VANCOUVER, BRITISH COLUMBIA--(Marketwired - Nov. 29, 2017) - Lucara Diamond Corp. (TSX:LUC)(BOTSWANA:LUC)(NASDAQ OMX Stockholm:LUC) ("Lucara" or the "Company") is pleased to provide operating guidance for 2018 (all dollar amounts are in US dollars unless otherwise stated).
2018 HIGHLIGHTS
- Revenue is forecast at $170 million to $200 million.
- Karowe operating cash costs are expected to be between $38.0 - $42.0 per tonne processed as the Company continues to advance the major push back to fully access south lobe ore. Operating cash costs, excluding waste mining is expected to be $21 - $24 per tonne processed.
- The performance of the Company's mining contractor has improved, and ore mined is forecast to increase to between 2.5 - 2.8 million tonnes in 2018 from 2017 forecast of between 1.4 - 1.6 million tonnes ore mined.
- Based on the positive results from the Preliminary Economic Analysis ("PEA") for a potential underground mine at Karowe, the Company is continuing with a Pre-Feasibility Study ("PFS") which we expect to release in Q2, 2018.
- The Company anticipates it will declare an annual dividend in 2018 of Canadian $0.10 per share to be paid in four equal payments in the last month of each financial quarter.
William Lamb, President and Chief Executive Officer commented "The Company is forecasting to mine robust volumes from the high value south lobe and continuing waste mining to complete the push back at the Karowe mine to fully access south lobe ore. In 2018, we continue to advance our internal growth projects including the pre-feasibility study for an underground mine at Karowe as well as our exploration portfolio. Following the successful completion of the MDR and sub-middles projects as well as the expected completion of the cut 2 waste push back in early 2019, operating and capital costs are forecast to be significantly reduced going forward contributing to free cash flow in future periods".
| Karowe Mine - Diamond Sales, Production, and Cost Outlook: | ||
| Karowe Mine (all dollar amounts are in US dollars unless otherwise stated) | Full Year 2018 | |
| Diamond revenue (million) | 170 - 200 | |
| Diamond sales (thousands of carats) | 270 - 290 | |
| Diamonds recovered (thousands of carats) | 270 - 290 | |
| Ore tonnes mined (million) | 2.5 - 2.8 | |
| Waste tonnes mined (million) | 13.0 - 16.0 | |
| Ore tonnes processed (million) | 2.4 - 2.7 | |
| Total operating cash costs including waste mined (per tonne processed). This includes costs (a) to (c) below: |
$38.00 - $42.00 | |
| (a) Ore and waste mined cash costs (per tonne mined) | $2.90 - $3.20 | |
| (b) Processing cash costs (per tonne processed) | $13.75 - $15.0 | |
| (c) Mine on-site departmental costs (security, technical services, mine planning, safety and health, geology) - per tonne processed | $4.50 - $5.50 | |
| Operating cash costs excluding waste mined (per tonne processed) | $21.00 - $24.00 | |
| Botswana general and administration costs including marketing costs (per tonne processed) |
$2.00 - $3.00 | |
| Tax rate | 22% | |
| Average exchange rate - USD/Pula | 9.8 | |
Diamond Revenue
The Company forecasts revenue of between $170 million to $200 million, excluding the sale of significant high quality exceptional stones. Diamonds recovered and sold are forecast between 270,000 to 290,000 carats. The recovery of these high value diamonds can positively impact the Company's revenue. To date the Karowe mine has produced and sold the world's two highest value rough diamonds, the Lesedi La Rona and the Constellation for a combined value of $116.1 million dollars as well as selling 7 rough diamonds in excess of $10 million each.
Production
We remain on track to achieve the Company's 2017 production guidance. For 2018, the Company is forecasting ore mined guidance at to 2.5 - 2.8 million tonnes compared to 2017 forecast of 1.4 - 1.6 million tonnes.
The Karowe mine is forecast to process between 2.4 - 2.7 million tonnes of ore, producing between 270,000 and 290,000 carats. It is expected that the mill feed will comprise up to 85% south lobe ore during 2018. The South lobe grades are lower than the Centre and North lobes resulting in lower diamond recoveries however the overall higher diamond quality and value from the south lobe as compared to the Centre and North lobes results in higher average sales prices and resulting revenues and cash flows.
Cash Costs - Operating cost per tonne processed
Cash costs per tonne of ore processed is forecast to be between $38.0 - $42.0 per tonne. To fully access cut 2 south lobe ore requires at large volume of waste to be mined which significantly impacts operating cash costs in 2018 as it did in 2017. Operating cash costs, excluding waste mining is expected to be between $21 - $24 per tonne processed. The strip ratio is forecast at approximately 5.0 - 6.0 in 2018 before decreasing significantly in 2019 and then forecast at under 2.0 going forward from 2020. The decrease in waste mining is expected to add to free cash flow once the cut 2 push back is complete in 2019.
Tax rates
Boteti's progressive tax rate computation allows for the immediate deduction of operating costs, including the mining of waste as well as capital expenditures in the year they are incurred. Based on 2018 revenue guidance of $170 - $200 million and the additional waste mining next year along with the completion of the Company's capital program, the Company forecasts a tax rate of 22%.
Sustaining Capital Expenditures
Sustaining capital expenditures of up to $11 million, includes final expenditure for the sub-middles XRT project which are part of the total project cost at $45 million compared to guidance of $45-$48 million.
Exploration
A budget of up to $6 million has been allocated to advance exploration work on the companies prospecting licenses. The Company is focused on drill programs at AK13, AK24, LDD programs based on results of core drilling and geophysical surveys in the vicinity of AK11 and AK24. Completion of processing of AK11 LDD samples and additional drilling will be conducted if warranted. The Company continues to set staged hurdle targets throughout its exploration program, where results will be evaluated to determine whether funding will be advanced for further work.
Underground Development
During 2017 the Company completed a preliminary economic assessment in accordance with the National Instrument 43-101 for the development of an underground mine to commence production shortly before the completion of the current open pit at the Karowe mine. Based on the positive PEA results the Company has continued with the development of a PFS which is anticipated to be complete in Q2, 2018. (See press release November 2, 2017).
The costs of a PFS in 2018 are forecast at up to $3 million. Costs associated with geotechnical and hydrogeology drilling and additional studies in support of a Feasibility Study are forecast at up to $26 million in 2018.
Dividend Policy
The Company anticipates it will declare an annual dividend in 2018 of Canadian $0.10 per share to be paid in four equal payments in the last month of each financial quarter. The amount of any dividend declared will remain at the discretion of the Board of Directors. In determining the rate of the total dividend, in Canadian dollars per share, the Board of Directors will consider current operating results and outlook, the need to invest to maintain profitable long term growth, the external environment and any other factors deemed relevant.
