Land status

The following summarizes the Company's current land holdings:

Country Property Type		Area (km2)
Lesotho	Mothae Diamond Mining Lease	20
(75% interest)
Botswana	Boteti AK6 Diamond Mining License	9
(60% interest)
Namibia	Kavango Prospecting License (9)	7,411
(49% interest)

Mothae Diamond Project -- Lesotho

The Mothae project is located in northeast Lesotho and is a large low grade kimberlite which contains a significant population of large, high value Type lla diamonds.

Mothae Diamond, an indirect wholly owned subsidiary of the Company, holds a 75% interest in the Mothae project, in partnership with the Government of Lesotho, which holds a 25% interest. Mothae Diamonds is the project operator. One half of the project interest held by the Government (i.e. 12.5% of the project interest) is a free carried interest and one half is funded by the Government through its share of project dividends.

Based on results from the 100,000 tonne bulk sample completed in 2009, the Company is planning a test mining program at Mothae to sample and process up to 720,000 tonnes over the next 18 to 24 months commencing in June 2010 to confirm geological potential and the presence of the high value Type IIa diamonds. In order to carry out this phase of processing, the Company commenced in early 2010 an upgrade to the process plant, including a large diamond recovery system, enhanced water systems and a new X-ray recovery circuit. Electrical systems in the process plant were upgraded to provide for sustainable operations over the next two years. Total estimated cost to complete the process upgrades is approximately $3.0 million ($905,000 expended by March 31, 2010).

Following a competitive bidding process for mining and process plant operation, a mining contract has been awarded to Lesotho based Thoytanyana Mining and Civil works and a plant operation contract has been awarded to Lesotho based Minerals Operations Executive (Pty) Ltd. The mining fleet mobilized to site in early May to begin pre-stripping of overburden and stockpiling kimberlite for plant commissioning. Commissioning of the plant is expected to continue through June, subsequent to which trial mining will commence at a targeted production rate of 30,000 tonnes per month.

Based on average grade estimates from the 100,000 tonne bulk sample completed in 2009, the trial mining program is expected to produce approximately 1,000 carats of diamonds per month and the Company anticipates holding Mothae diamond sales periodically, with the first sale expected before year end.

Mothae Diamonds has recruited the first of key personnel in Lesotho, including the Managing Director and the Company Site Representative, required to manage and oversee the test mining program.

Mothae Diamonds has engaged in dialogue locally and with the Government to foster relationships at all levels and to ensure integration within the community.

Boteti AK6 Diamond Project, Botswana

In December 2009, the Company, through its indirect wholly-owned subsidiary Boteti Diamond Holdings Inc. ("Boteti Diamond"), acquired an initial 70.268% interest in Boteti AK6. In April 2010, African Diamonds exercised its option to increase its interest in Boteti AK6 by a further 10.268% in consideration of a cash payment of $7.3 million to the Company. Following the option exercise, the Company has a 60% interest in Boteti AK6 and is the project operator. The remaining 40% is held by African Diamonds.

Boteti AK6 is located in northeast Botswana and is part of the Orapa/Letlhakane kimberlite district, one of the world's most prolific diamond producing areas. The Boteti AK6 kimberlite consists of three lobes, South, Centre and North, of which the South Lobe makes up approximately 75% of the kimberlites' resource potential. The pipe has an area of 4.2 hectares at the surface which expands to 7 hectares at a depth of 120 meters.

The partners have retained an independent Johannesburg based EPCM firm to complete the feasibility study to upgrade previous work to a confidence level to support project approval. The project scope includes a revised mine plan, confirmation of process plant flowsheet and design, confirmation of site and support infrastructure, engineering and cost estimated to support capital and operating cost estimates and the preparation of an execution schedule.

As part of the ongoing feasibility study, a resource update was completed on the project in March 2010. The new resource update estimates an indicated resource of just over 51 million tonnes at an average grade of 22 cpht and an average modeled diamond value of US$194 per carat, and an inferred resource of approximately 20 million tonnes at an average grade of 19 cpht and an average modeled diamond value of US$183 per carat.

