Lucara Diamond Corp.

Thank you very much. And good day and thank you.

Can anybody hear me? [Technical Difficulty].

Sorry, I had music in the background there. Okay, let's start this again.

Good day everyone. And thank you for joining us for a combined call to discuss the results of our recently released Underground Feasibility study together with our Q3 results.

Joining me today we have Zara Boldt, our CFO; Dr. John Armstrong, our Vice President, Technical Services; Ayesha Hira, our Vice President of Corporate Development and Strategy and Gord Doerksen, Principle at JDS Energy and Mining and our Feasibility study lead on the underground project.

Before we start, I would just like to remind everyone that all of the speakers on the call today will be making forward-looking statement. Please refer to the cautionary statements on Slide 2 of the webcast for more detail.

So addressing the big news first, Lucara is delighted to be reporting strong positive economic results from its recently completed bankable feasibility study contemplating a 15 year expansion of 100% owned Karowe diamond mine in Botswana. Karowe which has been in production since 2012 is a unique top of class diamond asset renowned for its consistent recovery of large, high value type IIA white diamonds, and the only mine in history to ever recover two plus 1000 carat diamonds.

Over the past seven years of open pit mining, Karowe has mined and sold 2.6 million carats generated $1.5 billion in revenues, and has consistently delivered high operating margins better than 60%. Since 2014, Lucara has also paid out more than $270 million in dividends, well in excess of the total capital invested to build and upgrade our mine.

With the completion of our 2019 bankable underground feasibility study, we can also confidently state that this is just the beginning. Resource work completed since November 2017identified a much larger economic opportunity at depth than was previously envisaged driven by the increasing contribution of higher grade, higher value EMPKS ore.

Underground expansion would double the mine life outlined in the original 2010 feasibility study, deliver net after-tax cash flow of $1.22 billion and gross revenues of $5.25 billion. The underground alone will deliver close to $4 billion of those revenues.

It is also important to note that approximately $200 million in revenues generated from exceptional high value diamonds like the Lesedi La Rona and the Constellation were not included in our economic analysis and represent a significant opportunity for revenue upside. We are highly confident that further large high values stone recoveries especially as we mine deeper and gain access to higher grade higher value EMPKS ore we just can't predict exactly when they will come.

Based on the recoveries to-date, these exceptional diamonds could add upwards of $500 million in additional revenues over the proposed new life of mine. Another key takeaway from this study is that the cost to expand or mine underground is affordable and can be largely funded out of cash flow and anticipate the short payback period of under three years.

What's more, operating margins remain healthy despite the application of conservative diamond pricing models that take into consideration, with current difficult market environment. Lucara’s short term view is that the market is now stabilizing.

Longer term the fundamentals are expected to strengthen in line with supply shortfalls from mature depleting mines in Australia and Canada. Our return to diamond prices observed in 2015 would nearly double the NPV of this project to 1.4 billion at a 5% discount.

Engagement with Botswana government has been ongoing and with a feasibility study complete, we are now in a position to file for a mining license extension to cover the remaining open pit and proposed underground mining operation. To this end, we will be meeting with the government in the near term to present the results of the study and finalize our plans for stakeholder engagement.

To take us through the results of the underground feasibility study more detail, including assumptions and key inputs, I would now like to turn the presentation over to Dr. John Armstrong.

Thank you, Eira. Good morning and good afternoon to everyone.

I'm very pleased to provide this breakdown of the results of the study. So my plan is to run through the key findings of the study.

And I think on the one slide we were looking at, we can see some of the key findings. Basically, as part of the feasibility study, the resource model has been updated with conversion from inferred to indicated between 400 and 250 meters above sea level within the South globe, and an extension of the inferred classification from 250 meters above sea level to 66 meters above sea level, which is again against the previous model, which had the base of the inverted 250 meters above sea level.

And the Kimberley remains open below the 66 level. I would say that overall the mining method selection was data driven and the method chosen is long haul shrinkage and we'll get into the details of that as the presentation proceeds provides access to high value high grade ore early in the underground mine life.

With the underground mind ramping up coincident with the depletion of the open pit reserves, and the proposed schedule does not require processing of stockpiles to mitigate against any production shortfalls during the transition from open pit to underground. The payback period happens where we're mining in competence granted host material and overall we're going to maintain or to the plans of 2.6 to 2.7 million tons a year.

And the combined open pit and underground scenario as you can see on the slide provides a strong economic argument for proceeding. I'd like to mention the technical team are engaged with JDS Mining and Energy to be the study lead under the direction of Gord, as Eira indicated.

JDS assembled the group of their own internal consultants and external consultants. That is world class extremely experienced or subject matter experts with proven track record of project delivery and mine construction.

