Lucara Diamond Corp.
operations



Operations Update


2010 Second Quarter


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 (10) 8,359
(100% interest)    


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. The current shareholdings in Boteti AK6 are 60% held by Boteti Diamond and 40% held by African Diamonds. Boteti Diamond is the operator.

The Boteti AK6 Diamond Project 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 retained an independent Johannesburg based EPCM firm to complete a bankable feasibility study to upgrade previous work to a confidence level to support project approval. This updated feasibility study was completed in June 2010. The study details a cost effective technical solution with a process plant initially designed at a throughput rate of 2.5 million tonnes per annum ("mtpa") increasing to 4.0 mtpa after 4 years.

This phased production approach, combined with contract mining reduces up-front capital required to bring this project on stream.

The updated study indicates the first phase will require a capital investment, including a 14.5% contingency of US$120 million, which includes the process plant and all mine site and off-site infrastructure. Operating costs over the life of the mine are estimated to average US$17.51 per tonne treated. The project holds key government approvals to proceed and the execution schedule indicates that with work commencing this quarter, diamond production is expected to ramp up to full design capacity during 2012.

As part of the feasibility study, a resource update was completed on the project. From an Indicated Resources of 51 million tonnes ("mt") containing 8.2 million carats of diamonds, the mine design delineates a Probable Reserve of 36.2 million tonnes of ore, containing 6.3 million carats of diamonds, using a 1.5mm bottom cut off size, in an open pit to a depth of 324 metres. The reserves will be mined over an estimated 11 year mine life.

Project engineering has been awarded to DRA Africa (PTY) Ltd ("DRA") and work has commenced. Work on weather sensitive tasks has commenced in the third quarter such as the upgrading of the mine access road and plant terracing.

Relocation of parties affected by the mine development has been completed in accordance with the Botswana Land Board assessment report as a minimum. Relocation and resettlement claims have been finalized to all parties' satisfaction.

Amendments to the diamond sales provisions of the mining license with the Government of the Republic of the Botswana ("GRB") have been concluded. The mining license was amended to allow the sale of the entire AK6 production of diamonds either through open tender sales or exclusive contract. A further amendment to the mining license pertaining to a revised start of commercial production has been submitted to the GRB. The Ministry of Mines has made their recommendation to the Minister and the formal approval of the amendment is expected by the end of the third quarter.

The first of key personnel have been hired, including Mr. Ribson Gabonowe as CEO of Boteti and Gerald Ndlovu as Boteti's General Manager.

Mothae Diamond Project -- Lesotho

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

Mothae Diamond, an indirect 75% owned subsidiary of the Company, holds a 100% 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 pursuing a test mining program at Mothae to sample and process up to 720,000 tonnes over the next 18 to 24 months to confirm geological potential and the presence of the high value Type IIa diamonds

Following a competitive bidding process for mining and process plant operations, a mining contract was awarded to Lesotho based Thoytanyana Mining and Civil works and a plant operation contract was awarded to Lesotho based Minerals Operation Executive (Pty) Ltd. Mining commenced in late May establishing a kimberlites stockpile feed for the diamond recovery plant. Planned upgrades to this plant were completed during the quarter and plant commissioning completed in mid July 2010. The process feed rate is being ramp up to design capacity of 30,000 tonnes per month, with the target of achieving this throughput by the end of the third quarter. Total cost to complete the process upgrades was approximately $3.2 million.

All diamond recovery units are functioning well and provisional audit work on x-ray tailings indicates a high level of recovery efficiency which was a key object of the plant upgrade.

A 53.3 carat, Type lla diamond was recovered in the first week of processing. Diamond grades for the material processed to date have been consistent with material processed during previous treatment of the Mothae kimberlite material.

Mothae Diamonds has recruited the first of key personnel in Lesotho, including Nyakallo Mpatuoa as the Managing Director and Shaun Simmonds as 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.


2010 First Quarter

2009 Annual  

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