Consolidated Financial Statements
For the year ended December 31, 2023
PricewaterhouseCoopers LLP
250 Howe Street, Suite 1400, Vancouver, British Columbia, Canada, V6C 3S7
T: +1 604 806 7000, F: +1 604 806 7806, ca_vancouver_main_fax@pwc.com
PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
Independent auditor’s report
To the Shareholders of Lucara Diamond Corp.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of Lucara Diamond Corp. and its subsidiaries (together, the Company) as at
December 31, 2023 and 2022, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS).
What we have audited
The Company’s consolidated financial statements comprise:
●
the consolidated statements of financial position as at December 31, 2023 and 2022;
●
the consolidated statements of operations for the years then ended;
●
the consolidated statements of comprehensive (loss) income for the years then ended;
●
the consolidated statements of cash flows for the years then ended;
●
the consolidated statements of changes in equity for the years then ended; and
●
the notes to the consolidated financial statements, comprising material accounting policy information
and other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of
the
consolidated
financial
statements
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2023. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Impairment test of mineral properties and
related construction assets and plant and
equipment for the Karowe Mine cash generating
unit (Karowe CGU)
Refer to note 3 – Significant accounting judgments,
estimates and assumptions, note 4 – Summary of
material accounting policies and Note 24 -
Impairment test - Karowe mine to the consolidated
financial statements.
As at December 31, 2023, the total net book value
of mineral properties and related construction
assets and plant and equipment amounted to
$286.3 million and $125.9 million, respectively,
which relates to the Karowe CGU. When
impairment indicators exist, an impairment
assessment is conducted at the level of the CGU (a
group of assets that generate independent cash
inflows). An impairment loss is recognized for the
amount by which the CGU’s carrying amount
exceeds its recoverable amount.
During the year, management identified impairment
indicators due to the update to the Underground
Expansion project (UGP) schedule that extended
the anticipated duration of construction and
increased the estimated capital cost. As a result,
management performed an impairment test of the
Karowe CGU as of June 30, 2023. The recoverable
amount of the Karowe CGU is based on the
discounted projected after-tax cash flows expected
Our approach to addressing the matter included the
following procedures, among others:
●
Tested how management determined the
recoverable amount of the Karowe CGU,
which included the following:
–
Tested the appropriateness of the
discounted cash flow model.
–
Tested underlying data used in the
discounted cash flow model.
–
Evaluated the reasonableness of
significant assumptions by (i) comparing
the production costs and future sustaining
capital expenditures to recent actual
production and sustaining capital
expenditures incurred; (ii) comparing
exchange rates with external market and
industry data; and (iii) assessing whether
these assumptions were consistent with
evidence obtained in other areas of
the audit.
–
The work of management’s experts was
used in performing the procedures to
evaluate the reasonableness of the
significant assumptions which included
economically recoverable reserves,
diamond prices and the capital
expenditure to complete development of
the UGP. As a basis for using this work,
the competence, capabilities and
to be derived from the mining properties and
represents the CGU fair value less cost of disposal.
The determination of the recoverable amount
calculated using a discounted cash flow model
included the following significant assumptions:
economically recoverable reserves, diamond
prices, the capital expenditure to complete
development of the UGP, future sustaining capital
expenditures, production costs, exchange rates
and discount rate.
Management’s estimates of the economically
recoverable reserves, diamond prices and the
capital expenditure to complete development of the
UGP are based on information compiled by
qualified persons (management’s experts).
As of June 30, 2023, no impairment charge was
required for the Karowe CGU because its
recoverable amount exceeded the carrying amount.
We considered this a key audit matter due to the
significant judgment by management in estimating
the recoverable amount of the Karowe CGU, and a
high degree of auditor judgment, subjectivity and
effort in performing procedures and evaluating
management’s assumptions. The audit effort
involved the use of professionals with specialized
skill and knowledge in the field of valuation.
objectivity of management’s experts was
evaluated, the work performed was
understood and the appropriateness of the
work as audit evidence was evaluated.
The procedures performed also included
evaluation of the methods and
assumptions used by management’s
experts, tests of the data used by
management’s experts and an evaluation
of their findings.
–
Professionals with specialized skill and
knowledge in the field of valuation assisted
in evaluating the reasonableness of the
discount rate
.
●
Tested the disclosures, including the
sensitivity analysis, made in the
consolidated financial statements with
regard to the impairment test for the
Karowe CGU.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate the
Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with Canadian generally accepted auditing standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
●
Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
●
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
●
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
●
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditor’s report. However, future events or conditions may cause the Company to cease to
continue as a going concern.
●
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
●
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Dean Larocque.
/s/PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, British Columbia
February 20, 2024
LUCARA DIAMOND CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of U.S. Dollars)
1
|
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December 31,
2023
x
December 31,
2022
x
ASSETS
Current assets
Cash and cash equivalents
$
$
Receivables and other (Note 5)
Derivative financial instrument (Note 10)
Inventories (Note 6)
Investments
Inventories (Note 6)
Plant and equipment (Note 7)
Mineral properties and related construction assets (Note 8)
Intangible assets (Note 9)
Deferred financing fees (Note 10)
Derivative financial instrument (Note 10)
Cost overrun facility (Note 10)
Other non-current assets
TOTAL ASSETS
$
$
LIABILITIES
Current liabilities
Trade payables and accrued liabilities
$
$
Deferred revenue (Note 15)
Credit facilities (Note 10)
Tax and royalties payable
Lease liabilities
Credit facilities (Note 10)
Debenture (Note 10)
Restoration provisions (Note 11)
Deferred income taxes (Note 17)
Other non-current liabilities
TOTAL LIABILITIES
EQUITY
Share capital, unlimited common shares, no par value (Note 12)
Contributed surplus
Retained (deficit) earnings
(13,702 )
Accumulated other comprehensive loss
(103,256 )
(94,640 )
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
$
$
The accompanying notes are an integral part of these consolidated financial statements.
Commitments – Note 22
Subsequent events – Note 1, 10, 25
Approved on Behalf of the Board of Directors:
“Marie Inkster”
“Catherine McLeod-Seltzer”
Director
Director
LUCARA DIAMOND CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of U.S. Dollars, except for share and per share amounts)
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2023
2022
Revenues
(Note 15)
$
$
Cost of goods sold
Operating expenses
Royalty expenses (Note 8)
Depletion and amortization
Income from mining operations
Other expenses
Administration
(Note 16)
Impairment of intangible asset (Note 9)
Sales and marketing
Finance expenses
Exploration
Loss (gain) on derivative financial instrument (Note 10)
(10,662 )
Foreign exchange loss
Loss on disposal of assets (Note 7)
Net income before tax
Income tax expense
(Note 17)
Current income tax
Deferred income tax
Net (loss) income for the year
$
(20,191 )
$
(Loss) earnings per common share
(Note 18)
Basic
$
(0.04 )
$
Diluted
$
(0.04 )
$
Weighted average common shares outstanding
(Note 18)
Basic
Diluted
The accompanying notes are an integral part of these consolidated financial statements.
LUCARA DIAMOND CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of U.S. Dollars)
3 |
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2023
2022
Net (loss) income for the year
$
(20,191 )
$
Other comprehensive (loss) income
Items that will not be reclassified to net income
Change in fair value of marketable securities
(1,595 )
Items that may be subsequently reclassified to
net income
Currency translation adjustment
(8,766 )
(19,340 )
(8,616 )
(20,935 )
Comprehensive (loss) income for the year
$
(28,807 )
$
The accompanying notes are an integral part of these consolidated financial statements.
LUCARA DIAMOND CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of U.S. Dollars)
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2023
2022
Cash flows from (used in):
Operating activities
Net (loss) income for the year
$
(20,191 )
$
Items not affecting cash:
Depletion and amortization
Unrealized foreign exchange loss
Share-based compensation
Impairment of intangible asset
Unrealized loss (gain) on derivative financial instruments
(10,662 )
Deferred income taxes
Finance costs
Loss on disposal of assets
Net changes in working capital:
Receivables and other
(5,286 )
Inventories
(9,146 )
(7,603 )
Trade payables, deferred revenue and other current liabilities
Tax and royalties payable
Financing activities
Drawdown (repayment) on working capital facility, net
(7,662 )
Drawdown on project finance facility
Drawdown on liquidity guarantee
Share units vested
(461 )
(144 )
Lease payments
(1,540 )
(3,055 )
Contributions to cost overrun facility
(18,000 )
Investing activities
Investment in plant and equipment
(14,364 )
(18,992 )
Mineral property expenditure
(101,318 )
(106,339 )
Development of intangible assets
(112 )
(90 )
(115,794 )
(125,421 )
Effect of exchange rate change on cash and cash equivalents
(305 )
(544 )
Decrease in cash and cash equivalents
(13,081 )
(593 )
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
(1)
$
$
Supplemental information
Interest paid
$
(14,607 )
$
(8,539 )
Taxes paid
(8,494 )
(248 )
Changes in trade payables and accrued liabilities related
to plant and equipment and mineral properties
(2)
(3,079 )
(1)
Cash and cash equivalents consist of 100% cash deposits held with accredited financial institutions.
(2)
Included within accounts payable and accrued liabilities at each period end are additions to property, plant and equipment and
mineral properties, acquired on normal course payment terms, of $8.2 million at December 31, 2023 ($11.3 million at December
31, 2022).
The accompanying notes are an integral part of these consolidated financial statements
.
LUCARA DIAMOND CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(in thousands of U.S. Dollars, unless otherwise indicated)
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Number of
shares
issued and
outstanding
Share capital
Contributed
surplus
Retained
earnings
(deficit)
Accumulated
other
comprehensive
loss
Total
Balance, January 1, 2023
$
$
$
$
(94,640 )
$
Net loss for the year
–
(20,191 )
(20,191 )
Other comprehensive loss
–
(8,616 )
(8,616 )
Total comprehensive loss
–
(20,191 )
(8,616 )
(28,807 )
Share-based compensation
–
Shares issued for liquidity guarantee
Shares issued from share units vested
(1,371 )
Withholding tax for share units vested
–
(461 )
(461 )
Balance, December 31, 2023
$
$
$
(13,702 )
$
(103,256 )
$
Balance, January 1, 2022
$
$
$
(33,945 )
$
(73,705 )
$
Net income for the year
–
Other comprehensive loss
–
(20,935 )
(20,935 )
Total comprehensive income (loss)
–
(20,935 )
Share-based compensation
–
Shares issued from share units vested
(641 )
Withholding tax for share units vested
–
(144 )
(144 )
Balance, December 31, 2022
$
$
$
$
(94,640 )
$
The accompanying notes are an integral part of these consolidated financial statements.
