PEA supports development of underground mine at Lucara’s Karowe

JOHANNESBURG (miningweekly.com) – A preliminary economic assessment (PEA) has revealed the potential for the development of an underground mine at Karowe, in Botswana, TSX-listed Lucara Diamond said on Friday.

The Vancouver-based diamond producer is considering the development and commissioning of an underground mine after the depletion of the current openpit Karowe mine operations, expected in 2026.

Following the positive results of the PEA, a prefeasibility study will continue, with completion expected by the second quarter of 2018.

"The results of the PEA demonstrate the potential economic viability for the development of an underground mine at Karowe,” said Lucara president and CEO William Lamb.

The Karowe mine, which started commercial production in 2012, has produced an average of 320 000 ct/y from the treatment of 2.5-million tonnes a year of ore from three kimberlite lobes.

The Karowe underground PEA evaluates, on a standalone basis, the development of a sublevel caving operation to extract the AK06 kimberlite resource, with all kimberlite to be processed at the existing Karowe processing plant over a ten-year period.

Karowe underground targets the South Lobe kimberlite resource below the current planned bottom of the openpit.

The PEA reveals a preproduction capital expenditure of $195-million, including a 25% contingency, and a development period of about five years to first production.

As there is existing infrastructure and processing facilities are already in place, additional capital requirements centre around the purchase or lease of underground equipment, the underground mine development and dewatering systems.

The mine is expected to deliver a total life-of-mine production of 2.72-million carats.

Q3 FINANCIAL RESULTS
Meanwhile, Lucara achieved third-quarter revenues of $77.9-million, or $1 161/ct, up from $38.1-million, or $332/ct, in the corresponding period the year before.

This included the sale of the Lesedi La Rona for $53-million, a regular diamond tender of $24.6-million and $300 000 of proceeds received from the company’s second-quarter regular tender.

Excluding the Lesedi sale, the third-quarter average sales prices reached $389/ct, 17% higher than in the third quarter of 2016.

Earnings a share for the quarter under review were $0.09, compared with a $0.01 loss a share in the third quarter of 2016.

Earnings before interest, taxes, depreciation and amortisation increased from $12.4-million in the third quarter of 2016 to $49.8-million in the three months under review.

“Cash flow generation during the quarter was strong, reflecting robust sales prices including for the sale of the Lesedi La Rona,” Lamb said.

The Karowe mine ended the quarter with the recovery of 108 special diamonds larger than 10.8 ct, including two poor-quality diamonds in excess of 100 ct.

Lucara lowered its full-year production guidance, for the second consecutive quarter, to between 260 000 ct and 265 000 ct, from the revised 265 000 ct to 285 000 ct forecast in second quarter.

This was down from the previously targeted 290 000 ct to 310 000 ct.

The group further revised downwards its revenue guidance to between $165-million and $175-million, from the previous $200-million to $220-million, for the year to end December 31.