In terms of the data elements, I did touch on this Lucara and Lucara Botswana has been engaged with the government of Botswana from the early stages of the study and we've maintained that communication. As Eira indicated, we will be sitting down with the government in the next few weeks to present the results of this feasibility study, to initiate our stakeholder engagement, and proceed with filing for mining life extension to cover the remaining open pit and proposed underground mining operation.

The projects in its conclusions have been very much data driven using historical data operational data, obtained from seven years of mining processing, diamond recovery and diamond sales from Karowe and as indicated earlier, we have an extensive set of new information obtained over the course of the feasibility study. Identified key focus areas of hydro geology, geotechnical constraints in the kimberlite and host rocks have been addressed through this intensive set of work programs.

The data collection started back in 2016 ran through the PDA process, which was completed in 2017. And has been substantially updated and augmented by the feasibility study and you can see and read some of the metrics on this particular slide, I won’t run through all the details.

And ultimately the quality and abundance of data was deemed sufficient and suitable for the level of the study being presented. I'll touch quickly on these next set of slides, which is the resource update.

I mean, the space key underpins the whole decision to proceed with the feasibility study. We've updated the geological model we've updated the resource model.

This has resulted in the new base of indicated resource sitting at 250 meters above sea level previously, that sat at 400 meters above sea level, so we've added 150 meters of indicated within the South lobe and we push the inferred down to 66 meters above sea level. The work has been supported by detailed core logging of geotechnical and delineation holes that were drilled as part of the 2018 '19 FS study complemented by additional dry density, detailed petrography and microdiamond data, which is augmented by our previous work in 2018.

Now we can look at the Mineral Reserve statements for the remaining open pits and now classification of probable mineral reserves within the underground portion of the deposit. And this table is represented here also in the press release and you can see the split between the open pit and underground reserves and the split between the dominant rock types.

Within the underground we have 33.5 million tons with just over 5 million carats available for the feasibility study is probable mineral resource. Now touch on diamond pricing.

Separate size frequency distribution and value models were generated for the EMPKS and the MPKS within the South lobe. These are the dominant rock types present within the South lobe.

And based on data gained over the last two years or so, we've been able to develop these independent SFD and value models for both E and EMPKS. The parcels use to model the SFDs are very robust EMPKS models and formed by approximately 410,000 carats are greater than a year's production.

The EMPKS model is informed by approximately 45,000 carats of targeted production and compared against the set of sum 150,000 carats of daily EMPKS production where as SFD sizing data for that particular daily production. The average price per carat models are a function of the size frequency distribution, and value by size class.

The value models for the EMPKS and MPKS have been adjusted in the plus 10.8 size category to reflect current weakness and the price achieved for large high quality rough to our tender sales. The average price proposed for the feasibility study are based on the view that portion of the market will see price improvement by 2025, but a levels that are still conservative against the market high and also against pricing used in 2018.

And I just like to remind everyone, we're looking this particular histogram plot on the bottom that are achieved the average prices that have over the last since 2014 represent of blend and are weighted by the proportions of carats recovered and sold from the various lobes and you get an idea of what that looks like in terms of the pricing metrics on that histogram slide. This next slide is a couple of the schematics cross sections of the AK06 kimberlite, one of the most significant findings of the various resource upgrade drilling programs that have been running since 2016.

As in the determination that the EMPKS unit became increasingly significant with respect to diamond content and volume at depth within the South lobe. Based on operational data we are confident that some of the world's largest gem quality diamonds have been sourced from the EMPKS.

What's also shown here on this diagram is the split between the indicated and inferred at the 250 meter above sea level. You can see in the shaded diagram on the left, where we have the EMPKS in purple becoming the dominant rock type as we get deeper in the resource, and you can see within the inferred there's another unit now coming in called Kim 3, which has attributes more similar to the M than the EMPKS sitting within the inferred category.

Next slide please. Now we're going to talk about the underground mine design and the selection of Long hole shrinkage as the preferred technique.

Trade off studies were completed that examined a variety of underground options including block caving assisted block caving sub level caves, sub level retreat. The AK06 kimberlite and host rocks of the crew sequence present a very unique setting.

Particularly Karowe from surface we have about 140 meters of the salt, which overlay about 120 meters of sand stones locally with interbeds of re mudstone that are very good quality and our water bearing followed by a mud stone domain and then 140 meter package of carbonaceous shales with discontinuous flow. So this package about 400 meters of sedimentary sequence over live basement granites.

The Kimberlite of the South lobe and the basement granites are a very good rock quality with UCS is of 130 to 250 MPA with sparse joining. The remainder of the host rock package or a reasonable rock qualities.

