Lucara’s $752M Karowe Underground Expansion Reaches Critical Development Milestones

What Makes the Karowe Underground Expansion Unique?

The Lucara Karowe underground project represents one of the most significant transitions in modern diamond mining, marking Lucara Diamond Corporation's strategic evolution from conventional open-pit operations to sophisticated underground extraction. Located in central Botswana's diamond-rich geological formations, this ambitious development targets the South Lobe kimberlite formations with resources extending 760 meters below surface.

The underground operation's technical specifications showcase advanced mining methodology, with a designed daily processing capacity of 7,400 tonnes utilizing long-hole shrinkage mining techniques combined with assisted caving. This approach allows for systematic extraction of high-grade ore from the EM/PK(S)2 unit, which serves as the initial underground production zone.

Key Technical Achievements:

• Production shaft completion at over 720 meters below surface depth
• Ventilation shaft advancement reaching 680+ meters
• Installation of permanent bulk air coolers and critical surface infrastructure
• Advanced lateral development connecting production and ventilation systems

The project timeline bridges a critical operational gap, transitioning from the scheduled 2026 open-pit closure to full-scale underground production planned for the first half of 2028. This continuity ensures sustained access to Karowe's premium diamond resources while extending mine life beyond 2040.

During the third quarter of 2025, significant milestones were achieved including 184.5 meters of lateral development at the 310-level and substantial progress on interconnecting shaft systems. The company completed essential electrical installations at multiple levels while advancing comprehensive geomechanical studies to optimize ore extraction methodologies.

Why Did Lucara Invest $752 Million in Underground Development?

The substantial capital commitment reflects the exceptional resource potential underlying the Karowe orebody. The underground development targets 41.92 million tonnes containing 6.60 million carats at a recovered grade of 15.8 carats per hundred tonnes, representing one of the world's most concentrated diamond resources.

Financial Investment Breakdown:

The investment strategy prioritises Type IIa diamond specialisation, targeting stones with minimal nitrogen impurities that command premium market positioning. These exceptional-quality diamonds represent the highest-value segment of the global diamond market, justifying the substantial capital requirements for underground access.

Furthermore, strategic partnerships reinforce the investment rationale, including a 10-year New Diamond Sales Agreement with HB Antwerp secured in February 2024. This long-term commercial framework provides revenue stability and validates confidence in sustained production capabilities through 2034 and beyond.

The underground development addresses declining open-pit reserves while accessing significantly higher-grade ore deposits. Third-quarter 2025 operational performance demonstrated the economic foundation, with operating margins reaching 57% compared to 48% in the previous year, driven by a 16% revenue increase and 5% reduction in operating expenses.

Operating efficiency metrics support the capital allocation, with cost per tonne processed declining to $25.65 from $27.34 year-over-year. These improvements reflect operational optimisation and controlled inflationary impact management, particularly regarding labour cost pressures.

What Are the Key Technical Milestones Achieved in 2025?

Shaft Development Progress

The production shaft reached final depth in July 2025, marking a pivotal achievement in the Lucara Karowe underground project timeline. This milestone, completed at over 720 meters below surface, represents the primary vertical access component for future ore extraction operations.

Ventilation infrastructure advanced significantly with the ventilation shaft reaching 680+ meters depth alongside comprehensive station development work. During the third quarter, lateral development activities progressed substantially with 184.5 meters completed at the 310-level, advancing toward interconnection with the production shaft.

Third Quarter Development Metrics:

• Production shaft lateral development: 7.8 meters advanced
• Station construction: Significant concrete work and pump installations
• Electrical systems: Key installations at 355-level and 470-level completed
• Infrastructure: Man and material winder installations finalised

Stage modifications and equipment assembly commenced on the production shaft following depth completion, transitioning focus toward lateral development phases. The 310-level development work facilitates critical interconnection between shaft systems, enabling efficient ore movement and ventilation circulation throughout underground engineering marvels.

Engineering Transition Strategy

Fourth-quarter 2025 planning emphasises completion of interconnection infrastructure and advancement of ore handling systems. Ventilation shaft objectives include 310-level station development completion, ore pass blasting to the 285-level, and substation installation with commissioning.

