Lucara Diamond Corp. · TSX:LUC
Lucara Diamond — Investor Day (October 2018)
58 slides from Lucara Diamond's investor day presentation, Oct 22, 2018
Slide 1: Lucara Diamond Capital Markets Day
Lucara Diamond Capital Markets Day October 22, 2018
Slide 2: Cautionary Statement
Cautionary Statement Forward‐looking information This investor presentation contains forward‐looking statements and information as defined in applicable securities laws including: the estimates of the Company’s mineral reserve and resources; estimates of the Company’s production volumes; forecasted
Slide 3: Agenda
Agenda 1. Introduction Eira Thomas 2. Lucara Botswana Naseem Lahri 3. Karowe Resource John Armstrong 4. Operational Update Johane Mchive 5. Diamond Market Steven Lincoln 6. Financials Zara Boldt 7. Corporate Development Strategy Ayesha Hira 8. Underground Studies John Armstrong 9. Clara Eira Thomas
Slide 4: 1. Introduction
1. Introduction LUCARA
Slide 5: Lucara Management Team
Lucara Management Team Lucara Diamond Corp. Lucara Botswana (Pty) Ltd. • Lukas Lundin Chairman & • Naseem Lahri Managing Director Director Lucara Botswana • Eira Thomas President, CEO & • Boitumelo Maoketsa CFO Lucara Director Botswana • John Armstrong VP, Technical Services • Johane Mchive General
Slide 6: The Investment Case
The Investment Case All currency figures in USD, unless otherwise stated. 100% owned Karowe Mine in Botswana • High margin diamond producer since 2012 producing large Type IIa gem quality diamonds • Feasibility Study (FS) underway on Karowe underground with potential to extend mine-life to 2036 100%
Slide 7: Strategic Goal
Strategic Goal • To become the world’s premier, mid-tier, investible diamond company, positioned for long term, sustainable growth 7
Slide 8: Karowe Diamond Mine: History
Karowe Diamond Mine: History Karowe Diamond Mine: AK06 Kimberlite • 1969 Discovery • Renewed delineation and sampling in early 2000’s • 2010 Feasibility Study (FS) updated and Lucara acquires 100% ownership • 2012 commercial production achieved • 2013 resource update, start of large diamond recoveri
Slide 9: Karowe – Foremost Producer of Large Type IIa Diamonds
Karowe – Foremost Producer of Large Type IIa Diamonds • 170 diamonds have sold for >$1 million each and 10 single diamonds have sold for >$10 million • Karowe has a coarse size frequency distribution (SFD) that includes the regular recovery of diamonds greater than 10.8 carats in size, referred to a
Slide 10: Historic Diamond Recoveries
Historic Diamond Recoveries Lesedi La Rona 2nd largest gem 813 carat Constellation which sold diamond ever recovered for a record US$63.1 million 10
Slide 11: 2. Lucara Botswana
2. Lucara Botswana LUCARA DIAMOND
Slide 12: Lucara Botswana
Lucara Botswana • Population of Botswana is 2.3 million • Diamonds contribute to 16 % of GDP • Average annual GDP growth is 6.5% • Unemployment rate is at 18% • Lucara Botswana is owned 100% by Lucara Diamond Corp. • Lucara Botswana owns the Karowe Diamond Mine which has been in production since 201
Slide 13: 3. Karowe Resource
3. Karowe Resource LUCARA DIAMOND
Slide 14: Karowe Diamond Mine: AK06 Kimberlite
Karowe Diamond Mine: AK06 Kimberlite • Tri-lobate, Group 1, opaque-rich monticellite bearing kimberlite • Emplaced circa 93 Ma • Magmatic to pyroclastic/fragmental kimberlite • North and Centre lobes are infilled with geologically similar material • South lobe is volumetrically the most significant,
Slide 15: Resource – Carats Recovered
Resource – Carats Recovered Karowe Quarterly Specials Count Karowe Cumulative Weight % Specials • 253 specials recovered in Q2, highest quarterly tally Life of Mine, 10.5 wt.% (Q2-17 5.9%) of recovered carats • 11 diamonds > 100 carats, including 3 > 300ct • EM/PK(S) continues to contribute positive
Slide 16: Consistency in Specials