However, there is a substantial thickness of weaker material with UCS is a 30 to 40 MPA within the 140 meters sequence of carbonaceous shales intercalated coal seems the lie on top of the basement granite. Regional institute horizontal stresses are low in the country rock, roughly half out of the vertical stress while the pipe has elevated horizontal stresses, as evidenced by the results of wireline and CT Stress Test that were conducted as part of the geotechnical data program.

The South kimberlite is much stronger than normal, and the in-depth test work data analysis including detailed port logging, geotechnical core logging, the institute stress measurements, eliminate natural caving is an option, to present a good opportunity for sculpting. The money method selected is preferred to as long hole shrinkage and the plan is a systematically drilling blast the kimberlite on a vertical retreat basis.

During the blast we will occur from a series of sublevels space of 100 meter vertical intervals, access via two vertical shafts and internal ramp system developed within the granites and also developed within the kimberlite itself to avoid lateral development within the re-carbonaceous shale sequence. Long hole shrinkage with this technique, significant portion of the blast as much is left in the sculpt during blasting and sculpting or during the after mining activity, that acts to assist and stabilizing the whole stock.

The only extract as well during this drilling blast face. We’ll see a few schematics coming up, marking will take place from a number of draw points on the 310 or 310 meters above sea level, which form the main extraction level.

Once the column of south lobe is fully blasted, the scope is drawn empty by marking out the draw points. Production rates are sufficient to maintain the 2.6 to 2.7 million tons per annum of ore to the ore processing facility.

The underground portion of the mine alone will produce an average 392,000 carats a year, mining from the 700 to 310 meter above sea level elevations, with 13 year production life after initial 5.5 years of pre-production developments and ramp up the full underground production. The resource economically favors the long hole shrinkage over sub-level caving for it’s – bottom up approach.

This take advantage of the higher value Kimberlite depth coupled with lower operating cost and derisks the project with respect to geotechnical and hydro geological issues of host drugs. This next slide is a nice metric diagram of the underground, close underground workings.

So, we’re going to walk through this series of steps. You can see the two vertical shafts, there is a production shaft and ventilation shaft and on the next slide we’re going to see some more details around the kind of the physicality’s of those particular items.

I just want to reinforce the advantages of this method where we’re looking at this isometric diagram, we get extraction of the highest value rock first. We have low and delayed dilution, we have development and production of the underground and occur well simultaneously with pit operations, so we’ll be developing the mine at depth flow, we’re still operating in a pit.

We reduce the de-watering risk by having using grounded shafts, and delay circuits break through into the open pit for five production years. We’ve minimal developments in poor ground, and the development of the extraction level which we’ll discuss in the 310 level, is designed to manage natural caving should it occur.

And we’ve the ability to rapidly increase the draw on the marking rate once the resource is fully blast. We have flexibility, we have less risk, and we have the ability to mine below the 310 level within the indicated resource down to 250 and potentially beyond.

The shafts that we sunk at the same time at the ventilation shaft dedicated is a heavy lift, providing access additionally on the 680 level for the purpose of the drill level and establishment of the dewatering gallery. Water control on hydro geological context in the deposit and gold structure are key elements of the mine planning.

The 680 level dewatering gallon we provides a necessary infrastructure and access to dewater the overlying red mud stones, in advance both in pit mining in the preparation for underground mining and breaching of the ground pillars to the open pit, scheduled for 2029. The main extraction level, 310 level, lay a more typical of caving mines with a total of 56 draw points, underground pressures and basically normal layout for rock-handling systems underground, to replace where the 221 ton skips for conveyance surface.

Total lateral developments of the proposed underground is approximately 16.3 kilometers on eight levels, the 208 meters of vertical development in shafts and vent raises. Development of the extraction level and shaft design allow for deep ore to be accessed below 310.

This series of summary slide tables, with the main aspects of the design for the shafts, the levels, the extraction doing eight levels, six which are access from the shaft, two of which are accessed through internal ramping, either up from the 320 level or down from the 680 level. The key takeaway here I think is to drivers attention to the extraction level design with 56 draw points from five panels that brings significant operational and extraction flexibility.

The potential to increase production in a period post 2029 once the stoke is fully blasted is there. The ore tons per meter of development at 2,000 tons of meter aligns with more aligns of caving operations and sub level type operations.

The powder factor and whole burden is aligned with the current open pit operations. So basically, the drilling blast regime that we’ll be using underground is almost identical to the same that we're using the open pit at the present time.

And we have blast studies that indicate that our combination and our size distribution of the mud will be easily handled within those draw points. This is a cross sectional view bit of a cartoon for soap design and sequence.