Production shaft priorities focus on stage modification completion, continued shaft equipping, and loading pocket structure installation. Additionally, shaft bottom spillage systems and deflection wall installation will support operational readiness, while station steel construction advances at both the 285-level and 310-level.

Safety performance throughout development activities maintained exceptional standards, achieving 2,067 lost-time injury-free days with a twelve-month rolling total recordable injury frequency rate of 1.37. The project-to-date TRIFR through September 2025 reached 0.59, demonstrating effective safety management protocols.

How Is Lucara Managing Project Financing and Cost Control?

Financial management strategies balance project advancement requirements with cash flow optimisation through strategic capital allocation deferrals. The revised 2025 capital guidance of $95 million, reduced from initial projections of $115 million, reflects disciplined expenditure management without compromising development momentum.

Current Financial Position:

• Cash balance: $18 million as of September 30, 2025
• Project finance facility drawn: $190 million fully utilised
• Working capital facility drawn: $30 million fully accessed
• Working capital deficit: $157.8 million due to facility classification

Third-quarter capital expenditure totalled $22.7 million, focusing on production shaft advancement, 310-level station development, and essential infrastructure installations. Priority allocations supported shaft equipping activities, concrete work, pump installations, and electrical system completions at multiple operational levels.

However, debt facility amendments align financing arrangements with projected cash flow requirements, while the $10 million drawdown from Nemesia's $63 million shareholder support facility provides additional financial flexibility. The associated unsecured debenture matures on June 30, 2031, offering extended repayment terms.

In addition, capital raising methods employed throughout the development phase demonstrate sophisticated financial planning approaches. Cost control measures emphasise strategic deferrals that maintain development progress while managing immediate cash requirements.

The company's financial strategy anticipates stockpiled material providing mill feed until 2027, when underground development ore will begin offsetting stockpiles with higher-grade production. This timeline allows for continued revenue generation during the transition period while underground infrastructure reaches operational readiness.

What Production Capabilities Will the Underground Operation Deliver?

Operational Specifications

The underground operation will process 7,400 tonnes daily through long-hole shrinkage mining methodology combined with assisted caving techniques. This production capacity targets the highest-value portions of the Karowe orebody, with initial extraction predominantly from the EM/PK(S)2 unit.

Resource parameters encompass 41.92 million tonnes containing 6.60 million carats at a recovered grade of 15.8 carats per hundred tonnes. These specifications position the underground operation among the world's highest-grade diamond mining operations, justifying the substantial capital investment requirements.

Recent Recovery Performance:

• Total Q3 2025 recovery: 97,651 carats
• Direct ore feed: 95,302 carats at 12.8 cpht grade
• Historical tailings recovery: 2,349 additional carats
• Special diamonds (>10.8 ct): 9.1% by weight of total recovery

Eight diamonds exceeding 100 carats each were recovered during the third quarter, including two stones surpassing 1,000 carats. The recovery of three 1,000+ carat diamonds year-to-date in 2025 reinforces Karowe's reputation as one of the world's most consistent sources of exceptional-quality gems.

Quality Differentiation Factors

Type IIa diamond specialisation distinguishes Karowe's production within premium market segments. These stones exhibit minimal nitrogen impurities, resulting in exceptional clarity and colour characteristics that command significant market premiums over conventional diamond categories.

The underground operation's focus on the South Lobe kimberlite formations targets formations known for producing large, high-quality diamonds. Geomechanical studies and caving scenario modelling optimise extraction techniques to maximise recovery of these premium stones while maintaining operational efficiency.

For instance, modern mine planning principles guide the development of these premium resource areas. Sales channel diversification supports market access through multiple revenue streams. The HB Trading BV partnership generated $38 million in third-quarter revenue, representing 74% of total revenue and demonstrating the value of strategic commercial relationships for premium diamond marketing.

How Do Market Challenges Impact Project Timeline?

Industry Context and Market Dynamics

"The diamond industry faces unprecedented structural shifts as lab-grown diamond production capacity significantly exceeds demand, while global natural diamond production forecasts indicate declining trends following major producer guidance reductions."

Market conditions present complex challenges for natural diamond producers, with lab-grown alternatives continuing price decreases throughout 2025. Production capacity in the synthetic segment outweighs market demand, creating pricing pressure across multiple diamond categories.