Boteti AK6 is on schedule for construction to commence in the fourth quarter of this year, and to be in production in late 2011, ramping up to full production in first half of 2012. The project holds key government approvals to proceed to development -- a Mining License and an approved Environmental Impact Assessment ("EIA").

In order to achieve the project schedule, key tasks will be initiated ahead of full capital approval. An early works budget has been approved to bridge the gap between completion of the feasibility study and full capital approval. This budget is focused on weather sensitive project tasks such as the upgrading of the mine access road and completion of plant terracing before the rainy season. Ongoing environmental and socio-economic activities which are essential to project success will be funded by this budget.

The first of key personnel have been hired, including the General Manager, required to guide the project through detailed engineering, construction and commissioning. In line with the EIA, an Environmental and Community Liaison Officer has also been hired which will enable consistency and continuity in environmental and socio-economic programs throughout the mine life.

The feasibility study considers a phased development. Phase I mining will commence in late 2011 with production ramping up to 2.5 million tonnes per annum in 2012. Phase II is scheduled to commence in 2015 with production ramping up to 4.0 million tonnes per annum by the addition of a second mill circuit. The process design contemplates a 1.5 millimeters bottom cutoff so as to optimize plant throughput and enhance project economics. Open pit optimisation work has been conducted by Johannesburg based ASG Consulting to determine open pit mine reserve, waste to ore stripping ratio, pit depth and provisional mine life. Work on the feasibility study is well advanced and is scheduled to be complete by mid year 2010.

Mothae Diamond Project - Lesotho

Prior to the start of the calendar year 2009, Lucara elected to proceed with Phase II of the Mothae Project evaluation sampling program, which comprised the processing of an additional 70,000 metric tonnes) of kimberlite and the completion of a 2,500 metre delineation drilling program to define the Mothae kimberlite ore body to a depth of approximately 200 metres. The program was completed in April of 2009 under a budget of approximately $4.2 million.

The following table summarizes the tonnage sampled and diamonds recovered (greater than 2 millimeters) from both Phase I and Phase II of the Mothae evaluation program.

Table M-1 -- Mothae Phase I & II Sample Grade Information

Kimberlite Domain	Wet Tonnes	Dry Tonnes	# of Stones	Total Carats	Carats/ Stone	Dry Grade
A Phase	5,341	4,565	372	129.83	0.35	2.84
C Phase	28,529	23,592	2,042	902.51	0.44	3.83
E Phase	5,363	4,338	255	99.61	0.39	2.30
F Phase	26,223	21,664	2,681	1,160.05	0.43	5.35
G Phase	34,503	28,169	3,536	1,575.04	0.45	5.59
ALL SAMPLES	99,959	82,328	8,886	3,867.04	0.44	4.70

A fifteen hole, 2,452 metre core drilling program was completed in early February, 2009 and led to the development of a preliminary geological model which outlined between 35 and 40 million tonnes of kimberlite to 200 metres depth. The southern lobe of the Mothae pipe, which produced the highest bulk sample diamond grades, is estimated to contain between 20 and 25 million tonnes of the outlined 35 to 40 million tonnes. At this stage of the evaluation, these tonnage figures indicate the geologic potential of the Mothae kimberlite and are not intended to imply a 43-101 compliant resource tonnage.

Of significance, several large, high quality diamonds were recovered during the bulk sample program including the recovery of a 23.39 carat white anhedral Type IIa broken diamond with additional pieces indicating an original stone estimated to be greater than 60 carats. Other highlights include the recovery of 217 stones greater than 2 carats, 63 stones greater than 5 carats, 13 stones greater that 10 carats, and 5 stones greater than 20 carats. The five largest diamonds weigh 24.60, 23.39, 22.71, 22.62 and 20.04 carats.

In April, 2009, a conceptual study was completed for Mothae which contemplated the requirements to build and operate a mine at Mothae which would be capable of processing at a rate of 2.5 million tonnes per annum. The conceptual study formed the basis for an application to the Government of Lesotho for a mining license at Mothae. In September, 2009, the Government of Lesotho awarded a mining license to Mothae Diamonds (Pty) Ltd. to mine for diamonds at Mothae. As part of the license award, the Government of Lesotho has taken a 25% interest in the project, 50% of which will be free carry with the remainder being contributed from dividends. The license was awarded for a 10 year period, renewable for a further 10 years.

