Lucara Diamond Corp. · TSX:LUC
Lucara Diamond — Investor Day (June 2017)
45 slides from Lucara Diamond's investor day presentation, Jun 20, 2017
Slide 1: Capital Markets Day
Capital Markets Day London UK June 20, 2017 1
Slide 2: Cautionary Statement
Cau$onary Statement Forward-looking informa0on • This investor presenta0on contains forward-looking statements and informa0on as defined in applicable securi0es laws including: the es0mates of the Company’s mineral reserve and resources; es0mates of the Company’s produc0on and sales volumes, revenue
Slide 3: Introduction
Introduc$on Lucara is an established diamond producer. Its principal asset is the Karowe Mine in Botswana. The 100 percent owned Karowe Mine is a state-of-the-art mine which has consistently delivered large, Type IIA stones. The Company has an experienced board and management team with extensive dia
Slide 4: Differentiated Lucara
Differen$ated Lucara • 100% owned Karowe Mine in Botswana • One of the foremost producers of large Type IIa diamonds • Consistent delivery of large and excep0onal stones suppor0ng strong free cashflow • 145 diamonds > US$1.0M • 73 gem quality diamonds > 100ct sold as individual lots • 51 diamonds betw
Slide 5: Capital Structure
Capital Structure Lucara is a publicly listed company trading under the symbol “LUC” TSX NASDAQ Sweden BSE (Botswana) Issued shares 382,446,001 Fully diluted shares 387,814,588 Insider Holdings 21% on a fully diluted basis Debt Nil Cash on hand US$ 43.5 million (Q1 2017) $50 million Credit Facility
Slide 6: Year Stock Chart
TSX: Five Year Stock Chart Lucara Diamond Corp. – TSX - LUC TSX – LUC vs. S&P Global Mining Index 6
Slide 7: Focus and Delivery
Focus and Delivery 7
Slide 8: Safety is Our First Priority
Safety is Our First Priority Karowe has developed a strong and stable LTIFR safety culture underpinned by a focussed 0.99 approach to managing material risks 0.4 People are at the centre of Karowe’s safety 0.17 strategy – behavioural based training and 0 0 0.08 accountability 2012 2013 2014 2015 201
Slide 9: Track Record of Delivery
Track Record of Delivery Strong Opera$onal Performance • World class asset results in strong prices Revenue (US$ millions) EBITDA (US$ millions) $185 and EBITDA margins of over 60% $296 $173 $266 $134 $224 • High value South lobe has resulted in an $181 $103 increase of 140% in average price from $8
Slide 10: Strong Cash Flow Generation
Strong Cash flow Genera$on Future cash flows boosted by: $1,200 • Capital projects completed in 2017 – no 276.3 US$ millions further major capital projects planned Revenue Royal8es $1,000 1033.2 • Sustaining capital expenditure forecast of 103.3 Tax up to $8-10 million per year 173.0 $800 • Major push
Slide 11: At Our Core - Value and Returns
At Our Core - Value and Returns Maximise Shareholder Returns Invested capital must maximise total shareholder returns. Capital management focus: Regular Dividends (US$ millions) • Commitment to maintaining a strong balance sheet $29.7 • Invest in projects and technology to improve operating $17.1 ef
Slide 12: Our Contribution: Lucara in Botswana
Our Contribution: Lucara in Botswana A positive contribution to Botswana and the local communities Botswana Re-Investment: • $286 million or 25% of total revenue paid to government of Botswana from 2012-16 in total cumulative taxes and royalties • 80% of operating costs and project costs spent in Bo
Slide 13: Our Contribution: Lucara in Botswana
Our Contribution: Lucara in Botswana Recipient of the 2016 PDAC Environmental & Social Responsibility Award Karowe Emerging Entrepreneurial Fund (KEEF): • Assist entrepreneurs to start and grow their businesses, increase employment and contribute to the local economy • 8 businesses operating in vari
Slide 14: Technical Session: Amazing Geology
Technical Session: Amazing Geology 14
Slide 15: Diamonds 101
Diamonds 101 o • Carbon (C, Atomic No.6, Temperature (C) 10, Cubic Hardness Kimberli>c 0 200 400 600 800 1000 1200 1400 1600 Crystal system) 0 Lamproites • Perfect Cleavage, density of 3.52g/cm3, Garnet Chromite Diamond hydrophobic Ilmenite 50 • 1 carat= 0.2 grams 20 Graphite • Formed within diamond