However, premium-grade large natural diamonds demonstrate signs of potential stability, supported by limited global supply growth. Mid-range and lower-grade segments face continued pricing pressure due to high inventory levels, cautious consumer sentiment, and rapid adoption of lab-grown alternatives.

Timeline Adjustments and Strategic Response

Original Lucara Karowe underground project startup schedules targeted 2026, with revised timelines now projecting full-scale production for the first half of 2028. This two-year adjustment reflects comprehensive geotechnical study reviews and updated cost modelling requirements.

Budget increases of approximately 25% from initial estimates to current projections address execution complexities and enhanced technical requirements. These adjustments incorporate lessons learned from shaft development phases and updated understanding of orebody geomechanics.

The mining method review process focuses on understanding orebody geomechanics and modelling potential caving scenarios that affect ore extraction levels and extraction point designs. Furthermore, 3D geological modelling results will be incorporated into updated technical reports and life-of-mine planning parameters.

Despite market uncertainties, the company maintains strategic confidence in Type IIa large diamond segments, which benefit from supply constraints and established premium market positioning. Long-term commercial arrangements provide revenue stability during market transition periods.

What Role Does the Underground Project Play in Lucara's Future Strategy?

Market Positioning Elements

The underground development establishes Lucara's transition from declining open-pit operations to sustained high-grade resource access extending beyond 2040. This transformation positions the company within the premium large diamond market segment, differentiating from mid-market competitors facing pricing pressures.

Strategic partnerships with cutting and technology companies enhance value-chain integration, while the 10-year New Diamond Sales Agreement with HB Antwerp provides commercial stability through established premium market channels. These relationships support long-term revenue optimisation and market access consistency.

Geographic stability within Botswana's mining-friendly regulatory environment offers operational continuity advantages compared to higher-risk jurisdictions. The country's established diamond industry infrastructure and supportive policy framework facilitate long-term development planning.

Competitive Advantages

Proven track record of exceptional diamond recoveries supports investor confidence in underground operation potential. The ninth 1,000+ carat diamond recovery reinforces Karowe's reputation as a world-class source of exceptional-quality gems, validating resource quality assumptions.

Advanced processing technology integration optimises large diamond recovery rates while maintaining operational efficiency. The company's expertise in handling premium stones and maximising value realisation creates sustainable competitive differentiation.

Long-term Strategic Benefits:

• Operations projected beyond 2040 with substantial resource base
• Premium market segment focus amid industry structural changes
• Established sales channel diversification reducing market dependency
• Geographic and political stability supporting investment security

Consequently, understanding mineral deposit tiers becomes crucial for investors evaluating the project's long-term potential. The underground project represents foundational infrastructure for decades of sustained production from one of the world's most valuable diamond resources, positioning Lucara for long-term industry leadership within premium market segments.

How Does the Project Address Technical and Operational Risks?

Engineering Risk Mitigation

Comprehensive geomechanical studies provide detailed understanding of orebody characteristics and potential caving scenarios that influence extraction methodologies. Simulation work informs ore extraction level determinations and extraction point designs, ensuring optimal resource recovery while maintaining operational safety.

Updated life-of-mine planning incorporates simulation results and detailed engineering assessments of lateral development requirements. This technical foundation supports confident progression toward commercial production while minimising geological and operational uncertainties.

Infrastructure redundancy through dual shaft systems ensures operational continuity and enhanced safety protocols. The production and ventilation shaft configuration provides multiple access points and comprehensive air circulation capabilities essential for safe underground operations.

Engineering transition from EPCM contractor management to owner-operated development enhances direct control over technical specifications and cost management. This approach allows for more responsive decision-making and optimised resource allocation throughout remaining development phases.

Safety and Performance Metrics

Outstanding safety performance demonstrates effective risk management protocols throughout complex underground development activities. Achievement of 2,067 lost-time injury-free days reflects comprehensive safety culture and rigorous operational standards.

Safety Performance Indicators:

• Twelve-month rolling TRIFR: 1.37 (Q3 2025)
• Project-to-date TRIFR: 0.59 (through September 2025)
• Lost-time injury-free days: 2,067 consecutive
• Zero fatalities throughout development phases

Technical risk mitigation strategies include phased development approaches that validate engineering assumptions before full-scale implementation. Lateral development engineering advancement allows for ground condition assessment and methodology refinement prior to production commencement.

