Lucara Diamond’s Karowe underground expansion project or UGP in Botswana is expected to extend the mine life to at least 2040, with initial underground carat production predominantly from the highest value EM/PK(S) unit and is forecast to contribute approximately $4 billion in additional revenues, using conservative diamond prices.
The updated estimated capital cost for the Karowe UGP is $547 million (including contingency) and reflects expected pricing changes following execution of the main sink contract in Q2 2022. The main sink is being carried out by UMS Group, which completed the pre-sink works in early 2022.
Mine ramp up is expected in 2026 with full production from the Karowe UGP expected in H2 2026. The company is using a combination of cash flow from operations and project debt for the investment in the Karowe UGP, which is fully financed.
During the three months ended December 31, 2022, a total of $22.3 million was spent on the Karowe UGP development, primarily in relation to ongoing construction activities and procurement of long lead items. For all of 2022, $106 million was invested in the Karowe underground expansion project, with a total project to-date investment of $226.1 million.
Lucara reports progress in main sinking in both the production and ventilation shafts. First, cover grouting began in the production and ventilation shafts in December 2022 in response to expected water inflows from the sandstones. Planned methodology, which includes the use of chemical grouting, has been effective. Experiences gained from this first grouting event, which was subsequently completed in February in the production shaft and remains ongoing in the ventilation shaft, will inform future anticipated cover grouting events as the shafts progress to depth.
Main sinking activities continued to ramp up in Q4 2022, however, the mining company says equipment and operational challenges continued to negatively impact planned cycle times. Cycle time is the period it takes to complete a series of activities within the sinking process to achieve the next planned vertical advance. Active interventions and mitigations implemented in Q4 including equipment and personnel changes as well as shift and rotation schedule optimisation along with the roll-out of a behavioural-based safety training program are helping to resolve these issues.
The company says it intends to assess the impact of the incurred delays against the effectiveness of the operational changes implemented in Q4 2022 combined with recent grouting experiences to refresh estimates around planned sinking rates and overall project schedule and budget, before the end of Q2, 2023.
The 29 km, 132 kV bulk power supply powerline, including the Letlhakane and Karowe substations, was energised and handed over to the Botswana Power Corporation at the end of December 2022. The 11 kV transmission line to the project site was commissioned in mid-January 2023. This represents a significant milestone for the Karowe UGP as it is now fully powered through grid-supplied electricity. Back-up power will continue to be provided by diesel generators.
Procurement of shaft station underground mobile equipment progressed with equipment deliveries expected to commence in Q1 2023. The underground mine bulk air cooler and shaft cooling tender was also awarded.
Activities for the Karowe UGP in Q1 2023 are expected to include ainking and grouting within both the ventilation and production shafts; procurement of underground equipment, including dewatering pumps and underground crush and convey systems; development of a request for proposal for the underground lateral development work; continuation of detailed design and engineering of the underground mine infrastructure and layout; plus transition of the temporary power supply to a back-up power configuration.
The quarter will also see stage two of the bulk power supply upgrade to connect all mine power requirements to the new Karowe Substation and 132kV power line.
Eira Thomas, President & CEO commented: “For the underground expansion project, we achieved a number of important milestones, including the completion of all pre-sinking activities on schedule and budget, the execution of a main shaft sinking contract, the commencement of main shaft sinking and the completion of a new power line on schedule and budget. Importantly, we commenced our first grouting phase in the production shaft in December which was successfully completed in February 2023, confirming that our planned approach and methodology is effective. The impact of delays and a slower than anticipated ramp up in shaft sinking cycle times, together with experience gained from our first grouting program will be incorporated into a refreshed schedule and budget which is expected to be completed in the second quarter of 2023.”