Slide 16: Karowe Diamond Mine: History
Karowe Diamond Mine: History • Karowe Diamond Mine: AK06 Kimberlite • 1969 Discovery • Within the prolific Orapa Cluster of Kimberlites • Renewed delinea0on and sampling in early 2000’s • 2010 Feasibility Study Updated and Lucara gains 100% control • 2012 commercial produc0on achieved • 2013 resource
Slide 17: Karowe Diamond Mine: AK06 Kimberlite
Karowe Diamond Mine: AK06 Kimberlite • Tri-lobate, Group 1, opaque-rich mon0cellite bearing kimberlite • Emplaced circa 93 Ma • Magma0c to pyroclas0c/fragmental kimberlite • North and Centre lobes are infilled with geologically similar material • South lobe is volumetrically the most significant, also
Slide 18: Maiden Resource Drilling
Maiden Resource Drilling North Lobe Centre Lobe South Lobe 1000 masl 900 North Lobe 800 Centre Lobe 700 600 500 N 400 MINERAL SERVICES CANADA INC. Date: 29 Nov 2013 300 Geology By: De Beers - MRM Model By: Stephen Moss - MSC 260 masl Figure By: Stephen Moss - MSC South Lobe 18
Slide 19: Current Mining Cut and Geological Model
Current Mining Cut 1 and 2 North Lobe Centre Lobe NNW South Lobe SSE North Lobe WK(C) WBBX(S) WK(N) CFK(C) BBX(S) BBX(C) BBX(N) KBBX(C) Centre Lobe Pit outline as at end of April FK(C) 2017 South Lobe Intbasalt M/PK(S) Profile view facing East of Plan view of the 2013 the Geological Model Geological
Slide 20: Grade and Size Distribution by Lobe
Grade and Size Distribu$on by Lobe • Each lobe has dis0nct Size Frequency Distribu0on (SFD) and diamond content (grade) • Grade - North > Centre > South • SFD (coarseness) - South > Centre > North • Con0nuity of SFD at depth within South Lobe • Economics ($/t in-situ) - South > Centre > North 20
Slide 21: Number of Specials (>10.8ct)
Large Diamonds • Evidence of a large diamond popula0on in bulk sample data • Recovery of Type IIa diamonds • March 2013 – recovery of 239 carat Type IIa: immediate increase to top size • Recovery of +10.8ct diamonds (“Specials”) has significantly increased as mining progressed into Centre and South L
Slide 22: Consistent Recovery of +10.8ct Diamonds
Consistent Recovery of +10.8ct Diamonds Karowe +10.8 ct Diamonds Cumulative % of Total Production 8% 7% 2013 2014 2015 2016 Cumulative Wt. % 6% 5% 4% 3% 2% 1% 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Month 22
Slide 23: Impact of Large Diamond Recovery
Impact of Large Diamond Recovery $900 $800 • Con0nued recovery of high value large $700 diamonds $600 2012 2013 $/carat $500 • A total of 73 +100 carat diamonds have $400 2014 been sold as individual lots ($364 million 2015 $300 USD) $200 2016 $100 • Represents 56% by count and 61% by weight of all
Slide 24: XRT Bulk Sorting
XRT Bulk Sor$ng • Over 47,000 carats recovered since 15.0% commissioning in Q2/15 XRT Circuit Carats % of total carats 12.5% • 5 ROM sorters and one Audit sorter (2x 8 10.0% to 14mm, 2x 14 to 35mm, 1x 35 to 90mm) 7.5% • Commissioning of an addi0onal two 5.0% circuits through 2017 2.5% • MDR : 60 to
Slide 25: Recovering Value
Recovering Value • MDR will allow for early recovery of diamonds >200 carats • Sub-Middles XRT provides for the most efficient and cost effec0ve processing of the dense high-yielding South Lobe ore at depth MDR SUB-MIDDLES XRT 25
Slide 26: Resource Expansion
Resource Expansion
Slide 27: Karowe Resource Expansion
Karowe Resource Expansion • Targe0ng South Lobe Inferred below 400 metres depth • Update pipe volume, internal geology, density models, microdiamond dataset • Incorporate current diamond recoveries, updated SFD’s, diamond valua0on, historic LDD 2017 Classification Resource Tonnes Carats(Mct) Grade (
Slide 28: Karowe Resource Expansion
Karowe Resource Expansion • 10,000 metre drill program with target to bring inferred mineral resources into the indicated category • Drilling program completed in Q1 2017 • 2,600 metres of kimberlite intersected in 12 holes • Pipe volume updated: no material changes in volume • Internal Geology: log
Slide 29: Exploration
Explora$on
Slide 30: Botswana Exploration Targets