Looking forward at Mothae

In order to confirm the potential for Mothae to yield large high value diamonds, a preproduction test mining phase that contemplates the processing of up to 720,000 tonnes at a rate of 30,000 tonnes per month, was initiated in November 2009. To complete this phase of processing, the process plant will be upgraded to include a large diamond recovery X-ray system, enhanced water systems and a new X-ray recovery circuit. Additional to the above, the electrical systems in the process plant will be upgraded to provide for sustainable operations over the next two years. Additional delineation drilling may also be completed to help better define the internal geology of the Mothae kimberlite. The capital costs for the plant upgrade is estimated to be in the order of C$3.0 million.



Boteti AK6 - Botswana

In early November, the Company acquired a 70.268% interest in Boteti, which holds a 100% interest in the AK-6 project, from De Beers in consideration for US$49.0 million. The AK-6 project is an advanced diamond development project located in the Orapa district of Botswana, the largest diamond producing region in the world. The acquisition of the De Beers interest in AK-6 was completed on December 17, 2009.

The Company entered into a Share Holder Agreement with its development partner on the AK-6 property, African Diamonds plc. ("African Diamonds"). The Agreement includes a Call Option whereby African Diamonds can earn an additional 10.268% interest in the AK-6 property through a cash payment of approximately US$7.0 million. African Diamonds have 120 days from December 17, 2009 to exercise this option. Under the Agreement, the Company is the operator of the joint venture with a minimum 60% interest in AK6.

The Company initiated a feasibility study update for AK-6 which is scheduled for completion in the second quarter of 2010. This study will confirm the capital costs and detailed schedule which currently is contemplated to have detailed design, development and construction activities taking place during the latter half of 2010 and through 2011.
Paradigm Project Management has been selected to complete the feasibility study update.

Looking Forward at Boteti

Lucara intends to aggressively develop the AK-6 project in Botswana. The initiation of tasks defined in the project's Environmental Management Plan (EMP), which encompasses both environmental and socio-economic programs, will be an area of focus early in 2010 as we advance the AK-6 project and establish ourselves as a partner of choice in Botswana. Boteti will recruit key staff in Botswana to further foster relationships at all levels to ensure the successful integration of Boteti within the community and for the advancement of the EMP commitments.


Exploration

Kavango Project - Namibia

Lucara's joint venture partner, Namdeb, did not conduct any field programs in 2009 due to budget restrictions. Data analysis and reporting early in 2009 of drill programs completed in 2008 identified a high interest down-hole heavy mineral anomaly in drill hole RC-29, located northwest of the main Omatako indicator mineral anomaly. Namdeb is developing a follow-up program of detailed ground geophysics and further drill testing for 2010.

Namdeb failed to meet its vesting obligations required to hold a 51% interest in the Kavango project in 2009. The agreement has been amended, in principle, such that all interest held by Namdeb reverts to Lucara, and the time period in which Namdeb has to meet its expenditure obligation has been extended to December, 2010.

Drill hole RC-29 produced a down-hole kimberlite indicator mineral anomaly that suggests that the source kimberlite may be located nearby. Follow-up work planned for 2010 includes detailed ground geophysical surveys over selected areas near RC-29 and subsequent drill testing of any anomalies generated from this work.

Lufupa Option - DRC

Lucara has the option to earn a 50% interest in diamond prospects in southern DRC by incurring exploration expenditures of US$2.0 million by October, 2012. To date, approximately US$250,000 has been spent on heavy mineral sampling and ground geophysical surveys designed to develop drill targets.

A work program to drill test up to 18 prioritized drill targets on a budget of approximately US$300,000 was proposed in May 2009. This program was deferred in response to other priorities and budget uncertainties.

Heavy mineral sampling carried out in 2008 and interpretation of airborne magnetic data has resulted in identification of 18 priority drill targets as potential source contributors to the regional kimberlite indicator mineral anomaly. Work planned for 2010 includes additional ground geophysical work as needed to position drill collars, followed by drill testing of these targets.