Lucara Diamond corp (LUC.TO) released the outcome of the Preliminary Economic Assessment it completed on the underground portion of its Karowe diamond mine in Botswana. This PEA is the first ste before moving to a pre-feasibility study which is expected to be published in the second quarter of next year.
The PEA unveiled an after-tax NPV5% of US$451M (NPV8%: $318M) based on an initial capex of just $195M and an average operating cost of slightly lower than $50/t. The expected after-tax IRR will be almost 39% with an after-tax undiscounted net cash flow of $820M. We don’t expect any substantial changes to pop up in the PFS and FS, as the majority of the expected capex is pretty much ‘fixed’. The processing plant is already on site, so the initial $195M will predominantly be spent on the development of the underground workings.
These results appear to be very robust, and there’s very little doubt Lucara Diamond’s board will approve the underground development once all studies will have been completed.
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The author has a long position in Lucara Diamond. Please read the disclaimer
