Mr. William Lamb reports

LUCARA ANNOUNCES SECOND QUARTER RESULTS

Lucara Diamond Corp. has released second quarter revenues of $79.6-million or $1,336 per carat (all dollar amounts are in U.S. dollars unless otherwise stated).

Highlights

Financial:

• Revenue was $79.6-million or $1,336 per carat (second quarter 2016: $77.7-million excluding the sale of the Constellation diamond for $63.1-million and $1,017 per carat).
• EBITDA (earnings before interest, taxes, depreciation and amortization) was $51.8-million (second quarter 2016: $46.6-million excluding the sale of the Constellation diamond).
• Operating margin was 82 per cent (second quarter 2016: 85 per cent excluding the sale of the Constellation diamond).
• Second quarter cash position was $62.7-million (first quarter 2017: $43.5-million).
• Operating costs were $30.10 per tonne processed (second quarter: 2016: $25.90 per tonne processed).
• Earnings per share for first half 2017 was eight cents (first half 2016: eight-cent earnings per share excluding the sale of the Constellation diamond).

Operational: Karowe mine:

• During second quarter, the company recovered 113 specials (more than 10.8 carats), which equated to 5.9-per-cent weight percentage of recovered carats, which was in line with expectations (second quarter 2016: 4.6 per cent).
• The company's mining contractor, Aveng Moolmans, experienced equipment availability issues during the beginning of the quarter that resulted in lower-than-planned ore and waste mined. As the company is focused on mining waste to ensure access to larger volumes of high-value south lobe ore in the future, mining focused on waste and remains in line with current mine plan as efficiencies improved in the latter part of second quarter and into third quarter through the addition of more loading equipment.
• Processing volumes were largely on forecast as the lower volume of ore mined was replaced with stockpile ore, largely from the south lobe.
• The company's two capital projects to improve diamond recovery and maintain design throughput remain on schedule and within forecast costs.
• As a result of the reduced mined ore volumes, management has reduced forecast carats recovered to between 265,000 to 285,000 carats and carats sold to between 260,000 to 275,000 carats. Revenue guidance is maintained at $200-million to $220-million based on the processing of south lobe material. The company is maintaining its revenue guidance due to the more-than-planned high-value south lobe ore being processed. While revenue guidance is maintained, lower recovered carats result in increased risk to the revenue forecast based on the overall timing of the recovery of large and higher-value stones.

Exploration:

• The company's drilling program at the Karowe mine testing the AK06 kimberlite at depths below 400 metres was completed in February, 2017. Mineral Services Canada has been contracted to assist in the development of the sampling program and internal geology updates that will be utilized for an updated resource estimate for the current inferred portion of the Karowe mine to a depth of approximately 600 m. The resource update is expected to be complete in fourth quarter 2017.
• During second quarter 2017, the company initiated a large-diameter drilling sampling program at the AK11 kimberlite, and microdiamond work is being conducted on kimberlite recovered from AK13, which may lead to a further drilling program based on the overall results.
• Extension applications were submitted for each of the prospecting licences: (PL367/2014 and PL371/2014), and responses from the Ministry of Mines are expected in third quarter 2017.

William Lamb, president and chief executive officer, commented: "Sales in the first half achieved extremely strong prices, and with our focus on cost control, the Karowe mine continues to deliver strong operating margins. We have worked with our new mine contractor to improve performance during Q2 and Q3, and our mining department is now achieving our productivity targets. Our focus on the process plant is to complete the capital projects, further enhancing diamond recovery by the end of Q3 this year. This will place the Karowe mine in an even stronger position to maximize value from the recovery and sale of diamonds from the high-value south lobe."

Financial update

Revenues and operating margins: The company achieved revenues of $79.6-million during the quarter (second quarter 2016: $140.8-million or $77.7-million excluding the sale of Constellation -- 813-carat stone for $63.1-million) or revenue per carat of $1,336 per carat (second quarter 2016: $1,017 per carat excluding the sale of the Constellation diamond). This revenue excludes $300,000 of proceeds received post second quarter for the company's June tender. The company's second quarter 2017 operating margins were $1,089 per carat or 82 per cent, which is largely due to the company's first exceptional stone tender in 2017, which achieved proceeds of $54.8-million or $31,010 per carat. Year-to-date revenue was $105.7-million or $852 per carat, achieving a 73-per-cent operating margin.

Net cash position: The company's ending second quarter cash balance was $62.7-million (full-year 2016: $53.3-million). The increase in cash is due to the company's exceptional stone tender and regular tender during the quarter and was partially offset by operating costs, royalty payments and capital expenditures of $17.0-million. The company's $50-million credit facility remains undrawn.