Consistency in Specials • Consistent recovery of large diamonds • LoM over 100,000 carats in more than 4,100 individual diamonds • Influence of South Lobe as mining has progressed • 2018 HY1 excellent recoveries Karowe Mine Specials Year >300 >100 >20<100 >10.8<20 2012 39 154 2013 21 259 452 2014 38
Slide 17: 2018 Lucara Diamond Sales
2018 Lucara Diamond Sales $/CT CONTRIBUTION TO OVERALL AVERAGE PRICE * REGULAR & EXCEPTIONAL TENDERS 800 RST $/Ct EST $/Ct 700 $644 $647 $649 $648 600 $593 $251 $210 $230 500 $329 $411 $261 $ CT 400 300 $165 200 $397 $434 $418 $315 $332 100 $254 $247 0 2012 2013 2014 2015 2016 2017 2018** Steady sta
Slide 18: 2018 Updated Mineral Resource
2018 Updated Mineral Resource • 7.9 million carats hosted in 57.85 million tonnes, average grade of 13.7 cpht, average diamond value of US$ 673 per carat (NI 43-101) M/PK(S) EM/PK(S) • Successful reclassification to Indicated Resource of the AK06 kimberlite between 600 and 400 metres above sea level
Slide 19: Karowe Mine: Mineral Resource
Karowe Mine: Mineral Resource Volume Density Tonnes Carats Grade Classification Resource $/ct (Mm3) (tpm3) (Mt) (Mct) (cpht) North Lobe 0.62 2.48 1.54 0.20 13.0 222 Centre Lobe 1.68 2.57 4.32 0.63 14.6 367 South Lobe 16.29 2.92 47.63 6.78 14.2 716 Indicated LOM SP 1.28 1.85 2.36 0.09 3.8 609 Working
Slide 20: Karowe Mine: Open Pit Mineral Reserve
Karowe Mine: Open Pit Mineral Reserve Open Pit Ore Reserve Estimate for the Karowe Diamond Mine, Botswana, as at May 2018 Reserve Recoverable Recoverable Diamond Unit Lobe Tonnes 13 6 Category Grade Carats Revenue Revenue (Mt) (cpht) (Mcts) (US$/ct) (US$/t) North Probable 1.04 13.37 0.14 222 29.68 C
Slide 21: Production Data for SFD Models
Production Data for SFD Models Size Production (ct) Production (% ct) SFD model (% ct) Class North Centre South North Centre South North Centre South +10.8 ct 579 8,836 36,024 1.01 3.44 7.04 0.95 3.05 6.42 6 - 10 ct 1,140 5,626 16,013 1.99 2.19 3.13 2.37 2.94 4.35 3 - 5 ct 3,552 14,378 30,857 6.20 5
Slide 22: Value Models
Value Models Value estimate (US$ per carat) Value distribution model (US$ per carat) Size Class North Centre South North Centre South +10.8 ct1 1,425 5,849 8,201 1,600 6,050 8,100 6 - 10 ct 1,033 1,082 1,064 1,127 1,357 1,218 3 - 5 ct 753 623 671 808 651 677 8 - 10 gr 451 406 438 484 436 445 3 - 6 g
Slide 23: 4. Karowe Operational Update
4. Karowe Operational Update
Slide 24: Safety
Safety LTIFR ICMM 2.00 1.87 • Zero LTI over the last 12 1.80 1.81 months 1.60 1.45 • LTI free days – 404 days 1.40 • 1,668,284 manhours 1.23 worked as at end of Q2 1.20 1.20 • 3,819,652 manhours 1.00 1.00 0.87 worked since the last LTI 0.78 0.80 0.70 0.64 0.60 0.40 0.20 0.00 0.00 0.00 0.00 0.00 0.00
Slide 25: Production Summary
Production Summary Year 2012 2013 2014 2015 2016 2017 H1 2018 Total Kimberlite mined (tonnes) 1,600,971 3,944,343 3,327,754 2,358,657 2,722,375 1,575,052 1,333,067 16,862,219 Waste mined 4,074,196 5,493,445 10,270,720 11,407,010 11,058,041 15,865,121 8,408,009 66,576,542 (tonnes) Kimberlite processe
Slide 26: Process Plant Update
Process Plant Update • Unique, world first diamond recovery circuit • Two major upgrades to comminution and diamond recovery processes since 2012 to mitigate ore hardness, DMS yield, while enhancing large diamond recovery • All diamonds +4mm recovered through sensor based XRT sorting from sized run
Slide 27: Process Plant Update
Process Plant Update • Increase in milled tonnes • Improvement in availability and utilization 27
Slide 28: 5. Diamond Market
5. Diamond Market LUCARA DIAMOND
Slide 29: Diamond Market
Diamond Market India: • Consumer sales have been good to date; however, a slowdown has been noticed over the last few weeks • Many expect the market to shift further due to currency exchange issues, as well as due to high inflation rates • Liquidity Issues: With polished sales slower than expected,
Slide 30: Diamond Market
