023 RESULTS

Lucara Diamond Corp. today released its results for the quarter ended June 30, 2023.

Q2 2023 highlights

• Guidance maintained;
• Revenue for the quarter ended June 30, 2023, totalled $41.1-million;
• The Q2 2023 operating cash cost of $27.97 per tonne of ore processed was well below the expected annual operating cash cost range of $32.50 to $35.50 per tonne of ore processed;
• All key operational metrics were on plan, with 0.7 million tonnes of ore and 0.9 million tonnes of waste mined, 0.7 million tonnes of ore processed, and 90,497 carats recovered from direct milled ore;
• Cash flow generated from operating activities was $9.2-million;
• An updated schedule and budget for the Karowe underground expansion project (Karowe UGP) was released. The duration of the construction period increased, extending the anticipated commencement of production from the underground from H2 2026 to H1 2028. The revised forecast of costs at completion is $683-million;
• 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;
• An investment of $22.5-million in the Karowe UGP in Q2 2023 focused on sinking and grouting programs in the ventilation and production shafts.

Eira Thomas, president and chief executive officer, commented: "Karowe delivered another solid quarter against plan in Q2 and as we returned to mining in the south lobe, the proportion of specials (diamonds greater than 10.8 carats) increased and has so far included the recovery of 13 stones over 100 carats that will be polished and sold in the latter half of the year. The rebased schedule and budget will delay production from the underground and has increased costs by approximately 25 per cent, however, sufficient surface stockpiles ensure that the mill will operate to capacity during this period and the project remains economically robust. The expansion continues to have the support of our largest shareholder."

Review for the quarter ended June 30, 2023

• Operational highlights from the Karowe mine for Q2 2023 included:
  • Ore and waste mined of 0.7 million tonnes (Q2 2022: 1.1) and 0.9 million tonnes (Q2 2022: 0.4), respectively;
  • 0.7 million tonnes (Q2 2022: 0.7) of ore processed;
  • A total of 90,497 carats recovered (Q2 2022: 86,317) at a recovered grade of 12.6 carats per hundred tonnes of direct milled ore (Q2 2022: 12.0):
    • A total of 162 specials were recovered, with 13 diamonds greater than 100 carats including four diamonds greater than 200 carats in weight;
    • Recovered specials equated to 6.6 per cent of the weight percentage of total recovered carats from ore processed during Q2 2023 (Q2 2022 -- 6.1 per cent).
  • The Karowe mine has operated continuously for over 2.5 years without a lost-time injury.
• Financial highlights for the three months ended June 30, 2023, included:
  • Revenues of $41.1-million (Q2 2022: $52.3-million) reflected a continuation of weaker diamond prices and a planned change in product mix beginning in early 2023. During Q2 2023, 12 per cent of the carats processed were recovered from the Centre Lobe and 88 per cent were recovered from South Lobe material (Q2 2022: 100 per cent South Lobe ore). Most of the carats recovered in the second quarter will be sold in the third quarter of 2023;
  • Operating margins of 59 per cent were achieved (Q2 2022: 67 per cent). A strong operating margin continues to be achieved despite price softness in the rough diamond market;
  • Karowe's plus 10.8 production, sold through HB, accounted for 63 per cent (Q2 2022: 65 per cent) of total revenues recognized in Q2 2023;
  • Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $15.7-million (Q2 2022: $24.4-million), with the change directly attributed to a decrease in revenues;
  • Net income was $5.0-million (Q2 2022: $12.5-million), or one cent earnings per share (Q2 2022: three cents).
• During Q2 2023, the company invested $22.5-million into the Karowe UGP:
  • Grouting programs were the focus in both the ventilation and production shafts. A grout cover was completed in the ventilation shaft along with remedial grouting behind the concrete liner in previously dry portions of the shaft. In the production shaft, a grout cover was initiated 10 metres earlier than planned due to increased water inflows related to a water-making subvertical joint feature. Additional grouting was required to seal off areas within an earlier grout cover;
  • Shaft sinking in the ventilation shaft comprised 30 metres of vertical advance in April followed by grouting. Sinking resumed in July, 2023, eight days ahead of schedule;
  • In the production shaft, a total of 27 metres of vertical advance was achieved during Q2, with the remainder of time dedicated to grouting;
  • All components of the bulk power supply upgrade, including the Letlhakane and Karowe Substations and 132-kilovolt power line, were handed over to Botswana Power Corp.;
  • Mobilization for civil works related to construction of the bulk air cooler contractor commenced in late June;
  • A contract for fabrication of the permanent men and materials winder was signed during the quarter, representing the last major component for the permanent winders.
• Cash position and liquidity at June 30, 2023:
  • Cash and cash equivalents of $26.7-million;
  • $90.0-million drawn on the $170.0-million project loan for the Karowe UGP, with no draws on the facility during the second quarter;
  • The outstanding balance on the WCF increased from $23.0-million to $35.0-million through Q2 2023, resulting in available liquidity of $15.0-million;
  • The company has near-term commitments under its facilities, including the maturity date of the WCF on Sept. 1, 2023, and the requirement to finance a cost overrun facility. Due to these near-term commitments, there is concern regarding the company's ability to meet its commitments and discharge its obligations in the normal course of business. While management believes the company will be able to resolve the noted items through its continuing engagement with its lenders, there can be no assurance that those efforts will be successful.

