Lucara gets $60M for diamond projects

With two diamond projects in the pipeline, Lucara Diamond (LUC-V) has announced a $60-million private placement to help move them forward.

For the non-brokered financing, the company plans to issue 60 million shares at $1 each. Prior to the financing, the company had 302.5 million shares outstanding or 314 million fully diluted.

The financing closely follows updates on the development of the company’s Boteti AK6 diamond project in Botswana, and trial mining on its Mothae project in Lesotho. 

Lucara states it still expects to start commissioning the AK6 project by the end of 2011, with a ramp up to full production in 2012. In the first year, the company expects to produce 400,000 carats of diamonds.

The company only became involved with the project in late 2009, when it paid De Beers US$49 million for a 70.3% stake in the mine. Then in December 2010 the company secured full ownership when it acquired African Diamonds through a plan of arrangement, issuing 0.8 of a Lucara share for each African Diamonds share.

Once up and running, Lucara plans to process roughly 2.5 million tonnes in the first year, ramping up annual throughput to 4 million tonnes by year four. As of a spring 2010 feasibility update, the project has reserves of 36.2 million tonnes containing 6.3 million carats of diamonds to be recovered through open-pit mining. The pit should go as deep as 324 metres during the mine’s 11-year life.

As to financials, capital expenditures are estimated at US$120 million and processing at US$17.20 per tonne treated. Using its March 2010 diamond valuation, the net present value, with an 8% discount, came in at US$164 million and the internal rate of return at 29%. 

At the company’s Mothae project, a 49,152-dry tonne sample of kimberlite returned 1,439.85 carats for a grade of 2.93 carats per hundred tonnes. The sample, C8A, came as part of a 720,000-tonne trial mining program, which is a follow-up to an earlier 100,000-tonne bulk sample. 

The C8A sample contained one diamond greater than 20 carats, 12 stones between 10 and 20 carats, 23 stones between 5 and 10 carats and 62 stones between 2 and 5 carats. The largest carat from that sample was 31.87 carats, while the company recently recovered a 48.54-carat stone from sample C9A.

Lucara controls 75% of the Mothae project while the government of Lesotho controls the rest. The concession spans 20 sq. km while the diamondiferous kimberlite pipe has a surface extent of 8.8 hectares. 

The project is adjacent to the Letseng diamond mine, operated by De Beers between 1976 and 1982 and currently in production under Gem Diamond Mining (GEMD-L). In 2006 Letseng produced a 603-carat diamond known as the Lesotho Promise that is the 15th largest diamond ever found.

Lucara’s share price was up 2¢ on the day to close at $1.08 with 5.4 million shares traded. The company has a 52-week share price range between 65¢ and $1.30.

Lucara is a member of the Lundin Group of companies. Lukas Lundin was the company president and CEO until William Lamb became president in June 2009. Lundin remains chairman of the company.