Lucara Diamond Corp., which announced the results of a Preliminary Economic Assessment (PEA) for underground mining at the Karowe Mine in Botswana, “after the completion of the current open pit mine”, says it has received a positive report. Further, based on the PEA results, the Company says it has gone on to launch a pre-feasibility study (PFS). The results of the PFS are expected to be released in Q2 2018.

“The results of the PEA represent forward-looking information that are subject to a number of risks, uncertainties and other factors that may cause results to differ materially from those presented herein,” the Company cautioned before presenting the highlights.

The PEA  for the underground mine posits a Life-of Mine (LOM) production of 2.72 million carats; after-tax NPV (5%) of US$ 451 million and IRR of 38.9%; and an after-tax undiscounted net cash flow of US$ 820 million. The PEA anticipates that the average LOM operation costs would be approximately US$ 49.4 per tonne. It has also factored in a pre-production capital cost  (including a 25% contingency, the costs of a pre-feasibility and feasibility study and hydrogeology and geotechnical testing and modelling costs) of US$ 195 million.

“Diamond price and exchange rate assumptions include a 2.5% per annum real diamond price increase, a US$/South Africa Rand rate of exchange of US$/R13.00 and a Rand/Pula exchange rate of R1.3/BWP1,” the Company elaborated.

William Lamb, Lucara’s President and CEO, stated, "The results of the PEA demonstrate the potential economic viability for the development of an underground mine at Karowe. Underground operations are focused on the high value south lobe, which remains open at depth below the current design, and is a further indication of the potential longevity of the resource and cashflow generation at Karowe. We have seen on-going improvement in the value of diamonds from the south lobe and the development of an underground mine has the potential to add significantly to the Life of Mine at Karowe."

Further, the Company explained that “the Karowe Underground PEA presents a stand-alone scenario which does not incorporate the economics of the current Karowe operations except where taxes are affected based on capital expenditures”.

As per current estimates, the open pit reserves  at Karowe are expected to be depleted by  2026. “The Karowe Underground PEA evaluates the development of a Sub-Level Caving ("SLC") operation to extract the AK06 kimberlite resource, with all kimberlite being processed at the existing Karowe processing plant over a 10-year period following the depletion of the current open pit operations,” Lucara said.