• Karowe Underground expansion delayed to 2028, 25% cost overrun
• Lucara focuses on transparency, efficient execution, and diamond recovery
• Optimizing open pit production, exploring growth opportunities for future

Lucara Diamond Corp has provided an update on its Karowe Underground expansion project in Botswana which is designed to extend the mine life to at least 2040 and deliver over $4 billion in revenues. 

However, the company has announced schedule delays and cost overruns due to challenges with grouting programs to control water inflows. The project is now expected to commence production in the first half of 2028, a year later than previously planned. Capital costs have also increased by 25% to $683 million.

Despite the setbacks, Lucara CEO Eira Thomas says the project remains economically viable. The long-term outlook for diamond prices and potential recoveries of exceptional stones could help cash flows. Major shareholder Adam Lundin remains supportive.       

"The Karowe underground mine expansion provides access to the highest value portion of the orebody responsible for delivering numerous record-breaking diamonds," Lundin said.  

The delays and cost overruns are disappointing news for Lucara shareholders and the Botswana government which stands to benefit from royalties and taxes on the project. However, the underground expansion should still deliver significant economic benefits if production ramps up as planned from 2028.  

"Lucara remains a high-quality asset but investors will want to see a smoother execution of the expansion going forward," says Respect Gwenzi, Chief Analyst at Equity Axis. "The diamond market is facing short-term headwinds from inflation and slower consumer spending but structural supply constraints should keep prices supported over the medium term."

Lucara now needs to focus on executing the remaining construction phase efficiently to unlock the full potential of the Karowe underground project for all stakeholders. Transparency around any future challenges will also be important to maintain trust.

The main priority is to complete the Karowe underground expansion project on time and on budget. Any further delays or cost overruns could damage stakeholder confidence and investor sentiment.

Lucara needs to maintain transparency and keep shareholders, the Botswana government and other stakeholders updated on the progress of the project. This will help build trust that issues are being managed properly.

Once production starts from the underground expansion in 2028, Lucara will need to demonstrate it can consistently recover the large, high-value diamonds expected from that part of the orebody. This will be key to unlocking the full economic potential of the project.

Diamond prices are expected to remain supported over the medium term due to structural supply constraints. However, in the short term, prices still face headwinds from inflation, economic slowdown and softer consumer demand. Lucara will need to manage its costs and optimize its production during this period.

Lucara still has several years of open pit production at Karowe ahead of underground production starting. It will need to continue optimizing operations and production from the open pit to offset the delay in underground revenues.

Lucara may look to advance exploration and development projects within its large land package around Karowe to add future production sources. This could help extend the mine life beyond what is currently planned from the underground expansion alone.

The company may also consider accretive M&A opportunities if it can find assets that complement its existing operations and strategy. However, the focus for now is likely to remain on completing the underground expansion successfully.

In summary, timely and efficient completion of the Karowe underground expansion remains Lucara's most immediate priority. Maintaining strong governance and transparency will be important to rebuild stakeholder confidence. Optimizing open pit production and exploring opportunities for future growth could help Lucara navigate short-term diamond market headwinds and maximize the value of its world-class Karowe asset over the long run.

The main priority is to complete the Karowe underground expansion project on time and on budget. Any further delays or cost overruns could damage stakeholder confidence and investor sentiment.

Lucara needs to maintain transparency and keep shareholders, the Botswana government and other stakeholders updated on the progress of the project. This will help build trust that issues are being managed properly.

Once production starts from the underground expansion in 2028, Lucara will need to demonstrate it can consistently recover the large, high-value diamonds expected from that part of the orebody. This will be key to unlocking the full economic potential of the project.

Diamond prices are expected to remain supported over the medium term due to structural supply constraints. However, in the short term, prices still face headwinds from inflation, economic slowdown and softer consumer demand. Lucara will need to manage its costs and optimize its production during this period.

Lucara still has several years of open pit production at Karowe ahead of underground production starting. It will need to continue optimizing operations and production from the open pit to offset the delay in underground revenues.

Lucara may look to advance exploration and development projects within its large land package around Karowe to add future production sources. This could help extend the mine life beyond what is currently planned from the underground expansion alone.

In summary, timely and efficient completion of the Karowe underground expansion remains Lucara's most immediate priority. Maintaining strong governance and transparency will be important to rebuild stakeholder confidence. Optimizing open pit production and exploring opportunities for future growth could help Lucara navigate short-term diamond market headwinds and maximize the value of its world-class Karowe asset over the long run.

-Equity Axis News