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
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NATURE OF OPERATIONS AND LIQUIDITY
“Lucara”) is a diamond mining company focused on the development and operation of diamond
and a 100% interest in Clara Diamond Solutions Limited Partnership (“Clara”).
Clara operates a
secure, digital diamond sales platform that uses proprietary analytics together with cloud and
blockchain technologies.
The Company’s common shares are listed on the TSX, NASDAQ Stockholm and Botswana Stock
Exchanges. The Company was continued into the Province of British Columbia under the Business
During fiscal 2023, the Company incurred a net loss of $20.2 million and generated cash of $63.4
million from operating activities. As at December 31, 2023, the Company had cash and cash
equivalents of $13.3 million, a working capital deficit (current assets less current liabilities) of $16.6
million and had drawn $35.0 million from its $50.0 million working capital facility.
In July 2023, the Company provided an update to the schedule and budget for the Karowe
Underground Expansion project (the "UGP"). The estimated duration of the construction period
increased, extending the anticipated commencement of production from the underground from the
second half of 2026 to the first half of 2028. The revised forecast of costs at completion is $683.0
million, an increase of 25% from the prior estimate in May 2022. Committed, not yet incurred, costs
under the UGP are $77.2 million at December 31, 2023 (Note 22).
The Company’s debt package consisted of two facilities (the “Facilities”), a project finance facility
of $170.0 million to fund the development of an underground expansion at the Karowe Mine (the
“Project Loan”), of which $90.0 million has been drawn at December 31, 2023, and a $50.0 million
senior secured working capital facility (the “WCF”). Subsequent to year-end, the Company
completed an agreement with its lenders to modify the repayment schedule, adjust the Facilities to
include a project finance facility of $190.0 million and $30.0 million working capital facility, extend
the maturity date of its WCF to June 30, 2031, and certain other terms (the “Rebase Amendments”)
(Note 10).
Prior to June 30, 2025, the Company is required to place $61.7 million in a cost overrun facility (the
“COF") as a condition of the Facilities. The Facilities Agreement includes specific provisions for
how and when these funds may be released from the COF. The COF balance was $18.6 million as
at December 31, 2023. The Company is required to fund the remaining balance with the proceeds
from the sale of exceptional stones and cashflow from operations.
Under the terms of the Project Loan, the Company’s largest shareholder, Nemesia S.a.r.l.
(“Nemesia”) provided a limited standby undertaking of up to $63.0 million. The standby undertaking
consists of two components: i) an undertaking to support the requirement to fund the COF to $61.7
million by June 30, 2025 and ii) in the event of a funding shortfall, support up to $35.0 million occurring
up to project completion.
Following the completion of the Rebase Amendments, the Company expects to be able to meet its
obligations as they become due in the normal course of business for at least the next twelve months
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
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BASIS OF PREPARATION AND CHANGES TO ACCOUNTING POLICIES
(i)
Basis of presentation
These consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.
Other than changes due to new and amended standards and interpretations, the accounting
policies adopted are consistently applied in all periods presented.
These financial statements were approved by the Board of Directors for issue on February 20,
2024.
(ii)
New IFRS Pronouncements
Amendments to IAS 1 – Presentation of Financial Statements –
Classification of liabilities
as current or non-current and non-current liabilities with covenants
Amendments were issued to
IAS 1 - Presentation of Financial Statements
which removed the
requirement for a right to be unconditional and instead, now requires that a right to defer settlement
must have substance and exist at the end of the reporting period. A company classifies a liability
as non-current if it has a right to defer settlement for at least 12-months after the reporting period.
The amendments clarify how a company classifies a liability that includes a counterparty conversion
option, which could be recognized as either equity or a liability separately from the liability
component under IAS 32 - Financial Instruments Presentation. Further modification was issued in
October 2022 amendments in
Non-current liabilities with covenants
. Only covenants with which an
entity is required to comply on or before the reporting date affect the classification of a liability as
current or non-current. The amendments were effective on January 1, 2023 and had no significant
impact on the consolidated financial statements.
Amendments to IAS 12 – Income Taxes –
Deferred taxes on initial recognition
The amendments require companies to recognize deferred tax on particular transactions that, on
initial recognition, give rise to equal amounts of taxable and deductible temporary differences. The
amendments typically apply to transactions such as leases for the lessee and decommissioning
and restoration obligations related to assets in operation. The Company adopted these
amendments to IAS 12 - Income Taxes effective January 1, 2023. These amendments did not affect
the Company’s financial statements.
Several other amendments and interpretations were applied for the first time in 2023 but did not
have an impact on the consolidated financial statements of the Company. The Company is currently
assessing the impact of the standards and amendments to standards and interpretations which
have been issued but are not yet effective including IFRS S1 –
General Requirements for
Disclosure of Sustainability-related Financial Information
and IFRS S2 –
Climate-related
Disclosures
.
The Company has not early adopted any standard, interpretation or amendment that has been
SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of consolidated financial statements requires management to use judgment in
applying its accounting policies and make estimates and assumptions about the future. Estimates and
assumptions are continuously evaluated and are based on management’s experience and other
factors, including expectations about future events that are believed to be reasonable under the
circumstances. Uncertainty about these assumptions and estimates could result in outcomes that
require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
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3.
SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED)
The Company has identified the following areas where significant accounting judgments, estimates
and assumptions have been made in the preparation of the consolidated financial statements:
Areas of judgment
(a) Satisfaction of performance obligations under the HB sales arrangement
The Company has determined that, under the terms of the Company’s sales arrangements with HB
Trading BV (“HB”), control is transferred when the delivery and analysis of the rough diamonds are
completed. At this point the initial estimated polished outcome price of the rough diamond is
determined and HB assumes responsibility for its manufacturing, polishing and sale to an end buyer.
(b)
Assessment of impairment indicators
The Company carries its mineral properties and plant and equipment and intangible assets at depleted
cost less any provision for impairment. The Company assesses at each reporting period whether there
is an indication of impairment. Significant judgment is applied in assessing whether indicators of
impairment exist that would necessitate impairment testing. Internal and external factors, such as i) a
significant decline in the market value of the Company’s share price; ii) changes in the quantity of the
recoverable resources and reserves; and iii) changes in diamond prices, capital and operating costs
and recoveries; and iv) changes in inflation, interest and exchange rates, are evaluated in determining
whether there are any indicators of impairment.
(c)
Impairment
The Company reviews the carrying amounts of non-current assets whenever events or changes in
circumstances indicate that the carrying amounts may exceed the estimated recoverable amounts.
Recoverable amounts are determined by reference to relevant market data, discounted future cash
flows, and fair value less costs to sell. An impairment loss is recognized when the carrying amount of
those assets is no longer considered recoverable. Non-current assets that were previously impaired
are tested for possible reversal of the impairment whenever events or changes in circumstance
indicate that the impairment may have reversed.
Calculating the estimated recoverable amount of the cash-generating unit (“CGU”) for non-current
asset impairment tests requires management to make estimates and assumptions with respect to
estimated recoverable mineral reserves and resources, recovery estimates, estimated future diamond
prices, future production volume, expected future operating, capital and reclamation costs, future
operating volumes for Clara, discount rates and exchange rates. Management relies on production
history and geological experts to develop estimates of recoverable mineral reserves and resources,
diamond prices, as well as expected future operating, capital and reclamation costs. These estimates
are subject to various risks and uncertainties which may ultimately influence the estimated
recoverability of the carrying amounts of non-current assets.
Changes in these assumptions could significantly impact the valuation of the Company’s assets in the
future. During 2023, management identified impairment indicators with its mineral properties, plant and
equipment, and its intangible assets. Management’s impairment evaluation resulted in the Company
recognizing an impairment of intangible assets of $11.2 million in relation to the CGUs of the Clara
sales platform (Note 9).
(d) Deferred Taxes
Judgment is required in assessing whether deferred tax assets and certain deferred tax liabilities are
recognized and what tax rate is expected to be applied in the year when the related temporary
differences reverse. Judgment is also required on the application of income tax legislation. These
judgments are subject to risk and uncertainty and could result in an adjustment to the deferred tax
provision.
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
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3.
SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED)
Going concern and liquidity risk
Management is required to exercise judgment with respect to evaluating the Company’s ability to
continue as a going concern and to ensure that disclosures relating to liquidity are appropriate.
To this
end, the Company manages liquidity risk by maintaining an adequate level of cash and cash
equivalents to meet its short-term ongoing obligations, ensuring access to credit facilities, and reviews
its actual expenditures and forecast cash flows on a regular basis. Changes in demand for rough
and/or polished diamonds and diamond prices, amount, and timing of capital costs on the UGP,
production levels and related costs, foreign exchange rates and other factors all impact the Company’s
Sources of estimation uncertainty
(a)
Estimated recoverable reserves and resources
Mineral reserve and resource estimates are based on various assumptions relating to operating
matters. These include production costs, mining and processing recoveries, cut-off grades, long term
diamond prices and, in some cases, exchange rates, inflation rates and capital costs. Cost estimates
are based on feasibility study estimates or operating history. Estimates are prepared by appropriately
qualified persons, but will be affected by forecast commodity prices, diamond prices, inflation rates,
exchange rates, capital and production costs and recoveries amongst other factors. Proven and
probable reserves are determined based on a professional evaluation using accepted international
standards for the assessment of mineral reserves. The assessment involves geological and
geophysical studies and economic data and the reliance on a number of assumptions. The estimates
of the reserves may change based on additional knowledge gained subsequent to the initial
assessment. This may include additional data available from continuing exploration, results from the
reconciliation of actual mining production data against the original reserve estimates, or the impact of
economic factors such as changes in the price of commodities or the cost of components of production.
Estimated recoverable reserves are used to determine the depletion and amortization of property,
plant and equipment at the operating mine site, in accounting for deferred stripping costs and mineral
properties, determining a deferred tax rate and in performing impairment testing. Therefore, changes
in the assumptions used could affect the carrying value of assets, depletion and amortization, changes
in the deferred tax rate, and impairment charges recorded in the statement of operations.