Diamond Market USA: • The US remains the most important consumer market for diamond jewelry. This market has performed well over the last 18 months and there are no imminent indications that this market might slow down. China: • Very important consumer market which has done well over the last 12 mon
Slide 31: Lightbox and Synthetics
Lightbox and Synthetics • Lightbox production commences end of 2019 • 10,000cts per annum full production • Sold only in earrings and pendants. Fashion items. • Deep watermark on piece so cannot be re-polished • Made lab grown more acceptable • Production of lab grown diamonds (LGD) is approximately
Slide 32: Lucara Diamond Sales Strategy
Lucara Diamond Sales Strategy • Historically, Lucara has held both Regular Stone Tenders (RSTs) and Exceptional Stone Tenders (ESTs) • As of Q3 Lucara held a blended tender process, whereby a number of exceptional stones were sold as part of RST • A blended tender process decreases the inventory tim
Slide 33: Lucara Diamond Sales Strategy
Lucara Diamond Sales Strategy • Developed strong and transparent relations with clients • Our diamonds are highly sought after from the smalls through to the exceptional stones • The combination of the large percentage of Type IIa diamonds and lack of fluorescence found in the diamonds from the Sout
Slide 34: Lucara Offers World Class Facilities in Botswana
Lucara Offers World Class Facilities in Botswana As of October 2018, Lucara has 1,006 companies registered as compared to 891 for the same period in 2017. 34
Slide 35: Lucara Diamond Sales YTD (as at June 30, 2018)
Lucara Diamond Sales YTD (as at June 30, 2018) RST Sales: • 137,193 carats sold for proceeds of $57.4 million at an average price of $418 per carat • 6 individual diamonds sold for more than $1 million each EST Sales: • 10 single stones totaling 1,453.06 carats; Ranging from 472.37 to 40.4 carat sto
Slide 36: Production Profile Leveraged to Large Diamonds
Production Profile Leveraged to Large Diamonds • On average, 45% of Lucara’s production consists of goods below half a carat or less (smalls) • Although this appears to be a large percentage, if the market were to drop in value on these goods by 20% the impact to Lucara would only be a 1-2% decrease
Slide 37: 6. Financials
LUCARA | 6. Financials DIAMOND
Slide 38: Q2 2018 Highlights
Q2 2018 Highlights Karowe Diamond Mine Continues to Deliver • No LTI’s / 3.8 million man hours since last LTI / LTIFR of 0.00 • Ore mined, processed and carats recovered within forecast • 253 specials (single diamonds larger than 10.8 carats), representing 10.5% of the total recovered carats by weig
Slide 39: H1 2018 Karowe Operations and Cash Flow Highlights
H1 2018 Karowe Operations and Cash Flow Highlights Production Q2 2017 Q2 2018 H1 2017 H1 2018 Ore Processed (tonnes) 513,643 698,303 1,112,577 1,297,710 Ore Mined (tonnes) 432,017 702,825 563,397 1,333,067 Carats Recovered (carats) 57,624 81,507 122,865 157,205 Plant Feed Grade (carats per hundred t
Slide 40: H1 2018 Financial Highlights
H1 2018 Financial Highlights Revenue EBITDA (1) Net Income (millions) (millions) (millions) $56.7 $105.7 $37.5 $30.6 $89.9 $12.7 H1 2017 H1 2018 H1 2017 H1 2018 H1 2017 H1 2018 Total Sales ($ per carat) (1) US$ per tonne processed (1) Earnings per share $852 $37.53 $0.08 $648 $30.14 $0.03 H1 2017 H1
Slide 41: 2018 Outlook (all amounts in USD)
2018 Outlook (all amounts in USD) Diamond revenue ($ million) 170 – 200 Diamond sales (thousand carats) 270 – 290 Diamonds recovered (thousand 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 Operating cash costs
Slide 42: 7. Corporate Development Strategy
7. Corporate Development Strategy
Slide 43: Corporate Development Strategy – Focus on Diamonds, Growth & Value
Corporate Development Strategy – Focus on Diamonds, Growth & Value • Growth - Karowe underground project & Clara • Opportunities – Diversify asset base, Grow production profile, Additional product for Clara • Open geographically - Diamond universe is small • Value Add - Karowe – A high quality asset
