Tri-listed diamond miner Lucara Diamond Corporation has celebrated multiple successes at its Karowe mine in Botswana, which in 2020 will move into its eighth year of full production.
The mine has generated significant revenues for both company and country and is responsible for delivering three of the largest diamonds ever recovered – globally.
And the future looks even brighter as work gets underway this year to transition for this mine from open pit to underground – extending Karowe’s mine life while gaining access to the most valuable part of the ore body, CEO EIRA THOMAS tells LAURA CORNISH.
This article first appeared in Mining Review Africa Issue 1, 2020
The AK06 kimberlite – Lucara’s flagship Karowe operation – has only just begun to tap into the potential it offers in terms of quantity and quality of diamonds.
This is hard to believe considering the mine has produced a number of large, special stones over what was originally expected to be a lifespan ending in 2026.
The results of a feasibility study announced in November 2019 revealed the compelling economics to develop an underground mine below the existing open pit – an option that until this study was not believed to have any viable merit in doing.
“Just two years ago we envisioned a top down approach - mining the ore body at Karowe to the deepest point in the open pit that was still economically viable,” Thomas starts.
“But after more than 30 000 m of drilling and two years of study and investigation to understand the ore body at depth, we have identified that an underground expansion is far more economically viable than we had originally believed.”
The ore body becomes more valuable at depth Thomas continues. “Not only does the overall diamond content rise at depth but the actual preponderance of large, high value stones increases as well. As such we now have a bottom up approach rather than our original top down approach.”
Feasibility study highlights
The Karowe underground feasibility study will double the mine life (to end in 2040) from the original 2010 mine design and add net cash flows of US$1.22 billion and gross revenue of $5.25 billion – beyond the $1.5 billion already generated in revenue since 2012.
A $718 million after-tax NPV (5%) has been determined for the combined open pit and underground mine with no real diamond price escalation. “We have taken a very conservative pricing outlook in our numbers but even so have delivered strong economics.
It is however important to note that a return to diamond prices observed in 2015, which we believe could start in 2020, would nearly double the NPV (5%) of this project to $1.4 billion,” Thomas states.
Interestingly, large diamonds have contributed about 15% of Lucara’s total revenue to date and this has not been factored into the project’s underground model or financial figures.
The combined open pit and underground indicated resource now stands at 54.27 Mt at 15.3 carats cpht for a contained diamond resource of 8.3 million carats (excluding stockpiles).
The company has also chosen what Thomas describes as a less risky mining method. “Long hole shrinkage underground bulk mining will provide the earliest possible access to higher value ore,” and allows for a short payback period of 2.8 years and low operating costs of $28.43/t processed.
On the basis of a construction start in mid-2020, ore from underground mining will seamlessly integrate into current operations providing mill feed starting in 2023 with a ramp-up to the processing plant by 2026.
The underground mine is designed to access the South lobe kimberlite resource below the current planned bottom of the open pit (which is expected to be at approximately 700 meters above sea level (masl), to a depth of 310 masl.
Thomas explains that the Karowe open pit mine consists of the North, Centre and South lobes.
“The South lobe itself is further differentiated into different zones, the MP/K (S) and EM/PK (S). These two units are present in the open pit today but as we mine deeper the EM/PK (S) dominates as the main rock type and we lose the North and Central lobes completely.
The EM/PK (S) zone has to date produced most of our large diamonds, is almost twice the grade of MP/K (S) and contains coarser diamonds and for this reason our underground plans hold so much merit,” Thomas outlines.
Forward steps: from now to production start-up
The Lucara board have acknowledged the compelling opportunity Karowe underground presents and have authorised the first steps necessary in taking the project forward.
A budget of up to $53 million, which will be funded from operating cash flow, has been approved for early works related to the proposed underground mine which includes detailed engineering, design work and the start of sinking two vertical shafts (production and ventilation) of approximately 765 and 715 m deep respectively, which will gain main access to the underground ore body and drive its production.
The majority of the necessary infrastructure will be located at the 310 masl level – which constitutes granitic host rock and therefore good support.
“We are taking a fast track approach to the project which requires access to our underground ore before the open pit resource is depleted,” Thomas confirms.
An investment decision to proceed further with the full extent of the project is subject to receipt of all required authorisations and the arrangement of debt financing, which is expected in H2, 2020.
“I am confident however that the $4 billion of additional revenue this project will generate for the company and its stakeholders will ensure it proceeds. We would not have received approval to move forward with over $50 million in 2020 without the confidence that this project’s merits can be successfully exploited.”
Once the necessary authorisations and funding have been secured, the project kicks into top gear in 2021, which will be Lucara’s biggest spending year. Construction thereafter continues for another three years – ensuring the mine is fully operational by 2026.
“There is likely to be an overlap in production generated from the open pit and underground mine, but thanks to our chosen mining method, neither surface or underground will be compromised,” Thomas notes.
“We will also have access to existing surface stockpiles during the transition should production from the mine itself drop for a period.”
With no major changes required to Karowe’s process plant or mill, the mine will continue to process between 2.6 and 2.8 Mtpa – meaning this project in essence is a life extension rather than an expansion project.
“We do know however that the ore body continues deeper. As we sink and advance our underground development we will continue to drill further to evaluate the potential of extending the mine further at depth in the future,” Thomas reveals.