(b)
Uncertain Tax Positions
The Company recognizes that its tax obligations are subject to interpretation and judgment.
Uncertain tax positions arise when there is uncertainty regarding the application of tax laws and
regulations to the Company's transactions or positions. Estimates of uncertain tax positions are
measured using the most likely amount or expected value approach, considering all available
information, including tax rulings, case law, and professional opinions from the Company’s tax
experts and legal counsel.
Management evaluates uncertain tax positions based on the technical merits of the position and
the probability of settlement. This assessment involves significant judgment and may evolve over
time as new information becomes available.
(c)
Estimated variable consideration in determining revenue
Revenues include an estimate of variable consideration receivable under the terms of the Company’s
sales arrangements with HB. Variable consideration is a component of the transaction price and
represents an area of significant management estimate and judgment. Under the sales arrangements,
at the time of sale of a rough diamond, the Company receives an initial payment based on an estimated
polished outcome price.
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
10 |
Page
3.
SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED)
When the manufactured diamond is sold to an end buyer, HB is entitled to receive a fee and
reimbursement for the cost of manufacturing. If the final sales price is higher than the initial estimated
polished price a true up payment is payable to the Company. Any manufactured diamonds sold to an
end buyer for less than the initial estimated polished price (after deductions for HB’s fee and the cost
of manufacturing) will result in the difference being refunded to HB.
Variable consideration is estimated using the most likely approach, as the Company considers this
approach to be more predictive. The transaction price is reassessed each reporting period, including
any adjustments to the amount of variable consideration recognized. The revenue recognized as the
transaction price, including any variable consideration, is recognized within the constraint of “highly
probable”. In evaluating the most likely approach, significant judgment includes market conditions, the
current estimated polished value provided by HB and the probability that the variable consideration
would be realized.
Decommissioning and site restoration
The Company has obligations for site restoration and decommissioning related to the Karowe Mine.
The restoration provision is based on cost estimates of the future decommissioning and site restoration
activities and are estimated by the Company using mine closure plans or other similar studies which
outline the activities that will be carried out to meet the obligations. The restoration provision requires
significant estimates and assumptions because the obligations are dependent on the laws and
regulations of the country in which the mine operates and are based on future expectations of the
timing, extent and cost of required decommissioning and site restoration activities. As a result, there
(e)
Deferred Taxes
The deferred tax provisions are calculated by the Company whilst the actual amounts of income tax
expense are not final until tax returns are filed and accepted by the relevant authorities. Deferred tax
liabilities arising from temporary differences are recognized unless the reversal of the temporary
differences is not expected to occur in the foreseeable future and can be controlled. Assumptions
about the generation of future taxable profits and repatriation of retained earnings depend on
management’s estimates of future production and sales volumes, diamond prices, reserves and
resources, operating costs, decommissioning and restoration costs, capital expenditures, dividends
and other capital management transactions. These estimates and assumptions are subject to risk and
uncertainty and could result in an adjustment to the deferred tax provision and a corresponding credit
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
11 |
Page
SUMMARY OF MATERIAL ACCOUNTING POLICIES
The significant accounting policies used in the preparation of these consolidated financial
statements are as follows:
(a) Basis of measurement
These consolidated financial statements have been prepared under the historical cost convention,
except for investments in equity securities and derivative financial instruments, which are measured
at fair value.
These consolidated financial statements include the accounts of the Company and all of its
subsidiaries (see
Note 14 – Principal subsidiaries
).
Subsidiaries are entities controlled by the Company. An entity is controlled by the Company when as
a group; it is exposed to, or has rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the entity. Subsidiaries are included in the
consolidated financial statements from the date control is obtained until the date control ceases. Where
the Company’s interest is less than 100%, the Company recognizes non-controlling interests. All
intercompany balances, transactions, income, expenses, profits and losses, including unrealized gains
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker, who is responsible for allocating
resources and assessing performance of the operating segments, has been identified as the person
that makes strategic decisions. The CEO is deemed the chief operating decision-maker of the
Company.
The Company’s primary reporting segments are based on individual operating segments, being the
Karowe Mine and Corporate and other. The Corporate office provides support to the Karowe Mine with
respect to sales, treasury and finance, technical support, regulatory reporting and corporate
Functional and presentation currency
Items included in the financial statements of each of the Company’s entities are measured using the
currency of the primary economic environment in which the entity operates (the “functional currency”).
The consolidated financial statements are presented in U.S. dollars. The functional currency of the
parent company, Lucara Diamond Corp., is the Canadian dollar.
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at exchange rates of monetary assets and
liabilities denominated in currencies other than an entity’s functional currency are recognized in the
statement of operations.
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
12 |
Page
4.
SUMMARY OF MATERIAL ACCOUNTING POLICIES (continued)
Group companies
The functional currency of the most significant subsidiary of the Company, Lucara Botswana Proprietary
Limited (“Lucara Botswana”), is the Botswana Pula. The functional currency of the Company and its
other active subsidiary, Clara, is the Canadian dollar. The results and financial position of the group
companies, which have a functional currency different from the presentation currency, are translated
into the presentation currency as follows:
(i)
Assets and liabilities for each statement of financial position presented are translated at the closing
rate at the date of that statement.
(ii) Income and expenses are translated at average exchange rates (unless this average is not a
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates,
in which case income and expenses are translated at the rate on the dates of the transactions).
(iii) All resulting exchange differences are recognized in other comprehensive income as cumulative
Cash and cash equivalents include cash on account, demand deposits and money market
investments with maturities from the date of acquisition of three months or less, which are readily
convertible to known amounts of cash and are subject to insignificant changes in value. Cash and
Financial assets and liabilities are recognized when the Company becomes a party to the contractual
provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows
from the assets have expired or have been transferred and the Company has transferred substantially
all risks and rewards of ownership. Financial liabilities are derecognized when the obligation specified
in the contract is discharged, cancelled or expires. All recognized financial assets are measured
subsequently at amortized cost or fair value through profit or loss or fair value through other
comprehensive income.
At initial recognition, the Company classifies its financial instruments in the following categories:
Fair value through profit or loss: A financial asset or liability is classified in this category if acquired
principally for the purpose of selling or repurchasing in the short-term. Derivatives, including
interest rate swaps, are also included in this category unless they are designated as hedges.
Financial instruments in this category are recognized initially and subsequently at fair value.
Transaction costs are expensed in the consolidated statement of operations. Gains and losses
arising from changes in fair value are presented in the consolidated statement of operations within
(ii)
Fair value through other comprehensive income: The Company has made an irrevocable election
to designate its investments in marketable equity securities as classified at fair value through
other comprehensive income. Fair values are determined by reference to quoted market prices
at the reporting date. When investments in marketable equity securities are disposed of or
impaired, the cumulative gains and losses recognized in other comprehensive income are not
recycled to profit and loss and remain within equity.
(iii) Financial assets and liabilities at amortized cost: Financial assets and liabilities at amortized cost
include cash, trade receivables, credit facility and trade payables and are included in current
classification due to their short-term nature. Trade receivables and payables are non-interest
bearing if paid when due and are recognized at their face amount, less, when material, a discount,
except when fair value is materially different. Amounts drawn on the credit facility are interest-
bearing and are recorded at fair value upon inception. These are subsequently measured at
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
13 |
Page
4.
SUMMARY OF MATERIAL ACCOUNTING POLICIES (continued)
Inventories, which include rough diamonds, ore stockpiles and parts and supplies, are measured at the
lower of cost and net realizable value. The amount of any write-down of inventories to net realizable
value is recognized in the period the write-down occurs. Cost is determined using the weighted average
method. Cost includes directly attributable mining overhead but excludes borrowing costs.
Net realizable value represents the estimated selling price in the ordinary course of business, less all
Plant and equipment are stated at cost less accumulated amortization and impairment losses. The cost
of an asset consists of its purchase price, any directly attributable costs of bringing the asset to its
present working condition and location for its intended use and an initial estimate of the costs of
dismantling and removing the item and restoring the site on which it is located. Subsequent costs are
included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the Company and the
cost of the item can be measured reliably.
its cost less its residual value over its estimated useful life. The estimated useful lives of plant and
equipment are as follows:
Machinery and equipment | 5 to 15 years |
Plant facilities | based on recoverable reserves on a unit of production basis |
Furniture and office equipment | 2 to 3 years |
Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at each reporting
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount. Gains and losses on disposals are
determined by comparing the proceeds with the carrying amount and are recognized within “other gains
Exploration and evaluation expenditures
Exploration and evaluation expenditures relate to the search for mineral resources, the determination
of technical feasibility and the assessment of commercial viability of an identified resource. Exploration
and evaluation activities include:
•
Researching and analyzing historical exploration data;
•
Gathering exploration data through topographical, geochemical and geophysical studies;
•
Exploratory drilling, trenching and sampling; and
•
Determining and examining the volume and grade of the resource.
Exploration and evaluation expenditures are expensed in the statement of operations as incurred on
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
14 |
Page
4.
SUMMARY OF MATERIAL ACCOUNTING POLICIES (continued)
Costs associated with acquiring a mineral property are capitalized as incurred. When it has been
established that a mineral property is considered to be sufficiently advanced and an economic analysis
has been completed, all further expenditures for the current year and subsequent years are capitalized
as incurred. Mineral property costs are amortized from the date of commencement of commercial
During the production phase, mining expenditures (exploration or development costs) incurred either to
develop new ore bodies or to develop mine areas in advance of current production are capitalized to
mineral properties. Stripping costs incurred in the production phase are accounted for as variable
production costs. However, stripping costs are capitalized and recorded as deferred stripping, a
component of mineral properties, when the stripping activity provides access to sources of reserves or
resources that will be produced in future periods that would not have otherwise been accessible in the
absence of this activity. The deferred stripping costs are depleted on a unit-of-production basis over the
Intangible assets with finite lives consist of acquired trademarks, copyrights, patents and intellectual
property that are initially capitalized at the purchase price plus any other directly attributable costs.
These assets are amortized using the straight-line method over their estimated useful lives.
Amortization of intangible assets will be included in the cost of sales, administrative expenses and/or
research and development expenses, as appropriate.
