Lucara Diamond announces $38 million financing for Karowe in Botswana

Lucara Diamond (TSX: LUC) is raising $22 million in a bought deal financing to advance work at its 100%-owned Karowe diamond mine in central Botswana, about 350 km north of the capital Gaborone.

A syndicate of underwriters led by BMO Capital Markets will purchase 29.4 million common shares in the company at 75¢ per share. The deal also includes an over-allotment option for an additional 15% of the public offering at the offer price.

Lucara is also raising about $16 million in a private placement with Nemesia S.a.r.l and certain other investors on the same terms as the bought deal.  

The Vancouver-based miner said it would use the combined proceeds for working capital to support the development and ongoing operation of Karowe.

In May, the company secured US$220 million in debt financing to fund the underground expansion of Karowe that will extend the mine life to 2040. The financing is in two tranches: a project finance facility of US$170 million to fund the development of the underground project, and a working capital facility of US$50 million to support the operation of the surface mine.

Site construction work on the expansion project began in early January following a 25-year extension to the Karowe mine licence to 2046. The expansion is expected to cost US$514 million and take five years to complete.

This year, the mine is forecast to produce between 340,000 and 370,000 carats.

Karowe, which started production in 2012, is one of the world’s foremost producers of large, high quality, Type IIA diamonds over 10.8 carats, including the 1,758-carat Sewelo, the 1,109-carat Lesedi La Rona, and the 813-carat Constellation diamond, which sold for a record US$63.1 million in 2016.

The project currently contains 49.96 million indicated tonnes grading 15.4 carats per hundred tonnes for 7.67 million contained carats and inferred resources of 5.43 million tonnes grading 18.6 carats per hundred tonnes for 1.01 million carats.

At press time in Toronto, Lucara was trading at 76¢ per share within a 52-week trading range of 45¢ and $1.00. The company has about 397 million common shares outstanding for a $299.8 million market capitalization.