Sourcing

Lucara Secures $220M in Financing to Take Mine Underground

SourcingMay 11, 2021

Lucara Secures $220M in Financing to Take Mine Underground

The company has received credit-approved commitments from five financial institutions for the expansion of its Karowe Diamond Mine.

Five financial institutions with “significant mining track records and experience in Africa” have agreed to extend $220 million in financing to Lucara Diamond Corp. to take the Karowe mine (pictured here) underground. (Photo courtesy of Lucara Diamond Corp.)
Vancouver, B.C.—Lucara Diamond Corp. said it has secured $220 million in financing to help take the Karowe Mine in Botswana underground and extend its life by about 20 years.

Karowe is responsible for producing some of the most significant diamonds recovered in recent years, including the 1,109-carat “Lesedi La Rona,” which Graff bought for $53 million, and a 1,758-carat diamond that Louis Vuitton is turning into jewelry

The credit-approved senior debt facilities include two tranches: $170 million to go toward the development of the underground mine and $50 million to support the ongoing operation of the open pit. 

The underground expansion has an estimated capital cost of $514 million and is expected to take five years. The balance of development capital for the project is expected to come from cash flow from the mine’s ongoing open-pit operations. 

In a statement announcing the financing, Lucara President and CEO Eira Thomas called securing the financing “an important achievement for Lucara and a strong endorsement of our underground expansion plans.” 

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She said the loans will supplement the cash flow from the open-pit portion of Karowe for the next five years and will extend the life of the mine from 2025 to at least 2040.

The five lenders on the $220 million financing facility for Lucara are: ING Bank N.V., Natixis, the London branch of Societe Generale, Africa Finance Corp., and Afreximbank. Thomas described them as having “significant mining and metals track records and experience in Africa.”

Closing on the facilities is subject to completion of definitive documentation and the satisfaction of certain terms and conditions, including Know Your Customer (KYC) checks.

The target closing date for the financing package is mid-2021, with financing expected to be in place by the second half of the year.

Lucara made the financing announcement the day before it released its first-quarter 2021 results.

Revenues totaled $53.1 million, or $579 per carat sold, for the miner in Q1. Net income was $3.4 million.

That is a significant improvement over Q1 2020, when the onset of the pandemic limited sales to $34.1 million and caused Lucara to record a loss of $3.2 million. 

First-quarter 2021 results also are up when compared with 2019, when Lucara reported revenues of $48.7 million, or $512 per carat sold. Net income for the latter, however, was higher at $7.4 million.

The company said overall, the diamond market started 2021 in its healthiest position in five years following strong holiday seasons in the United States and China, and careful rough supply management by producers, which has helped to recalibrate polished inventories.

Lucara recovered this 341-carat gem-quality rough diamond from Karowe in late 2020. (Photo courtesy of Lucara Diamond Corp.)
Lucara recovered this 341-carat gem-quality rough diamond from Karowe in late 2020. (Photo courtesy of Lucara Diamond Corp.)

“Lucara has bounced back in the first quarter of the year, demonstrating its resiliency at a time of continued uncertainty in respect to the ongoing COVID-19 pandemic,” Thomas said.

“Our outlook for the diamond market remains strong, and with close to 20 years of future mining now ahead of us at Karowe, Lucara is highly levered to an improving diamond price environment, particularly in respect to large, high-value gem diamonds.” 

During the quarter, Lucara announced the recovery of two top white, gem-quality diamonds weighing 341 and 378 carats from the mine’s South Lobe. Both stones were completely intact.

In April, the miner announced it was extending its agreement with HB Antwerp to cut and polish all the larger (10.8 carats and up) diamond recovered from Karowe. The extension takes the agreement through December 2022. 

Karowe’s large, high-value diamonds account for 60-70 percent of Lucara’s annual revenues.  
Michelle Graffis the editor-in-chief at National Jeweler, directing the publication’s coverage both online and in print.

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