Development expenditures relating to intangible assets are capitalized only if the expenditure can be
measured reliably, the process is technically and commercially feasible, future economic benefits are
probable, and the Company intends to and has sufficient resources to complete development and to
use or sell the asset. Judgment is required in determining the technical and commercial feasibility and
in assessing the probability of future economic benefits. Amortization related to capitalized development
Contingent consideration relating to an asset acquisition is recognized using the cost accumulation
method when: (a) the conditions associated with the contingent payment are met; (b) the Company has
a present legal or constructive obligation that can be estimated reliably; and (c) it is probable that an
Long lived assets are reviewed at each reporting period for impairment when events or changes in
circumstances indicate that the carrying amount may not be recoverable. Intangible assets that are not
yet available for use are reviewed for impairment annually. When impairment indicators exist, an
impairment assessment is conducted at the level of the CGU (a group of assets that generate
independent cash inflows). An impairment loss is recognized for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s
fair value less costs to sell and its value in use. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating
units). Non-financial assets that suffered impairment are reviewed for possible reversal of the
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
15 |
Page
4.
SUMMARY OF MATERIAL ACCOUNTING POLICIES (continued)
Asset retirement obligations
The Company recognizes a liability for an asset retirement obligation on long-lived assets when a
present legal or constructive obligation exists, as a result of past events and the amount of the liability
is reasonably determinable. Asset retirement obligations are initially recognized and recorded as a
liability based on estimated future cash flows discounted at a risk-free rate. This is adjusted at each
reporting period for changes to factors including the expected amount of cash flows required to
discharge the liability, the timing of such cash flows and the risk-free discount rate. Corresponding
amounts and adjustments are added to the carrying value of the related long-lived asset and amortized
or depleted to operations over the life of the related asset.
Other provisions
Provisions are recognized when:
•
the Company has a present legal or constructive obligation as a result of a past event;
•
a reliable estimate can be made of the obligation.
Provisions are measured at the present value of the expenditures expected to be required to settle the
obligation, using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the obligation. The increase in the provision due to the passage of time
Income taxes are recognized in the statement of operations, except where they relate to items
recognized in other comprehensive income or directly in equity, in which case the related taxes are
recognized in other comprehensive income or equity.
Current taxes receivable or payable are based on estimated taxable income for the current year at the
statutory tax rates enacted or substantively enacted less amounts paid or received on account.
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the
initial recognition of assets or liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable income, and differences relating to investments in subsidiaries
and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable
future.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences
when they reverse, based on the sliding tax rate that is expected at the time of reversal and the laws
that have been enacted or substantively enacted by the year end.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities and assets, and they relate to income taxes levied by the same tax authority on the same
taxable entity, or on different tax entities where there is a legal right to do so, but they intend to settle
current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized
simultaneously.
A deferred tax asset is recognized to the extent that it is probable that future tax profits will be available
against which the temporary difference can be utilized. Deferred tax assets are reviewed at each year
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
16 |
Page
4.
SUMMARY OF MATERIAL ACCOUNTING POLICIES (continued)
Uncertain tax positions and interest and penalties related to uncertain tax positions are accounted for
under IFRIC 23, Uncertainty over Income Tax Treatments. The Company first determines whether it is
more likely than not that a tax position will be sustained upon examination. If a tax position meets the
more-likely-than-not recognition threshold it is then measured to determine the amount of benefit or
liability to recognize in the financial statements. The tax position is measured as the amount of benefit
or liability that is likely to be realized upon ultimate settlement. The Company assesses the validity of
conclusions regarding uncertain tax positions on a quarterly basis to determine if facts or circumstances
have arisen that might cause the Company to change their judgment regarding the likelihood of a tax
Common shares are classified as equity. Incremental costs directly attributable to the issue of new
Revenues from diamond sales are recognized when the purchaser obtains control of the diamond. For
diamonds sold through tender or Clara, control is transferred when the Company receives payment for
the diamonds sold and title is transferred to the purchaser according to contract terms.
Since 2020, the Company has sold its large stone production (diamonds greater than 10.8 carats) under
arrangements with HB Antwerp. For diamonds sold under these arrangements, control is transferred
when the stones are delivered and the analysis of the rough diamond are agreed according to the
contract terms to which the stones relate. The initial purchase price paid for the rough diamonds is
based on an initial estimated polished outcome with a true up paid to the Company if the actual achieved
polished sales price (less a margin, including the cost of manufacturing) exceeds the initial price paid,
or a repayment if the actual achieved polished sales price (less the margin, including the cost of
manufacturing) is below the initial price paid, after fees. Thus, the arrangement contains elements of
variable consideration as the Company’s final consideration is contingent on price obtained in the future
sale by the polished manufacturer. Variable consideration is recognized to the extent that it is highly
probable that its inclusion will not result in a significant revenue reversal when the uncertainty has been
The Company has share-based compensation plans, under which the entity receives services as
consideration for equity instruments (stock options or share units) of the Company.
Stock options and equity-settled share units granted to employees are measured on the grant date.
Stock options granted to non-employees are measured on the date that the goods or services are
received. Share units which do not meet the criteria for equity-settlement are recorded as a liability and
measured at fair value at each reporting period.
The fair value of the employee and non-employee services received in exchange for the grant of the
options is recognized as an expense. The total amount to be expensed is determined by reference to
the fair value of the stock options and share units granted and the vesting periods. The total expense
is recognized over the vesting period, which is the period over which all of the specified vesting
conditions are to be satisfied.
The cash subscribed for the shares issued when the options are exercised is credited to share capital,
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
17 |
Page
4.
SUMMARY OF MATERIAL ACCOUNTING POLICIES (continued)
Earnings (loss) per share
Earnings (loss) per share is calculated by dividing the income or loss attributable to the shareholders
of the Company by the weighted average number of common shares issued and outstanding during
the year. Diluted income per share is calculated using the treasury stock method.
In periods of loss
Leases are recognized as a right-of-use asset and a corresponding liability at the date at which the
leased asset is available for use. Assets and liabilities arising from a lease are initially measured on a
present value basis. Each lease payment is allocated between the liability and finance cost. The finance
cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest
on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the
shorter of the asset's useful life and the lease term on a straight-line basis.
The Company leases various properties. Lease terms are negotiated on an individual basis and contain
a wide range of different terms and conditions. The lease agreements do not impose any covenants
but leased assets may not be used as security for borrowing purposes.
Payments associated with short-term leases and leases of low-value assets are recognized on a
straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset
are capitalized as part of the cost of that asset. Other borrowing costs not directly attributable to a
RECEIVABLES AND OTHER
2023 | 2022 | |
Trade | $ 12,981 | $ 18,769 |
Value-added and income taxes | 13,927 | 5,301 |
Deferred financing fees (Note 10) | – | 975 |
Prepayments | 8,012 | 7,078 |
Other | 130 | 979 |
$ 35,050 | $ 33,102 |
Trade receivables at December 31, 2023 were $13.0 million (December 31, 2022 – $18.8 million)
due from HB. All amounts receivable from HB are current.
Revenue from diamond sales during the year ended December 31, 2023 includes $106.2 million
(December 31, 2022: $128.7 million) sold to HB.
Value-added and income taxes receivable include $5.0 million at December 31, 2023 which has
been remitted to tax authorities, through the withholding of value-added tax refunds, to dispute an
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
18 |
Page
2023 | 2022 | |
Rough diamonds | $ 19,217 | $ 17,988 |
Ore stockpile | 2,038 | 6,967 |
Parts and supplies | 13,279 | 13,417 |
Total current inventories | $ 34,534 | $ 38,372 |
Non-current inventories – ore stockpile | $ 38,719 | $ 27,867 |
Inventory expensed during the year ended December 31, 2023 totaled $78.6 million (December
31, 2022 – $79.3 million). There were no inventory write-downs during the years ended December
31, 2023 and 2022.
The portion of the ore stockpile that is expected to be processed more than 12 months from year
PLANT AND EQUIPMENT
Mine and | Furniture | |||||
Construction | plant | and office | Right of | |||
Cost | in progress | facilities | equipment | Vehicles | use assets | Total |
Balance, January 1, 2022 | $ 13,645 | $ 208,279 | $ 14,262 | $ 4,227 | $ 4,205 | $ 244,618 |
Additions | 18,785 | – | – | – | 3,145 | 21,930 |
Reclassification | (11,937) | 9,692 | 1,955 | 335 | – | 45 |
Translation differences | (1,353) | (17,205) | (1,225) | (355) | (451) | (20,589) |
Balance, December 31, 2022 | $ 19,140 | $ 200,766 | $ 14,992 | $ 4,207 | $ 6,899 | $ 246,004 |
Additions | 12,993 | – | – | – | 1,292 | 14,285 |
Reclassification (Note 8) | (12,073) | 30,151 | 1,740 | 863 | 23,752 | 44,433 |
Disposals and other | (943) | (109) | (9) | (89) | (184) | (1,334) |
Translation differences | (903) | (9,352) | (700) | (201) | (443) | (11,599) |
Balance, December 31, 2023 | $ 18,214 | $ 221,456 | $ 16,023 | $ 4,780 | $ 31,316 | $ 291,789 |
Accumulated amortization | ||||||
Balance, January 1, 2022 | $ – | $ 144,306 | $ 8,913 | $ 2,282 | $ 1,796 | $ 157,297 |
Depletion and amortization | – | 7,843 | 2,469 | 618 | 2,854 | 13,784 |
Translation differences | – | (12,052) | (809) | (208) | (247) | (13,316) |
Balance, December 31, 2022 | $ – | $ 140,097 | $ 10,573 | $ 2,692 | $ 4,403 | $ 157,765 |
Depletion and amortization | – | 7,166 | 2,465 | 235 | 1,205 | 11,071 |
Reclassification (Note 8) | – | 4,056 | 148 | 412 | 985 | 5,601 |
Disposals and other | – | (39) | (6) | (88) | (184) | (317) |
Translation differences | – | (6,474) | (499) | (129) | (212) | (7,314) |
Balance, December 31, 2023 | $ – | $ 144,806 | $ 12,681 | $ 3,122 | $ 6,197 | $ 166,806 |
Net book value | ||||||
As at December 31, 2022 | $ 19,140 | $ 60,669 | $ 4,419 | $ 1,515 | $ 2,496 | $ 88,239 |
As at December 31, 2023 | $ 18,214 | $ 76,650 | $ 3,342 | $ 1,658 | $ 25,119 | $ 124,983 |
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
19 |
Page
MINERAL PROPERTIES AND RELATED CONSTRUCTION ASSETS
Capitalized | Karowe | |||
production | Underground | |||
Cost | stripping asset | Karowe Mine | Construction | Total |
Balance, January 1, 2022 | $ 66,073 | $ 41,857 | $ 126,117 | $ 234,047 |
Additions | – | – | 106,389 | 106,389 |
Borrowing cost capitalized | – | – | 6,676 | 6,676 |
Adjustment to restoration asset | – | (1,669) | – | (1,669) |
Reclassification | – | – | (45) | (45) |
Translation differences | (5,368) | (3,336) | (14,277) | (22,981) |
Balance, December 31, 2022 | $ 60,705 | $ 36,852 | $ 224,860 | $ 322,417 |
Additions | – | – | 92,128 | 92,128 |
Borrowing cost capitalized | – | – | 9,285 | 9,285 |
Adjustment to restoration asset | – | (472) | – | (472) |
Assets put into use (Note 7) | – | – | (38,832) | (38,832) |
Translation differences | (2,847) | (1,726) | (10,864) | (15,437) |
Balance, December 31, 2023 | $ 57,858 | $ 34,654 | $ 276,577 | $ 369,089 |
Accumulated depletion | ||||
Balance, January 1, 2022 | $ 43,381 | $ 33,088 | – | $ 76,469 |
Depletion | 7,042 | 1,286 | – | 8,328 |
Translation differences | (3,776) | (2,734) | – | (6,510) |
Balance, December 31, 2022 | $ 46,647 | $ 31,640 | – | $ 78,287 |
Depletion | 5,851 | 1,415 | – | 7,266 |
Translation differences | (2,218) | (1,491) | – | (3,709) |
Balance, December 31, 2023 | $ 50,280 | $ 31,564 | – | $ 81,844 |
Net book value | ||||
As at December 31, 2022 | $ 14,058 | $ 5,212 | $ 224,860 | $ 244,130 |
As at December 31, 2023 | $ 7,578 | $ 3,090 | $ 276,577 | $ 287,245 |
Karowe Mine
A royalty of 10% of the gross sales value of diamonds produced from Karowe is payable to the
government of Botswana, regardless of whether the diamond is sold as rough or polished. During the
year ended December 31, 2023, the Company incurred a royalty expense of $20.1 million (December
31, 2022: $24.1 million).