Slide 44: 8. Underground Studies
8. Underground Studies LUCARA DIAMOND
Slide 45: Karowe Underground Study
Karowe Underground Study • 2017 released positive PEA • 2018 completed Resource Update, IND to 600mbg • 2018 initiated FS and technical studies • Trade off studies for: ‐ Access: decline, shaft ‐ Mining Method : Sub level cave, sub level retreat, block cave, hybrid scenarios ‐ Open pit – underground
Slide 46: Karowe Underground Study
Karowe Underground Study Technical studies • Geotechnical drilling for country rock and kimberlite characterization (15,000 metres drilled to date), de-risk access and infrastructure • Ongoing life of mine (LOM) open pit de-watering and characterization of deep aquifers, initiate de-watering for und
Slide 47: Underground Study
Underground Study • Geotechnical drilling program 12,766 metres , 5 rigs drilling • Sampling, data acquisition, logging on time, no backlog • Deep hydrology holes have not intersected significant water strikes, major de-risking to project • Trade off study between Sub-level retreat (SLR) and block c
Slide 48: 9. Clara Update
9. Clara Update Capital Markets Day
Slide 49: Push System
Prevailing Supply Chain 100 yrs old, Highly Inefficient, Unoptimized; Value Loss Throughout Supply Chain Producers (25, 5 Principal) Push System Sightholders/Primary Customers (<100) Secondary Rough Traders/ Manufacturers (1000’s) Integrated Unfulfilled Manufacturers/Jewelers Demand (1000’s) 49
Slide 50: How?
How? Producers Manufacturers/Retailers • Galaxy scan all rough diamonds as they • Upload polished diamond orders are extracted (continuous, real time) (using Polished Diamond • Diamonds undergo a “basic” Parameters “PDP”s) and price list assortment for size and color for each diamond Clara Platform
Slide 51: Polished Diamond Parameters (PDPs) and Orders
Polished Diamond Parameters (PDPs) and Orders Orders on the Clara Platform are made similarly to ordering polished diamonds. There are two main components. PDP Orders Polished diamond criteria range: Quantity: A combination of required polished Number of diamonds required to fulfill shape, angle tol
Slide 52: Benefits
Benefits Benefits Producers Manufacturers/Retailers • Maximum selling price achieved for every • Purchase of rough based on polished stone orders • Not reliant on tender sale cycles • Eliminates financial carrying costs of unwanted inventory • Reduces sorting inefficiencies, removes • Eliminates man
Slide 53: Benefits to Lucara
Benefits to Lucara • Clara is an affordable, potentially high value, near term growth platform, compatible with the Company’s core diamond mining business • Supports Lucara’s reputation as an industry-leader in the adoption of new technology. Non-cash transaction with no expected impact on the divid
Slide 54: Conclusion
Conclusion The rough you need for the polished you want, creating efficiencies, unlocking value and ensuring provenance from mine to finger • Link to Clara video 54
Slide 55: Catalysts
Catalysts • Inaugural Clara sale Q4 • Feasibility Study underway on Karowe underground with potential to extend the mine life to 2036 • Blended tender process started Q3 - lowers inventory time for large, high value diamonds, smoother more predictable revenue profile • Brownfields exploration contin
Slide 56: Capital Structure
Capital Structure Lucara is a publicly listed company trading under the symbol “LUC” • TSX • NASDAQ Sweden • BSE (Botswana) Issued shares 396,509,387 (Sept 2018) Fully diluted shares 402,193,265 (Sept 2018) Insider Holdings 22% on a fully diluted basis Debt NIL Cash on hand $49.6 million (Q2 2018) $
Slide 57: Contact
Contact Suite 2000 885 West Georgia St. Vancouver, BC V6C 3E8 Tel: +1 604 689 7872 Fax: +1 604 689 4250 Email: info@lucaradiamond.com Website: lucaradiamond.com
Slide 58: Q&A
Q&A LUCARA DIAMOND