Botswana Explora$on Targets AK11: Logging and sampling of the drill core is complete. LDD program set to begin in Q2 2017. Pilot holes followed by approximately 750 tonnes of LDD sample AK13: Five drill holes intersected kimberlite and within the five holes, three holes intersected wider intercepts o
Slide 31: Reclamation of Sites
Reclama$on of Sites • Commitment to EPA guidelines and environmental stewardship AK12 - Oct 2016 AK12 - Feb 2017 31
Slide 32: The Journey Through Lucara's Sorting & Sales
The Journey Through Lucara’s Sor$ng & Sales 32
Slide 33: Deep Boiling Facility
Deep Boiling Facility • It is critical that once diamonds are recovered from the mine, that they are thoroughly cleaned and prepared for sale • Enhances the look of the diamonds, more importantly adds value • Lucara owns and operates a modern Deep Boiling Facility (DBF) within the Diamond Technology
Slide 34: Sale Preparation
Sale Prepara$on • A small team of experienced sorters accurately sort and value the diamonds into assortments • Lucara has approximately 4,000 price points behind the assortments • Accurate consistent sorting and valuation of the production has been the key to our success • Assortments are then amal
Slide 35: Tender Process
Tender Process • Closed tender, bidding is conducted through an online platform • Bookings are made through contacting the Lucara sales office • Clients will normally be allocated a five hour viewing time • Maximum participation in Lucara tenders is assisted by scheduling sales to coincide with othe
Slide 36: World-Class Viewing Facilities
World-Class Viewing Facili$es 36
Slide 37: Lucara's Clients
Lucara’s Clients • Strong and transparent rela0ons with clients • Highly sought awer produc0on from the small sizes through to the excep0onal diamonds • A large percentage of Type IIa diamonds and a lack of fluorescence ensures maximum bidding from our clients • Maximum revenue by offering consistent
Slide 38: Client by Country of Registration
Client by Country of Registra$on HK, 2% Canada, 1% China, 1% Botswana, 1% USA, 4% India, 16% Israel, 19% UAE, 7% Belgium, 34% New clients Total clients Since 2016 674 UAE, 11% 161 Belgium, 43% Israel, 19% USA, 2% India, 29% HK, 2% South Africa, 4% Seychelles, 0.1% Sweden, 0.1% Botswana, 3% China, 0.
Slide 39: World Renowned Diamonds
World Renowned Diamonds • Demand for Lucara’s excep0onal diamonds con0nues to grow and exceed expecta0ons • Consistent diamond assortments, reputa0on, the Lucara brand and the profound rela0onships Lucara has developed with our clients will con0nue to flourish • Strong posi0on for future Lucara sales
Slide 40: Lucara Brand of Exceptional Stones
Lucara Brand of Excep$onal Stones • Since produc0on commenced in 2012, the Karowe Mine has yielded many large excep0onal diamonds: • 145 diamonds sold for > US$1.0M each totaling US$528M • 93,400 carats totaling 3,242 diamonds > 10.8ct recovered since commencement of produc0on • 73 gem quality diamo
Slide 41: The Diamond Market
The Diamond Market
Slide 42: 2017 Diamond Market
2017 Diamond Market • Market is cau0ous – supply and demand fundamentals remain unbalanced • Retail sales in China appear to be improving, specifically in the smaller goods • Large volumes of rough con0nue to be sold by the majors with a strong rebound in the price of rough in the categories where de
Slide 43: Diamond Sector: Supply vs. Demand
Diamond Sector: Supply vs. Demand The gap between supply and demand is expected to remain 0ght in the medium term Note: Rough-diamond demand has been converted from polished-diamond demand using historical ra0o of rough-diamond and polished-diamond values Bain & Company – The Global Diamond Report 2
Slide 44: Rough Diamond Production
Rough Diamond Production • Rough diamond produc0on has remained sta0c over the past 5 – 7 years • Expected to increase in 2017 as three new mines Rough Diamond Produc0on, millions of carats ramp-up to full produc0on (+7M carats) 200 • 2016 produc0on es0mated at 128 million carats Millions 177 176 18
Slide 45: Contact Information
Contact Informa$on Suite 2000 Tel: 604 689 7872 885 West Georgia St. Fax: 604 689 4250 Vancouver, BC info@lucaradiamond.com V6C 3E8 lucaradiamond.com 45