The Karowe Underground Construction will not be depreciated until the asset is available for its
intended use.
A 132 kV bulk power supply powerline, including the Letlhakane and Karowe substations, and an 11 kV
transmission line to the Karowe Mine were completed and put into use on March 31, 2023. The assets,
constructed pursuant to a self-build agreement, were handed over to Botswana Power Corporation
who will own and operate the substations and lines. Consequently, $23.3 million has been reclassified
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
20 |
Page
8.
MINERAL PROPERTIES AND RELATED CONSTRUCTION ASSETS (continued)
from Karowe Underground Construction to Plant and Equipment as a right of use asset. The
remaining assets reclassified relate to other Plant and Equipment put into use during the year.
Total borrowing costs of $16.7 million (December 31, 2022 – $7.8 million) during the period of
construction relating to the Karowe Underground Construction asset have been capitalized to date.
Capitalized borrowing costs include interest and other costs related to the project finance facility
(Note
Cost | |
Balance, January 1, 2022 | $ 23,916 |
Development expenditures | 90 |
Translation differences | (1,495) |
Balance, December 31, 2022 | $ 22,511 |
Impairment of intangible asset | (11,200) |
Development expenditures | 112 |
Translation differences | 499 |
Balance, December 31, 2023 | $ 11,922 |
Accumulated amortization | |
Balance, January 1, 2022 | $ 3,192 |
Amortization | 1,348 |
Translation differences | (253) |
Balance, December 31, 2022 | $ 4,287 |
Amortization | 1,306 |
Translation differences | 118 |
Balance, December 31, 2023 | $ 5,711 |
Net book value | |
As at December 31, 2022 | $ 18,224 |
As at December 31, 2023 | $ 6,211 |
In 2018, the Company acquired the Clara platform, a secure, digital sales platform for rough diamonds.
The consideration paid was allocated to intangible assets which will continue to be amortized over the
remaining estimated useful economic life of 13 years as at December 31, 2023.
Impairment
At December 31, 2023, the Company identified an impairment indicator due to a change in the way the
Company values the Clara platform and performed an impairment test. As a result of an impairment
indicator being identified, the recoverable amount of the Clara platform was estimated and compared
against its carrying value. An impairment of $11.2 million was recorded.
The recoverable amount of the Clara CGU is based on the fair value less cost of disposal (“FVLCD”)
expected to be derived from the platform. The determination of FVLCD requires use of Level 1 valuation
inputs.
As part of the purchase, contingent consideration was agreed to and will be recognized as additional
purchase consideration for the intangible asset, if the obliging events occur. The contingent
consideration consists of a profit-sharing allocation: cash payments based on 3.45% of the annual
Earnings Before Interest, Tax, Depletion and Amortization (“EBITDA”) generated by the sales platform
and a pre-existing 13.3% annual EBITDA performance based contingent payments payable to the
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
21 |
Page
9.
INTANGIBLE ASSETS (continued)
founders of the technology, to a maximum of $20.9 million per year for 10 years and additional Lucara
share payments to a combined maximum of 13.4 million shares if certain revenue triggers are reached
beginning at $200 million of cumulative revenue to $1.6 billion of cumulative revenue. As of December
2023 | 2022 | |
Current | ||
Working capital facility | $ 35,000 | $ 15,000 |
Revolving credit facility | - | 338 |
Deferred financing fees (Note 5) | $ - | $ (975) |
Non-current | ||
Project finance facility, net of fees | $ 86,515 | $ 62,151 |
Due to related parties | 15,000 | - |
Deferred financing fees | $ (4,122) | $ (5,410) |
Senior secured project facility
On July 12, 2022, the Company’s wholly-owned subsidiary, Lucara Botswana, with Lucara Diamond
Corp. as sponsor and guarantor, entered into a senior secured project financing debt package of
$220 million with a syndicate of five mandated lead arrangers (the “Lenders”): African Export-Import
Bank (Afreximbank), Africa Finance Corp., ING, Natixis, and Société Générale, London Branch.
The Facilities were made up of the Project Finance Facility of $170.0 million to fund the development
of an underground expansion at the Karowe Mine, and a $50.0 million senior secured Working Capital
Facility, utilized to repay the Company’s previous $50.0 million revolving credit facility.
The Project Finance Facility may be used to fund the development, construction costs and construction
phase operating costs of the underground expansion project as well as financing costs on the Facilities.
As at December 31, 2023, $90.0 million of the $170.0 million facility was drawn.
Subsequent to year-end, the Company completed the Rebase Amendments with its lenders to modify
the repayment schedule, adjust the Facilities to include a project finance facility of $190.0 million and
$30.0 million working capital facility, extend the maturity date of its WCF to June 30, 2031 and certain
other terms.
Under the Rebase Amendments, the Project Finance Facility matures on June 30, 2031, with quarterly
repayments commencing on September 30, 2028. The Project Loan bears interest at Term SOFR plus
a margin of 6.5% annually until the project completion date, 6.0% annually from project completion to
June 30, 2029, and 7.0% annually thereafter. Commitment fees for the undrawn portion of the Project
Loan are 35% of the margin.
The WCF may be used for working capital and other corporate purposes. As at December 31, 2023,
$35.0 million of the $50.0 million facility was drawn. Following the Rebase Amendments, this facility
bears interest at Term SOFR plus a margin of 6.5% annually for the period commencing from the date
of the amendment to projection completion, 6.25% from project completion to June 30, 2029, and
7.25% annually thereafter with commitment fees for the undrawn portion at 35% of the margin.
Prior to June 30, 2025, extended in connection with the Rebase Amendments, the Company is required
to place $61.7 million in a COF as a condition of the Facilities. The Facilities Agreement includes
specific provisions for how and when these funds may be released from the COF. The COF balance
was $18.6 million as at December 31, 2023. The Company is required to fund the remaining balance
with the proceeds from the sale of exceptional stones and cashflow from operations.
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
22 |
Page
The Company incurred $11.3 million of debt advisory, legal and due diligence fees in conjunction with
arranging the initial 2021 Facilities. Costs of $8.7 million were allocated to the Project Loan and initially
recorded as deferred financing fees that are subsequently transferred as transaction costs proportional
to the amount drawn under the Project Loan. Costs of $2.6 million were allocated to the WCF as
deferred financing fees, fully amortized. Transaction costs under the Project Loan are amortized over
the remaining facility terms.
As at December 31, 2023, the Company was in compliance with all covenants under the Facilities but
until the Rebase Amendments became effective, the Company was not permitted further draws from
the Facilities.
Interest rate swap agreements
On December 14, 2021, under the terms of the Project Loan, the Company became party to a series
of interest rate swap agreements on 75% of the principal amount available, up to $127.5 million.
Structured around the original expected Project Loan drawdown schedule, the Company receives
interest at the rate equivalent to the three-month USD LIBOR and pays interest at a fixed rate of 1.682%
on a quarterly basis. Effective June 30, 2023, the interest rate swaps were amended to replace LIBOR
with Term SOFR plus a credit adjustment spread. The final interest rate swap matures on March 31,
2028.
As at December 31, 2023 the interest rate swaps had a total unrealized fair value of $8.1 million
(December 31, 2022: $9.8 million), of which $3.0 million has been classified as a current asset. A loss
of $1.7 million was recognized in 2023 for the movement in the unrealized fair value (December 31,
2022: gain of $10.7 million). The fair value of the interest rate swap is based on the difference between
the three-month USD Term SOFR forward curve and the fixed rate of 1.682%, with the net interest due
in the next twelve months classified as current.
Debenture
In connection with the Rebase Amendments (Note 1), in August 2023 the Company’s largest
shareholder, Nemesia provided a liquidity support guarantee of up to $15.0 million in aggregate (the
"Liquidity Guarantee"). As consideration for providing the Liquidity Guarantee, Lucara issued 450,000
common shares to Nemesia. In November 2023, the Company provided noticed under the Liquidity
Guarantee and issued the $15.0 million debenture (the "Debenture") to Nemesia and issued 450,000
common shares to Nemesia as a fee upon execution of the Debenture.
