Lucara Diamond (TSX: LUC; NASDAQ: LUC) has updated the progress of its underground expansion project at its wholly owned Karowe diamond mine in Botswana.
The expansion will extend the life of the mine to at least 2040 and contribute $4 billion in additional revenues. Mine ramp up is expected in 2026 with full production from underground to be reached in the second half of that year.
The company invested $106 million in 2022 in underground development. Main shaft sinking activities ramped up near the end of last year, but equipment and operational challenges stretched cycle times. The company addressed these issues by changing equipment and personnel, optimizing the shift and rotation schedule, and introducing a new safety training program.
Grouting was completed in the production shaft and is continuing in the ventilation shaft. Procurement of underground mobile equipment and the signing of a contract for construction and supply of a bulk air cooler were also competed.
Meanwhile, Lucara is procuring underground equipment, including dewatering pumps and underground crushing and conveying systems. It is also development a request for proposal for lateral development underground. Detailed design and engineering continue, and all mine power requirements will be met shortly by the new Karowe substation and 132 kV powerline.
The updated estimated capital cost for the Karowe underground is $547 million (including contingency) and reflects expected pricing changes following execution of the main shaft sinking contract in the second quarter of 2022. A further update is expected in mid-2023.
In 2022, Lucara has revenues of $212.9 million, compared to $230.1 million in 2021. Adjusted EBITDA was $86.7 million, down from $102.5 million in 2021, primarily due to a decrease in revenues. But 2022 net income increased to $40.4 million from $23.8 million for the year earlier.
“The Karowe diamond mine completed its tenth year of continuous operations and successfully delivered on all of its financial and operating metrics, including safety, production, processing, sales and revenues, with costs trending below guidance and continued access to sufficient liquidity in support of our growth plans,” Lucara CEO Eira Thomas said in a statement.
“The diamond market remained healthy and stable in 2022, though price softening was observed in the latter half of the year which impacted revenues year over year, achieving the mid-range of guidance. Despite rising global economic uncertainties, our outlook for 2023 and beyond remains optimistic as global supply shortages continue to play out in the market,” she added.