The Facilities include two tranches: a project finance facility of US$170 million to fund the development of the underground project, and a US$50 million working capital facility to re-finance the Company’s existing debt and to support on-going operations. The Facilities, combined with the recently announced equity financings totaling approximately US$30 million (the “Initial Equity Contribution”) and projected cash flows from the Karowe open pit mine, during the underground construction period, result in the Karowe Underground Expansion Project being fully financed.
Eira Thomas, President and CEO commented: “Lucara is excited to be moving forward with a fully financed underground expansion project, extending Karowe’s mine life to at least 2040 and projected to deliver at least US$4 billion in additional revenues using conservative diamond price assumptions. Securing credit commitments for the arrangement of US$220 million senior debt facilities from five leading international financial institutions, with significant mining and metals track records and experience in Africa, is an important achievement for Lucara and reflects confidence in the large-stone resource at Karowe and the considerable efforts undertaken over the last five years to scope and define this attractive, highly economic growth opportunity for the company. It also reflects confidence in the strong, safe and reliable operating environment that has prevailed at Karowe over the last eight years, adhering to high standards in respect of ESG and striving to deliver long-term economic benefits to Botswana and the communities in which we operate. The development of the underground expansion project will adhere to all required environmental regulations and comply with Equator Principles.”
As a final comment, Thomas says they believe this expansion project comes at the right time in the market cycle, with improving supply and demand fundamentals helping to stabilize and support stronger diamond prices in the short and longer term. The Karowe mine remains one of the highest margin diamond mines in the world, having yielded 5 of the 10 largest diamonds in recorded history and is the only mine to have recovered three diamonds greater than 1,000 carats.”
First drawdown under the Facilities is expected to occur early in the third quarter this year, following satisfaction of certain conditions precedent customary to a financing of this nature, including the closing and receipt of the Initial Equity Contribution.
In connection with the Facilities, the Company’s largest shareholder, Nemesia S.a.r.l. (Nemesia) has agreed to provide a limited standby undertaking in the event of a funding shortfall occurring up to thirty-six (36) months from Financial Close (the Shareholder Undertaking).
Nemesia has agreed to provide up to US$25 million in the Shareholder Undertaking for a period of up to thirty-six months from Financial Close in support of the Facilities. The Shareholder Undertaking is unsecured and subordinated to the Facilities. As consideration for providing the Shareholder Undertaking, and subject to receipt of all required regulatory approvals, Lucara has agreed to issue 600,000 common shares as a fee upon execution of the Shareholder Undertaking and a further 600,000 common shares should the Shareholder Undertaking be called upon in the event of a funding shortfall. As an additional fee, Lucara, as the Sponsor, has agreed to issue 5,000 common shares for each US$500,000 drawn down per month until the amounts borrowed are repaid.