For each $500,000 outstanding
under the Debenture, the Company is required to issue, subject to the receipt of all required regulatory
approvals, 7,500 common shares per month to Nemesia until the amounts borrowed are repaid. The
Debenture matures August 29, 2029. As of December 31, 2023 a total of 127,500 shares were issued
in consideration for amounts borrowed.
Clara revolving credit facility
On September 28, 2022, the Company’s wholly-owned subsidiary, Clara, with Lucara Diamond Corp.
as guarantor, entered into a revolving credit facility agreement of $4.0 million with FirstRand Bank
Limited, acting through its Rand Merchant Bank Division (the “Clara Facility”).
The Clara Facility is
used for inventory and working capital purposes. During the year, an agreement was reached to extend
the Facility for a further year, until September 28, 2024. As at December 31, 2023, $nil (December 31,
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
23 |
Page
The Company’s restoration provisions relate to the rehabilitation of the Karowe Mine in Botswana. The
provisions have been calculated based on total estimated rehabilitation costs and discounted back to
their present values. The pre-tax discount rates and inflation rates are adjusted annually and reflect
current market assessments. The Company has applied a pre-tax discount rate of 8.7% at December
31, 2023 (2022 – 8.5%) and an annual inflation rate of 4.5% at December 31, 2023 (2022 – 4.6%).
Rehabilitation costs at the Karowe Mine are expected to commence during 2046 (the end of the current
mining license). The estimated liability for reclamation and remediation costs on an undiscounted basis
is approximately $34.2 million (2022 - $33.0 million).
2023 | 2022 | |
Balance, beginning of year | $ 13,649 | $ 15,346 |
Changes in rates and estimates | (472) | (1,669) |
Accretion of liability component of obligation | 1,205 | 1,202 |
Foreign currency translation adjustment | (644) | (1,230) |
Restoration provisions | $ 13,738 | $ 13,649 |
During the year ended December 31, 2023, 1,027,500 common shares ($0.3 million), were issued to
Nemesia consisting of 900,000 common shares for providing access to a liquidity guarantee and
127,500 common shares for payment of interest on its Debenture (Note 10).
Under the Project Loan (Note 10), the Company’s largest shareholder, Nemesia provided a limited
standby undertaking to the Company of up to $25.0 million in the event of a funding shortfall occurring
up to September 2, 2024. Subsequent to year-end, Nemesia amended the limited standby undertaking
to an amount of up to $63.0 million. The standby undertaking consists of two components: i) an
undertaking to support the requirement to fill the COF to $61.7 million by June 30, 2025 and ii) in the
event of a funding shortfall, support up to $35.0 million occurring prior to project completion. A further
1,900,000 common shares were paid as consideration in January 2024.
A further 600,000 common shares will be issuable should the undertaking be called upon.
For each
$500,000 drawn down under the standby undertaking, the Company will be required to issue 5,000
a.
Stock options
The Company’s stock option plan (the ‘Option Plan’) was approved by the Company’s Shareholders
initially on May 13, 2015 and has since been amended, with Shareholder approval, several times.
Amendments to the Option Plan were most recently approved by Shareholders on May 12, 2023.
Under the terms of the amended Option Plan, a maximum of 10,000,000 shares are reserved for
issuance upon the exercise of stock options.
The Option Plan provides the Board of Directors with
discretion to determine the vesting period for each stock option grant.
Options historically vest in thirds
over a three-year period beginning on the first anniversary of the date of grant and expire four years
from the date of grant. Options granted in 2023 cliff vest following a three-year period and expire five
years from the date of grant.
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
24 |
Page
Movements in the number of stock options outstanding and their related weighted average exercise
prices are as follows:
Number of shares issuable | Weighted average exercise | |
pursuant to stock options | price per share (CA$) | |
Balance at January 1, 2022 | 6,249,000 | $ 1.26 |
Granted | 2,332,000 | 0.66 |
Expired | (1,065,000) | 2.35 |
Forfeited | (1,102,000) | 1.06 |
Balance at December 31, 2022 | 6,414,000 | $ 0.89 |
Granted | 2,412,000 | 0.57 |
Expired | (1,134,000) | 1.64 |
Forfeited | (1,148,000) | 0.65 |
Balance at December 31, 2023 | 6,544,000 | $ 0.68 |
Options granted to acquire common shares are outstanding at December 31, 2023 as follows:
| Outstanding Options | Exercisable Options | |||||
Weighted | Weighted | Weighted | Weighted | |||
average | average | average | average | |||
Range of | Number of | remaining | exercise | Number of | remaining | exercise |
exercise | options | contractual | price | options | contractual | price |
prices CA$ | outstanding | life (years) | (CA$) | exercisable | life (years) | (CA$) |
$0.50 - $0.74 | 3,765,000 | 3.21 | 0.61 | 1,284,999 | 2.78 | 0.63 |
$0.75 - $0.79 | 2,779,000 | 0.73 | 0.78 | 2,404,000 | 0.67 | 0.78 |
6,544,000 | 2.16 | $ 0.68 | 3,688,999 | 1.40 | $ 0.73 | |
During the year ended December 31, 2023, an amount of $0.3 million (2022 – $0.4 million) was
charged to operations in recognition of share-based compensation expense, based on the vesting
schedule for the options granted.
The fair value of each option granted is estimated on the date of grant using the Black-Scholes option
pricing model with weighted average assumptions and resulting values for grants as follows:
2023 | 2022 | |
Assumptions: | ||
Risk-free interest rate (%) | 2.99 | 1.59 |
Expected life (years) | 4.54 | 3.63 |
Expected volatility (%) | 49.81 | 51.56 |
Expected dividend | Nil | Nil |
Results: | ||
Weighted average fair value of options granted (per option) | CA$0.25 | CA$0.25 |
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
25 |
Page
b.
Restricted and performance share units
The Company has a share unit (“SU”) plan that provides for the issuance of SUs as a long-term
incentive for certain members of the management team. Amendments to the SU plan, including a
decrease in the common shares reserved for issuance upon the vesting of SUs to 17,000,000 were
approved by Shareholders at the May 12, 2023 annual meeting.
SUs typically vest three years from the date of grant and certain share units include performance
metrics, some of which provide for annual vesting.
Each SU entitles the holder to receive one common
share and the cumulative dividend equivalent SU earned during the SU’s vesting period.
The value
of each SU at the vesting date is equal to the closing value of one Lucara common share plus the
cumulative dividend equivalent which was earned over the vesting period.
For the year ended December 31, 2023, the Company recognized a share-based payment charge of
$0.8 million (2022 – $1.3 million) for the SUs granted.
Estimated fair value at | ||
Number of share units | date of grant (CA$) | |
Balance at January 1, 2022 | 5,234,848 | $ 0.83 |
Granted | 2,860,000 | 0.64 |
Redeemed | (1,038,848) | 1.14 |
Balance at December 31, 2022 | 7,056,000 | $ 0.71 |
Granted | 3,337,000 | 0.57 |
Redeemed | (2,876,001) | 0.74 |
Cancelled | (3,902,999) | 0.62 |
Balance at December 31, 2023 | 3,614,000 | $ 0.65 |
c.
Deferred share units (“DSUs”)
The Company’s deferred share unit plan was approved by the Company’s Shareholders initially on
May 8, 2020. Amendments providing for the issuance of up to 4,500,000 DSUs to eligible directors
were most recently approved on May 12, 2023. Directors can elect to receive up to 100% of their fees
earned in DSUs, awarded quarterly. DSUs vest immediately and are paid out upon retirement from the
Board of Directors of the Company. Each DSU entitles the holder to receive one common share and
the cumulative dividend equivalent DSU earned prior to the payout date.
The value of each DSU at
the grant date is equal to the closing value of one Lucara common share. The DSU Plan is a cash-
settled share-based compensation plan and is recorded as a liability. Upon payout, the director can
elect to receive the value in cash or common shares of the Company.
For the year ended December 31, 2023, the Company recognized a share-based payment charge of
$0.4 million (2022
–
$0.3 million) related to the DSUs granted.
Number of DSUs | Estimated fair value (CA$) | |
Balance at January 1, 2022 | 1,234,510 | $ 0.59 |
Granted | 881,593 | $ 0.58 |
Balance at December 31, 2022 | 2,116,103 | $ 0.50 |
Granted | 1,056,053 | $ 0.47 |
Balance at December 31, 2023 | 3,172,156 | $ 0.49 |
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
26 |
Page
The Company had the following direct and indirect wholly owned subsidiaries at December 31, 2023
and 2022:
Country of | ||
incorporation and | ||
Name | place of business | Nature of business |
African Diamonds Limited. | UK | (1) |
Clara Diamond Solutions BV (2) | Belgium | (1) |
Clara Diamond Solutions Limited Partnership | Canada | Diamond sales platform |
Clara Diamond Solutions GP Inc. | Canada | (1) |
Lucara Management Services Limited | UK | (1) |
Lucara Diamond Holdings Inc. | Mauritius | (1) |
Boteti Diamond Holdings Inc. | Mauritius | (1) |
Wati Ventures Proprietary Limited | Botswana | (1) |
Debwat Exploration Proprietary Limited | Botswana | (1) |
Lucara Botswana Proprietary Limited | Botswana | Diamond mining |
(1) Intermediate holding company
(2)
Incorporated March 14, 2022
The Company has pledged the shares held in Lucara Botswana Proprietary Limited, through the
various intermediate holding companies, to secure the Facilities (Note 10). The Company is not
2023 | 2022 | |
Revenue from diamond sales | $ 177,371 | $ 212,934 |
Revenue from diamond sales includes $20.2 million (2022: $36.9 million) in diamond sales to HB that
is considered variable.
The Company’s right to consideration is contingent upon the manufactured diamond being sold to an
end buyer, with market conditions and the current estimated polished value provided by HB (on a
stone-by-stone basis) being considered in estimating the amount of variable consideration that is
highly probable as at the reporting date.