Earnings per share: Earnings per share were eight cents for first half 2017 (first half 2016: 17-cent earnings per share). The company's prior-year earnings per share were largely impacted by the sale of the Constellation diamond. Excluding the sale of the Constellation diamond, 2016 earnings per share were eight cents.

Dividend paid: In second quarter 2017, the company paid its quarterly dividend of 2.5 cents per share or $7.1-million on June 15, 2017, bringing the total dividend paid in 2017 to $14.2-million.

                                     FINANCIAL HIGHLIGHTS
                       (in millions of U.S. dollars unless otherwise noted)
                                                            Three months ended         Six months ended
                                                                  June 30                   June 30
                                                             2017         2016         2017        2016

Revenues (*)                                           $     79.6    $   140.8    $   105.7   $   191.4
Average price per carat sold (**) ($/carat)                 1,336        1,824          852       1,233
Operating expenses per carat sold (**) ($/carat)              247          141          232         139
Operating margin per carat sold (**) ($/carat)              1,089        1,683          620       1,094
Net income for the period                                    32.2         46.1         30.6        63.3
Earnings per share (basic and diluted)                       0.08         0.12         0.08        0.17
Cash on hand                                                 62.7        210.8         62.7       210.8
                                                            -----       -----         -----       -----

(*) Revenue is presented based on cash receipts received during the period and 
excludes tender proceeds received after each quarter-end.
(**) A non-international financial reporting standard measure.                                   

2017 outlook

Karowe mine, Botswana

Operating guidance

The company continues to forecast revenue between $200-million and $220-million for the year ending Dec. 31, 2017. This excludes the sale of Lesedi La Rona currently held in inventory.

The company has ensured waste mining remains on schedule, opening up the pit to allow increased flexibility for mining south lobe ore in the future and has also continued to process volumes at forecast levels with a blend of pit ore and stockpile material. As a result, waste mining remains on schedule with a forecast of between 17 million to 18 million tonnes mined for the full year. A reduction in ore mined has led to a revised forecast from 2.4 million to 2.7 million tonnes to 1.8 million to 2.0 million tonnes.

The company continues to forecast tonnes processed at between 2.4 million to 2.7 million tonnes. Reduced mined ore volumes offset by increased volumes from the lower-grade south lobe stockpile have reduced forecast of carats recovered to between 265,000 to 285,0000 carats (previous guidance 290,000 to 310,000) and carats sold to 260,000 to 275,000 carats (previous guidance 290,000 to 310,000). Revenue guidance is maintained at between $200-million to $220-million; however, south lobe ore generally returns larger, higher-value diamonds contributing to higher overall rock value. Revenue guidance forecast does carry increased risk based on the challenge in predicting the overall timing of the recovery of these large, high-value stones.

The two capital projects comprising the MDR and submiddles XRT are expected to enhance diamond recovery and maintain design throughput. Both projects remain on schedule and on forecast for a spend of between $33-million to $35-million during 2017 for a total project spend of between $15-million to $18-million and up to $30-million, respectively. The projects are forecast to be fully commissioned in third quarter 2017.

Sustaining capital is unchanged and forecast to be between $7-million to $9-million in 2017.

Karowe's operating cash costs remain unchanged and are expected to be between $36 and $40 per tonne processed following a planned increase in waste mining as the company advances toward early completion of a major Cut 2 pushback that will open up the south lobe by the end of 2018.

A budget of up to $10.0-million is unchanged to advance resource evaluation work on the AK6 kimberlite at Karowe mine and the completion of a prefeasibility-level underground study and to advance its exploration program. A 10,000-metre-deep drilling program on the Karowe mine to test the AK06 kimberlite south lobe was completed in first quarter 2017 with the aim of converting inferred resources below a 400-metre depth to an indicated resource and to determine the economic viability of the Karowe mine resource extension. Detailed logging and sampling were initiated in second quarter 2017 and continue into third quarter 2017. Mineral Services Canada has been contracted to assist in the development of the sampling program and internal geology updates that will be utilized for an updated resource estimate for the current inferred portion of the Karowe mine to a depth of approximately 600 m. The resource update is expected to be completed in fourth quarter 2017.

About Lucara Diamond Corp.

Lucara is a leading independent producer of large exceptional-quality Type IIa diamonds from its 100-per-cent-owned Karowe mine in Botswana. 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.

We seek Safe Harbor.