Lucara Diamond, a Canadian diamond mining company, has announced that it has signed an amended agreement for its senior secured project financing debt package of $ 220 million. The loan will be used to fund the underground expansion of its flagship Karowe mine in Botswana, which is expected to extend the mine’s life until 2046 and increase its production of large and high-value diamonds.
The debt package, which was initially established in July 2021, consists of two facilities: a project finance facility of $ 190 million and a working capital facility of $ 30 million. The total amount of the facilities remains unchanged, but Lucara has extended the repayment profile by the rebase schedule released on July 17 last year. This adjustment aligns with the company’s aims to continue the development of the Karowe underground expansion (UGP) amid the challenges posed by the global pandemic.
The UGP is a strategic project that will unlock the full potential of the Karowe mine, which has produced some of the world’s largest and most valuable diamonds, including the 1 758 ct Sewelô, the 1 109 ct Lesedi La Rona, and the 813 ct Constellation. The UGP will allow Lucara to access the high-grade south lobe orebody at depths below 400 m, where it is estimated to contain more than 7.8 million carats of diamonds.
The project loan will cover the development, construction, and operating costs of the UGP, while the working capital facility will support the ongoing operations of the Karowe open-pit mine and stockpiles processed during the underground construction period. The loan has an eight-year maturity, with quarterly repayments starting on September 30, 2028, and carries an interest rate and margin based on the London interbank offered rate (Libor) plus 6.5% yearly from the rebase date to project completion. The loan also includes a cost overrun reserve amounting to $ 61.7 million to be funded by June 30, 2025, and various covenants and conditions.
The entities involved in these facilities include Lucara Botswana as the borrower and a syndicate of five international financial institutions, namely the African Export-Import Bank (Afreximbank), Africa Finance, ING, Natixis, and Societe Generale, London Branch. Afreximbank is also serving as the facility agent in connection with these facilities.
Lucara Diamond’s president and CEO William Lamb said that the signing of the amended facilities agreement marked a significant step in the company’s transformation. “This achievement continues to underscore the exceptional quality of the Karowe asset,” he said. “The adjusting repayment schedule aligns with the expected cash flow from the underground production profile, where Lucara is set to process the most valuable ore from the underground expansion in the first three years of operations.”
He added that the UGP was fully funded, thanks to the solid financial backing from the company’s largest shareholder, who had provided interim funding and guarantees. “We look forward to advancing the UGP and delivering on our vision of creating long-term value for all our stakeholders,” he said.
The UGP is one of several underground expansion projects underway in the diamond mining industry, as companies seek to extend the life of their existing mines and tap into deeper and richer orebodies. According to the World Diamond Council, global diamond production is expected to decline by 1.5% annually until 2030, as older mines reach the end of their life and discoveries become scarce. However, underground expansions could help offset this decline and sustain the supply of diamonds for the growing demand from emerging markets, especially China and India.
Lucara Diamond is confident that the UGP will enhance its position as a leading producer of large and high-quality diamonds, which have a strong and stable market demand. The company also believes that the UGP will bring significant benefits to Botswana, which is the world’s second-largest diamond producer by value and relies heavily on the sector for its economic development. The UGP will create more jobs, generate more revenues, and support the country’s vision of becoming a global diamond hub.
Source: Mining Weekly