At December 31, 2023, an advance of $20.0 million (December 31, 2022 - $12.0 million) was
received from HB as a prepayment on the 549-carat Sethunya diamond. Revenue will be
recognized when the manufactured diamonds are sold and will be based on the actual sales price
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
27 |
Page
2023 | 2022 | |
Salaries and benefits | $ 7,797 | $ 7,849 |
Professional fees | 4,870 | 3,070 |
Insurance, office, and general | 1,698 | 2,038 |
Promotion | 1,054 | 1,136 |
Stock exchange, transfer agent, shareholder communication | 334 | 306 |
Travel | 727 | 1,086 |
Share-based compensation (Note 13) | 1,440 | 1,977 |
Depreciation | 815 | 446 |
Sustainability and donations (1) | 880 | 1,211 |
$ 19,615 | $ 19,119 |
2023 | 2022 | |
Current | $ 3,483 | $ 307 |
Deferred | 29,268 | 24,071 |
Income tax expense | $ 32,751 | $ 24,378 |
Income tax expense differs from the amount that would result from applying the Canadian federal and
provincial income tax rates to net income before tax. These differences result from the following items:
2023 | 2022 | |
Statutory tax rate | 27.00% | 27.00% |
Net (loss) income before tax | 12,560 | 64,811 |
Computed income tax expense | 3,391 | 17,499 |
Differences between Canadian and foreign tax rates | (1,880) | (3,729) |
Differences in Botswana variable tax rates | 19,352 | 7,702 |
Non-deductible expenses and other permanent differences | 2,542 | 1,179 |
Change in deferred tax assets not recognized | 4,613 | 1,912 |
Other | 3,793 | – |
Withholding taxes | 940 | (185) |
$ 32,751 | $ 24,378 |
The Company is subject to a variable tax rate in Botswana based on a profit and revenue ratio which
increases as profit as a percentage of revenue increases. The lowest variable tax rate is 22% while
the highest variable tax rate is 55% (only if taxable income were equal to revenue).
The Company
has estimated the variable tax rate to be 37.8% in 2023 (2022: 33.0%) for deferred income taxes based
on current financial performance and the life of mine plan which includes the Karowe underground
expansion.
The Company has not recognized deferred tax liabilities in respect of historical unremitted earnings
from foreign subsidiaries for which the Company is able to control the timing of the remittance and
which are considered by the Company to be reinvested for the foreseeable future. At December 31,
2023, these earnings amount to $192.7 million (2022: $198.3 million). All of these earnings would be
subject to withholding taxes if they were remitted by the foreign subsidiaries.
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
28 |
Page
The movement in deferred tax liabilities during the year, without taking into consideration the offsetting
balances within the same tax jurisdiction, are as follows:
2023 | 2022 | |
Balance, beginning of year | $ 87,808 | $ 70,285 |
Deferred income tax expense | 29,268 | 24,071 |
Foreign currency translation adjustment | (4,313) | (6,548) |
Balance, end of year | $ 112,763 | $ 87,808 |
Deferred income tax assets and liabilities recognized | 2023 | 2022 |
Deferred income tax assets | ||
Non-capital losses | $ 16,325 | $ 11,723 |
Accounts payable and other | 2,059 | – |
Unrealized foreign exchange loss | 978 | 1,144 |
Restoration provisions | 3,022 | 3,003 |
Total deferred income tax assets | 22,384 | 15,870 |
Deferred income tax liabilities | ||
Mineral properties, plant and equipment | 135,147 | 101,268 |
Other | - | 2,410 |
Deferred income tax liabilities | 135,147 | 103,678 |
Deferred income tax liabilities, net | $ 112,763 | $ 87,808 |
Deferred income tax assets not recognized | 2023 | 2022 |
Tax losses | $ 35,346 | $ 29,728 |
Mineral properties, plant and equipment | 379 | 59 |
Other deductible temporary differences | 262 | 445 |
$ 35,987 | $ 30,232 |
As at December 31, 2023, the Company has non-capital losses for income tax purposes which expire
as follows:
Subsequent | No expiry | |||||
2024 | 2025 | 2026 | to 2026 | date | Total | |
Botswana | $ – | $ – | $ – | $ – | $ 55,418 | $ 55,418 |
Canada | – | – | – | 121,547 | – | 121,547 |
United Kingdom | – | – | – | – | 5,619 | 5,619 |
$ – | $ – | $ – | $ 121,547 | $ 61,037 | $ 182,584 |
No tax benefit has been recorded for the Canadian and United Kingdom non-capital losses.
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
29 |
Page
Various tax matters are outstanding from time to time. Judgements and assumptions regarding these
matters are subject to risk and uncertainty, hence there is a possibility that changes in circumstances
will alter expectations. If management’s estimate of the future resolution of these matters changes, the
Company will recognize the effects of these changes in the consolidated financial statements on the
date such changes occur. Lucara Botswana received an additional assessment from the Botswana
Unified Revenue Service for the fiscal years 2016 - 2020 related to the tax deductibility of certain
expenditures associated with the Company’s operations in Botswana. The additional taxes, interest
and penalties assessed for the fiscal years 2016-2020 were approximately $7.0 million. The Company
has paid the additional assessment and filed a notice of objection. The Company believes that its tax
a)
Basic
Basic earnings per common share is calculated by dividing the net income or loss attributable to the
shareholders of the Company by the weighted average number of common shares outstanding during
the year.
b)
Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of common shares
outstanding to assume conversion of all dilutive potential common shares. For stock options, a
calculation is done to determine the number of shares that could have been acquired at fair value
(determined as the average market share price of the Company’s outstanding shares for the year),
based on the exercise prices attached to the stock options. The number of shares calculated below is
compared with the number of shares that would have been issued assuming the exercise of stock
options. Share units are, by their nature, dilutive and included in the calculation on a weighted average
basis during the year.
2023 | 2022 | |
Net (loss) income for the year | $ (20,191) | $ 40,434 |
Weighted average number of common shares outstanding | 454,781,585 | 453,479,480 |
Adjustment for share units | - | 8,473,773 |
Weighted average number of common shares for diluted | ||
earnings per share | 454,781,585 | 461,953,253 |
Basic and diluted earnings per share | $ (0.04) | $ 0.09 |
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
30 |
Page
a)
Key management compensation
Key management personnel are those persons having the authority and responsibility for planning,
directing and controlling the activities of the Company, directly or indirectly. Key management
personnel include the Company’s named executive officers and members of its Board of Directors.
The remuneration of key management personnel was as follows:
2023 | 2022 | |
Salaries and wages | $ 3,637 | $ 2,256 |
Short term benefits | 34 | 27 |
Share based compensation | 991 | 1,226 |
$ 4,662 | $ 3,509 |
b) Clara acquisition
At the time of Lucara’s acquisition of Clara, a former officer of the Company was also a shareholder of
Clara. If all the Clara performance milestones are reached, this individual will receive an additional
74,999 common shares of Lucara.
Following the acquisition of Clara, Lucara appointed a new director
and a new officer, each of whom had been a shareholder of Clara at the time of its acquisition by the
Company. If all the Clara performance milestones are reached, these individuals will be entitled to
receive an additional 600,000 common shares and 74,999 common shares of Lucara.
Pursuant to the profit sharing described in Note 9, a total of 3.45% of the EBITDA generated by the
platform has been assigned to a former director and officer of Lucara, both founders of Clara.
A further
3.22% of the EBITDA generated by the platform may be distributed to a member and former member
of management, at the discretion of Lucara’s Compensation Committee, based on the achievement of
key performance targets. As at December 31, 2023, no amounts have been paid under this profit
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
31 |
Page
The Company’s primary business activity is the operation of an open-pit diamond mine in Botswana.
The Company has two operating segments: Karowe Mine and Corporate and other.
| 2023 | |||
Corporate | |||
Karowe Mine | and other | Total | |
Revenues (1) | $ 172,400 | $ 4,971 | $ 177,371 |
Income (loss) from operations | 62,536 | (2,120) | 60,416 |
Finance expenses | (6,093) | 1,587 | (4,506) |
Loss on derivative financial instrument | (1,712) | – | (1,712) |
Exploration | (1,244) | – | (1,244) |
Foreign exchange loss | (4,823) | (351) | (5,174) |
Loss on disposal of assets | (943) | – | (943) |
Administrative and other | (11,517) | (22,760) | (34,277) |
Taxes | (32,489) | (262) | (32,751) |
Net income (loss) for the year | $ 3,715 | $ (23,906) | $ (20,191) |
Capital expenditures | $ 115,683 | $ 112 | $ 115,795 |
Total assets | $ 566,382 | $ 9,421 | $ 575,803 |
| 2022 | |||
Corporate | |||
Karowe Mine | and other | Total | |
Revenues (1) | $ 203,803 | $ 9,131 | $ 212,934 |
Income (loss) from operations | 86,722 | (2,120) | 84,602 |
Finance expenses | (3,420) | (270) | (3,690) |
Gain on derivative financial instrument | 10,662 | – | 10,662 |
Exploration | (835) | – | (835) |
Foreign exchange loss | (3,912) | (20) | (3,932) |
Administrative and other | (10,255) | (11,740) | (21,995) |
Taxes | (24,089) | (289) | (24,378) |
Net income (loss) for the year | $ 54,873 | $ (14,439) | $ 40,434 |
Capital expenditures | $ 125,331 | $ 90 | $ 125,421 |
Total assets | $ 470,814 | $ 25,025 | $ 495,839 |
(1)
During the year ended December 31, 2023, one customer generated 60% (2022 – 60%) of the Company’s
revenue.
The geographic distribution of non-current assets is as follows:
| Plant and equipment | Mineral properties | Other | ||||||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |||
Canada | $ 130 | $ 225 | $ – | $ – | $ 7,022 | $ 18,886 | ||
Belgium | 8 | 40 | – | – | – | – | ||
Botswana | 124,845 | 87,974 | 287,245 | 244,130 | 72,660 | 44,245 | ||
$ 124,983 | $ 88,239 | $ 287,245 | $ 244,130 | $ 79,682 | $ 63,131 | |||
Depletion and amortization expense for Karowe Mine and Corporate and other during the year ended
December 31, 2023 totaled $16.6 million and $1.7 million, respectively (2022 – $23.8 million and $1.6
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
32 |
Page
Measurement categories and fair values
Financial assets and liabilities have been classified into categories that determine their basis of
measurement. Those categories are fair value through profit and loss; fair value through other
comprehensive income and amortized cost.
