Shares in Toronto-listed Lucara Diamond Corp dipped more than 17% Monday after the company announced a 25% cost blowout and significant production delay for its proposed circa-US$550 million Karowe underground expansion project in Botswana.
Higher than expected water inflows and grouting times that have slowed shaft sinking rates are going to set back the planned completion date and start of diamond production from the “highest value portion” of the orebody by more than a year. The capital cost adjustment is 25% – $683 million versus $547m – with Lucara having already increased the projected capex from $534m last year.
Expanded production is now expected to start in the first half of 2028, compared with H2 2026 previously. The underground expansion should extend mine life to at least 2040.
Lucara started production shaft sinking in August last year, and ventilation shaft work in June 2022.
“Management initiated an update to the [underground expansion project] schedule and budget in response to slower than planned ramp up to expected sinking rates and to account for time incurred to date, as well as for anticipated future grouting programs,” the company said.
“Grouting programs took longer than anticipated due to a combination of high-water volumes in the sandstone lithologies between 870m and 752m above sea level in depth – 144m to 262m below the shaft collar – combined with technical challenges associated with the transition to main sinking.
“The project remains technically and economically feasible, however, the impact of actual and modelled delays changes the revenue profile due to the use of lower-grade, stockpiled ore for mill feed rather than high-grade ore from the underground as previously planned.”
Lucara CEO Eira Thomas said the contractor’s grouting methodology had proven to be effective in controlling water inflows.
“As we transition out of the sandstones in early Q4 2023, we look forward to meeting planned sinking rates,” she said.
“Despite these challenges, the project continues to deliver strong economics paying back capital in under three years and adding approximately $4 billion in revenues from an extended mine life out to at least 2040.”
Lucara shares were down 17.35% Monday to C40c, capitalising the company at C$185 million.