Diamond market

The longer-term outlook for natural diamond prices remains positive, anchored on improving fundamentals around supply and demand as many of the world's largest mines reach their natural end of life over the next decade. Following on the record-high diamond prices achieved in early 2022, a softer diamond market emerged in the latter half of 2022 which has persisted into the second quarter of 2023, the result of global economic concerns combined with geopolitical uncertainty, including the ongoing conflict in Ukraine. Prices continued to show signs of stabilization, however, as China continues to open-up post-COVID. Sales of lab-grown diamonds increased during the period. Intense competition combined with improvements in technology continue to drive prices of lab-grown diamonds down. This further differentiates this market segment from the natural diamond market and highlights the unique nature and inherent rarity of natural diamonds. The longer-term market fundamentals remain unchanged and positive, pointing to strong price growth over the next few years as demand is expected to outstrip future supply, which is now declining globally.

2023 outlook

This section of the press release provides management's production and cost estimates for 2023. These are forward-looking statements and subject to the cautionary note regarding the risks associated with forward-looking statements. Diamond revenue guidance does not include revenue related to the sale of exceptional stones (an individual rough diamond which sells for more than $10-million), or the Sethunya.

No changes were made to the company's 2023 guidance (released in December, 2022).

Conference call

The company will host a conference call and webcast to discuss the results on Thursday, Aug. 10, 2023, at 7 a.m. Pacific Time, 10 a.m. Eastern Time.

Conference ID:  88318539/Lucara Diamond

Dial-in numbers

Toll-free participant dial-in

North America:   1-888-390-0605

UK toll-free:  0800-652-2435

Local Vancouver:  1-416-764-8609

The presentation slideshow will also be available in PDF format for download from the Lucara website.

Conference replay

A replay of the telephone conference will be available two hours after the completion of the call until Aug. 17, 2023. The pass code for the replay is 318539 followed by the pound key.

Replay number (toll-free North America):   1-888-390-0541

Replay number (local):  1-416-764-8677

About Lucara Diamond Corp.

Lucara is a leading independent producer of large exceptional-quality Type 2a diamonds from its 100-per-cent-owned Karowe diamond mine in Botswana. The Karowe mine has been in production since 2012 and is the focus of the company's operations and development activities. Clara Diamond Solutions Limited Partnership, a wholly owned subsidiary of Lucara, has developed a secure, digital sales platform that uses proprietary analytics together with cloud and blockchain technologies to modernize the existing diamond supply chain, driving efficiencies, unlocking value and ensuring diamond provenance from mine to finger. Lucara has an experienced board and management team with extensive diamond development and operations expertise. Lucara and its subsidiaries operate transparently and in accordance with international best practices in the areas of sustainability, health and safety, environment, and community relations. Lucara has adopted the IFC Performance Standards and the World Bank Group's Environmental, Health and Safety Guidelines for Mining (2007). Accordingly, the development of the Karowe underground expansion project (UGP) adheres to the Equator Principles. Lucara is committed to upholding high standards while striving to deliver long-term economic benefits to Botswana and the communities in which the company operates.

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