The value of the Company’s financial instruments at fair value through other comprehensive income
is derived from quoted prices in active markets for identical assets. The fair value of all other financial
instruments of the Company approximates their carrying values because of the demand nature or
short-term maturity of these instruments.
b)
Fair value hierarchy
The following table classifies financial assets and liabilities that are recognized at fair value in a
hierarchy that is based on significance of the inputs used in making the measurements. The levels in
the hierarchy are:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
Level 3 - Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs).
2023 | 2022 | |
Level 1: Fair value through other comprehensive income | ||
– Investments | $ 811 | $ 661 |
Level 2: Derivative financial instruments | $ 8,107 | $ 9,820 |
Level 3: N/A |
Financial risk management
The Company’s financial instruments are exposed to certain financial risks, including currency, credit,
liquidity and price risks.
The Company is exposed to the financial risk related to fluctuating foreign exchange rates. All sales
revenues are denominated in U.S. dollars, while directly related costs are denominated in Botswana
Pula. At December 31, 2023, the Company was exposed to currency risk relating to U.S. dollar cash
held within its subsidiaries with Canadian or Pula functional currency. Based on this exposure, a 10%
change in the U.S. dollar exchange rate would give rise to an increase/decrease of approximately $3.2
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they
become due. To manage liquidity risk, regular cash flow forecasting is performed in the operating
entities of the Company and aggregated in the head office to understand what level of capital is
required. Rolling forecasts of the Company’s liquidity requirements are prepared and monitored to
assess whether there is sufficient cash available to meet the Company’s short and longer-term
operational needs. Such forecasting takes into consideration the Company’s ability to generate cash
from the sale of diamonds and additional liquidity which can be accessed through the working capital
facility.
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
33 |
Page
Subsequent to December 31, 2023, as part of the Rebase Amendments, the Company received an
extension on its WCF to June 30, 2031 and the amount of the WCF was amended to $30.0 million.
Historically, the Company has used the WCF to manage its short-term working capital requirements.
As a condition of the Facilities Agreement, the Company is required to place $61.7 million in the COF
by June 30, 2025.
The Facilities Agreement includes specific provisions for how and when these funds
may be released. As at December 31, 2023, the COF balance was $18.6 million. This amount is
classified within other non-current assets.
Further details regarding the Company’s liquidity risk are disclosed in Note 1 and 10.
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to
meet its contractual obligations. The Company limits its credit exposure on cash and cash equivalents
by holding its deposits with international financial institutions with strong investment-grade ratings.
Considering the nature of the Company’s ultimate customers and the relevant terms and conditions
entered into with such customers, the Company believes that credit risk is limited as goods are not
released until full payment is received when goods are sold through tender or on Clara.
On September 28, 2023, the Company terminated the sales agreement with HB. The termination
increased the credit risk on amounts due from HB.
Under the terms of this sales agreement, a larger
proportion of the Company’s goods, by value, were sold through HB to buyers of polished diamonds.
The credit risk associated with these sales was concentrated with HB, a single customer, and payment
terms were longer (60 to 120 days) than the Company’s traditional tender sales and sales held through
Clara (5 days). The Company maintained legal title over goods sold to HB until the initial determined
estimated polished price was paid and monitored outstanding amounts for collectability. All amounts
are current at December 31, 2023.
The carrying amount of financial assets recorded in the financial statements, net of any allowance for
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows or a financial instrument will fluctuate
because of changes in the market interest rates. The Company’s exposure to the risk of changes in
market interest rates relates primarily to the credit facility obligations that reference floating interest
rates.
The Company mitigates interest rate risk on its Project Finance Facility through interest rate swaps
that exchange the variable rate inherent in the term debt for a fixed rate (see Note 10).
Therefore,
fluctuations in market interest rates should not materially impact future cash flows related to the credit
facilities. Changes in the fair value of the derivative financial instrument will however fluctuate in
response to changing market interest rates that will result in a corresponding credit or charge to profit.
In December 2021, the Company entered into contracts to exchange the variable interest rate (three-
month USD LIBOR; amended to Term SOFR) for a fixed interest rate of 1.682% on 75% of its expected
borrowings from the Project Loan (approximately $127.5 million). Interest rates increased rapidly
through 2022. The Company is exposed to these interest rate increases through 25% of its expected
borrowings from the Project Loan, amounts drawn from its WCF and from its revolving facility.
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
34 |
Page
Price risk
The Company derives its income from the sale of rough diamonds mined in Botswana, margin earned
on the sale of rough diamonds sold through Clara and polished diamond sales through HB. The price
and marketability of these diamonds can be significantly impacted by international economic trends,
global or regional consumption, demand and supply patterns and the availability of capital for diamond
manufacturers, all factors that are not within the Company’s control. Under the sales arrangements
with HB, the ultimate achieved sales prices of stones larger than 10.8 carats in size was based on a
polished diamond pricing mechanism. This pricing mechanism resulted in the Company’s revenue
being exposed to a greater extent to the price movements in the polished diamond market than through
its traditional tender process for rough diamonds. The pricing of both polished and rough diamonds
softened in the first half of 2023 following significant price improvements between late 2021 and mid-
2022.
To the extent that the supply of rough or polished diamonds exceeds demand, this is likely to result in
price deterioration and negatively impact the Company’s revenue and ability to generate positive cash
As at December 31, 2023, purchase orders and contracts that give rise to commitments for future
minimum payments for services to be provided related to the underground expansion project amounted
to $77.2 million (December 31, 2022 - $111.5 million). The following table summarizes the approximate
timing of the commitments (undiscounted) at December 31, 2023:
2027 and | ||||||
2024 | 2025 | 2026 | 2028 | Total | ||
Underground expansion | ||||||
project | $ million | 36.3 | 24.2 | 12.7 | 4.0 | 77.2 |
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue
as a going concern to pursue the development of its mineral properties and to maintain a flexible capital
structure which optimizes costs of capital at an acceptable risk.
In the management of capital, the Company considers items included in equity attributable to
shareholders and the Facilities to be capital.
The Company manages the capital structure and adjusts it in light of changes in economic conditions
and the risk characteristics of the Company’s assets. To maintain or adjust the capital structure, the
company may attempt to issue new shares or debt instruments, acquire or dispose of assets, or to bring
in joint venture partners.
To facilitate the management of its capital requirements, the Company prepares annual expenditures
budgets and life-of-mine plans which are updated as necessary depending on various factors, including
successful capital deployment and general industry conditions. The annual and updated budgets and
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
35 |
Page
The Company completed an assessment of impairment indicators for the Karowe Cash Generating
Unit (“CGU”), comprised of mineral properties, plant and equipment. On July 16, 2023, the Company
announced an update to the UGP schedule that extended the anticipated duration of construction and
increased the estimated capital cost.
This update was considered to be an indicator of impairment at
June 30, 2023. No additional indicators of impairment have been noted as at December 31, 2023.
As a result of an impairment indicator being identified, the recoverable amount of the Karowe CGU
was estimated and compared against its carrying value. No impairment was identified.
The recoverable amount of the Karowe CGU is based on the discounted projected after-tax cash flows
expected to be derived from the mining properties and represents the CGU’s fair value less cost of
disposal (“FVLCD”). The determination of FVLCD requires use of Level 2 and Level 3 valuation inputs.
The significant assumptions that impact the discounted projected cash flows used in determining the
FVLCD are set out below.
Significant assumptions as at June 30, 2023
Discount rate | A discount rate of 11.0%, calculated based on a real weighted cost of |
capital including the effect of factors such as market, project, and country | |
risk. | |
Economically | The current Karowe mine plan anticipates planned commencement of |
recoverable reserves, | production from the underground by mid-2028. |
including production | |
timing and volume | Production volumes and life of mine plans include economically |
recoverable reserves from the most recent reserve and resource | |
estimate based on technical studies undertaken in-house and by third | |
party specialists that consider internal management forecasts and long- | |
term development plans and expectations for the Karowe mine. | |
The current mine plan does not assume the conversion of additional | |
resources which are not currently categorized as reserves. | |
Diamond prices | The diamond price range is between $392 and $828 per carat, |
depending on the source of the ore, and these prices have been set with | |
reference to recently achieved pricing and market trends, supported by | |
industry views of long-term diamond market fundamentals. | |
Diamond prices are not escalated and remain unchanged over the life of | |
mine. The estimated contribution of exceptional diamonds, defined as an | |
individual diamond sold for more than $10.0 million, is determined with | |
reference to historical trends and management’s expectations based on | |
the source of future production. |
LUCARA DIAMOND CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(All amounts expressed in thousands of U.S. Dollars, unless otherwise indicated)
Lucara
Diamond
Corp.
36 |
Page
Capital expenditure to | Capital to complete development of the UGP is based on the |
complete development of the | revised project schedule and an estimated cost to complete of $419 |
UGP, production costs and | million at June 30, 2023. |
future sustaining capital | |
expenditures | |
Exchange rates | Exchange rates are estimated based on an assessment of current |
market fundamentals and long-term expectations. With operations | |
in Botswana, a large proportion of operating costs and sustaining | |
capital expenditure is denominated in Botswana pula. The | |
exchange rate range used for the Karowe CGU is between 12.50 | |
and 13.00 Botswana pula to the U.S. dollar. |
Sensitivity analysis Q2 2023
The Company analyzed the sensitivity of the impairment test to reasonably possible changes in the
significant assumptions used to determine the recoverable amount for the Karowe CGU. At June 30,
2023, no changes to any of the significant assumptions would, individually, result in an impairment of
the CGU:
•
Increase in discount rate by 3%;
•
Reducing diamond pricing by 15% over the life of mine;
•
Reducing production over the life of mine by 10%, through lower grades, recovery rates or
a combination of these and other factors;
•
Increasing underground project capex, operating cost and sustaining capital by 20%,
whether through escalation of costs, the impact of changes in foreign exchange rate or
On February 18, 2024, the Company announced the signing of a New Diamond Sales Agreement
(“NDSA”) with HB in respect of all qualifying diamonds produced in excess of 10.8 carats in size from
the Karowe Mine. The NDSA is subject to the approval of the Company's project lenders and the
Government of the Republic of Botswana. Upon such approval, the agreement terms will be effective
retroactively from December 1, 2023. Since that time, Lucara has continued to supply qualifying rough
diamonds to HB in order to fund its operations and the Karowe UGP.