Lucara Announces First Quarter 2018 Results

VANCOUVER, British Columbia, May 9, 2018

HIGHLIGHTS FOR THE FIRST QUARTER ENDED MARCH 31, 2018
(All amounts are presented in USD)

• Achieved revenues of $25.4 million (Q1 2017: $26.1 million) or $401 per carat (Q1 2017: $405 per carat) for its first regular tender, yielding an operating margin¹ of $170 per carat or 42% during the three months ended March 31, 2018.
   
• Recovered 218 specials (single diamonds >10.8 carats in size) during the quarter; the third best tally since mining began in 2012
   
• Operating costs (excluding depletion and amortization) for the quarter ended March 31, 2018 were $17.1 million, an increase of $0.5 million as compared to the quarter ended March 31, 2017
   
• The operating cash cost¹ for the three months ended March 31, 2018 was $43.04 per tonne processed (Q1 2017: $19.86 per tonne processed) compared to the full year forecast cash cost of $38-$42 per tonne processed. Costs per tonne processed during Q1 are higher than full year guidance due to mill maintenance completed during the period.  Forecast costs are expected to be within full year guidance
   
• Q1 2018 EBITDA¹ of $1.4 million as compared to $4.9 million in Q1 2017
   
• Net loss for the three months ended March 31, 2018 was $7.0 million (a loss of $0.02 per share) as compared to a loss of $1.5 million ($0.00 per share) in the comparative quarter and is attributable to lower revenues, higher depletion and amortization costs, higher administrative and other expenses as compared to the same period in 2017
   
• Karowe's overall performance with respect to ore mined, processed and carats recovered was within forecast for the three months ending March 31, 2018:
  
  
• Ore and waste mined was 0.6 million tonnes and 4.0 million tonnes respectively
• Ore processed totaled 0.6 million tonnes
• 218 specials (single diamonds larger than 10.8 carats) were recovered, representing 6.8% of the total recovered carats by weight
• In April 2018, a 327 carat top white gem and a 472 carat top light brown were recovered from South lobe ore 
   
• As at March 31, 2018, the Company had cash and cash equivalents of $43.6 million, a decrease of $17.5 million from the December 31, 2017 cash and cash equivalents balance of $61.1 million. This decrease is mainly due to a reduction in non-cash working capital by $5.8 million, capital expenditures of $4.0 million (Q1 2017: $5.0 million) primarily for the sub-middles XRT project audit facility, and capitalized production stripping costs of $6.8 million (Q1 2017: $0.6 million). The $50 million credit facility remains undrawn.
   
• Lucara completed the acquisition of Clara (see February 26, 2018 announcement), a company whose primary asset is a secure, digital diamond sales platform that combines proprietary analytics with existing cloud and blockchain technologies to transform how rough diamonds are sold.  Lucara is currently working on commercialization of the Clara platform (anticipated in H2 2018) and will initially use select diamond production from the Karowe Diamond Mine. Thereafter, it is management's objective to scale the platform to accommodate diamond uptake from a variety of sources across the supply chain. Testing on the platform has demonstrated the potential to unlock greater than 20% of value throughout the diamond pipeline to the benefit of all participants. Clara's revenue model will be based on capturing a portion of this incremental value.  As a wholly-owned subsidiary of Lucara, any revenue from the platform once commercialized will also benefit Lucara shareholders.

Eira Thomas, CEO, commented: "Karowe delivered solid performance in the first quarter, underpinned by production from the South Lobe which yielded 218 specials (diamonds >10.8 carats in size), the third best quarterly tally ever, and included eight diamonds greater than 100 carats in size. Large stone recoveries continued into April and included a 472 carat top light brown and a 327 carat white gem.  The strong sales result achieved from our first Regular Stone Tender of the year is consistent with the improving sentiment of the broader diamond market, and positions Lucara well for its June sale, which will include both a Regular Stone Tender and an Exceptional Stone Tender."

Karowe Diamond Sales

Diamonds are heterogeneous by nature, with thousands of different price points depending on weight, colour, shape, and quality.  Diamond production from Karowe is characterised by a coarse diamond size frequency distribution and is positively impacted by the regular recovery of diamonds in excess of 10.8 carats in size, referred to as "specials."  Karowe production is further distinguished by the consistent recovery of high value, gem quality specials.  Based on a production profile of 270,000 to 290,000 carats per annum, primarily sourced from the South Lobe, Lucara expects to consistently achieve average diamond values of between US$625 to US$680 per carat.  This average diamond value excludes contributions from the less frequent and less predictable recovery of very large, high quality gem diamonds like the historic 1109 carat Lesedi La Rona and the 813 carat Constellation.

Regular Stone Tenders versus Exceptional Stone Tenders

Historically, Lucara has sold diamonds through both regular stone tenders (RST's) and exceptional stone tenders (EST's).  Diamonds that qualify for EST's are rare, selected on a range of criteria including weight, quality, color, and, often achieve sales prices in excess of USD$ 1 million per diamond.  On average, Lucara has held between 4 and 5 RST's and 1 to 2 EST's per annum.