Quality control systems ensure construction standards meet design specifications while maintaining schedule adherence. Regular technical reviews and third-party assessments validate engineering approaches and identify optimisation opportunities throughout development phases.

What Are the Long-Term Implications for Diamond Supply?

Global Supply Context

The Lucara Karowe underground project contributes to natural diamond supply sustainability amid forecasted production declines from major global producers. Significant production guidance cuts by established mining companies highlight the strategic importance of new underground developments in maintaining supply levels.

Type IIa diamond availability from underground operations addresses premium market segment demands that cannot be satisfied through synthetic alternatives. These exceptional-quality stones maintain distinct value propositions within luxury markets, supporting pricing stability despite broader industry challenges.

Geographic diversification benefits emerge from African production sources as other major diamond regions face depletion or operational challenges. Botswana's stable political environment and established mining infrastructure provide supply chain reliability advantages.

Investment and Development Outlook

Underground development represents an industry trend for mature diamond operations transitioning from declining open-pit resources. Capital intensity requirements for deep mining transitions demonstrate the substantial investments necessary to maintain natural diamond supply levels.

Technology advancement applications in diamond recovery and processing support operational efficiency improvements and enhanced value realisation. These innovations contribute to sustainable competitive advantages while managing increased operational complexity.

Market Supply Implications:

• Contribution to decreasing natural diamond production trends
• Premium segment focus addressing market structural changes
• Strategic importance in Type IIa diamond global availability
• Long-term supply chain stability through geographic diversification

The project's successful development provides a model for similar underground transitions within the global diamond industry, demonstrating technical feasibility and economic viability of accessing deeper, higher-grade resources. For instance, according to Mining Weekly, the project represents a significant milestone in diamond mining evolution.

Sustainability considerations in long-term mining operations align with evolving environmental and social governance requirements. Underground mining methodologies often present reduced surface environmental impacts compared to open-pit alternatives, supporting industry sustainability objectives.

Positioning for Future Diamond Market Leadership

The Lucara Karowe underground project embodies Lucara Diamond Corporation's strategic transformation from conventional mining operations to sophisticated underground resource extraction, specifically targeting premium diamond market segments while securing operational continuity through 2042 and beyond. This ambitious undertaking represents more than infrastructure development; it establishes the foundation for sustained competitive advantage within an evolving global diamond industry landscape.

Through disciplined financial management, advanced technical innovation, and strategic market positioning, the project addresses both immediate production continuity requirements and long-term value creation objectives. The substantial $752 million investment reflects confidence in Karowe's exceptional resource quality and the company's ability to execute complex underground development successfully.

As the diamond industry navigates structural market shifts and supply constraints, Lucara's focus on Type IIa diamond specialisation positions the company within the most resilient market segment. The underground operation's capacity to deliver 7,400 tonnes daily processing capability from high-grade ore reserves ensures sustained access to the world's most valuable diamond resources.

The successful transition from open-pit to underground operations demonstrates technical excellence while maintaining exemplary safety standards. Achievement of significant development milestones, including production shaft completion and advancing lateral development, validates engineering approaches and project execution capabilities.

Looking forward, the Lucara Karowe underground project serves as a blueprint for sustainable diamond mining operations that balance operational efficiency, safety excellence, and environmental responsibility. This strategic foundation positions Lucara for continued leadership within the premium diamond market while contributing to global natural diamond supply stability through 2040 and beyond.

Disclaimer: This article contains forward-looking statements and projections based on publicly available information as of November 2025. Diamond market conditions, operational timelines, and financial projections are subject to change based on market dynamics, technical factors, and regulatory developments. Investors should conduct independent research and consider professional advice before making investment decisions.

Looking for Premium Diamond Investment Opportunities?

Discovery Alert's proprietary Discovery IQ model delivers instant notifications on significant ASX mineral discoveries, empowering investors to identify actionable opportunities across diverse commodity sectors including precious stones and metals. Explore Discovery Alert's dedicated discoveries page to understand why major mineral discoveries can generate substantial market returns, then begin your 30-day free trial today to position yourself ahead of the market.