The per metal sequence is proposed for the drilling and blasting of the stokes at Karowe . The blasting sequence will create a dome shape back at the top of the blast and volume to maintain the stability of the back.

So we blasted sequentially upward in 17.5 meter increments until 30 meters still pillars left between the drill panel and the still pack. And that final 30 meter still with empty blasted and terminate access to the drill panel of that location.

Drilling will take place from sub level space approximately 100 meters apart using in the hole hammer rigs and the idea is to drill down holes. The key points to take away from this diagram and that basically we will start at the extraction level blast the draw bells proceed up to the next level the 380 level and initiate blasting from the 480 level down and progress that scoping upward.

Once we get into the domain of the pipe which has the carbonaceous shales, the sedimentary rocks as the country rock will leave a skin of kimberlite behind, which will provide additional support against dilution. And then we will take this skin later in the mine life as we prepare to breach the ground pillar into the bottom of the open pit.

Building and blasting activity is proposed at a rate of around 21,000 tons per day, with mucking of the swell of approximately 7,500 tons a day to draw down stoke to accommodate the blasting of the next 17.5 meter lifts. The bulk of the host rock is a good quality and this combined with the cylindrical shape of the ore body prevents low risk for substantial waste entry.

And the kimberlite skin will provide additional confining support against the host rock as the broken muck before final draw down. This particular slide now shows that we're going to get into some of the financial and resource aspects of the proposed underground operation.

This is an illustration of available carats by rock tighten level. I think what we can see is we're going to see this carry through to the next set of slides.

As you can see that at the bottom levels, so the 250 and the 300 level, that the amount --the volume of carats available is dominated by the EMPKS. And as you can see from the diamond pricing and the course nature that size distribution that is also the highest value rock available within the column.

And we'll see that as I say flow through the next set of slides. The next set of slides also address indicative of an estimated volumes and tons and carats, costing and expense estimates.

And I would refer you back to the cautionary statement at the beginning of the presentation, where we go through these slides. Looking now the indicative production schedule.

And what this shows is basically the distribution of tons by rock type for the open pit and basically the crossover to underground tons in 2025. The key takeaway from this particular diagram is that when we look at the value of the material that's coming out of the underground, we see that peak in [indiscernible] 3 years, or 4 years of underground production, dominated by the EMPKS.

And you can see that from that particular diagram. And then made underground mine life as the EMPKS.

Not unexpectedly becomes a more significant driver of the volume. This is this particular unit becomes more significant in the shallow portions of the South lobe, that we see a decrease in the overall value.

And we'll see later we see a bit of a drop off in the carats, but we're still maintaining in excess of 300,000 carats a year. And there's no expectation to see treatments of stockpiles during that transition from open pits underground.

We see the stockpiles come through in the last 3 years of the mine life, where we process remaining working stockpiles and the life of mine stockpile. This next slide shows some production metrics, which is basically showing carat production by year and by source.

And we can see a boost in the carat and the influence of the EMPKS and the ramp up in the early period of the underground, with production of approaching 500,000 carats a year and over 400,000 carats a year for a number of years in the early part of the underground mine life. For total recovered carats from the underground is 7.8 million.

An average grade of 14 CPHT dragging in those stock piles at the end of the mine life for processing. Slide please.

Well look now, touch on pre-production CapEx sits at $514 million. This is driven obviously by the mine development with shafts sinking costs running around $160 million of that and the remaining underground development sitting in around the same $160 odd million.

We will need additional power of Karowe to support the underground operation in terms of hoisting and ventilation. So we as part of the feasibility study and shown in the numbers for the feasibility study is a new 29 kilometer long 132 KV power transmission line running from a new substation instructed by Botswana Power Corporation into the mine site.

Now we will provide sufficient power for the current requirements and the underground development. Work on this power line process is ongoing in parallel with the feasibility study but again I say all the costs for that power line are shown in the feasibility study economics.

Other infrastructure required to support the underground operation include various surface buildings and facilities, adjacent to the two vertical shafts, a construction camp and expansion of course and fine tailings facilities, based on understanding gain from the mining, milling and diamond recoveries from unweathered hard circle as low kimberlite over the last four years, in conjunction with additional tests work as part of the feasibility study. The current flow sheet is deemed suitable for processing of the underground source kimberlite and diamond recovery in line with the resource model.

Now we're going to run through some of the economics I won't spend a lot of time on these slides. In the interest of time everyone can read the numbers.

The first one is the standalone underground scenario with the life of mine average price per carat of $725, 13 years of mining and milling of underground only or with a 20.8% internal rate of return a 16% post-tax IRR and less than a three year payback. We're showing now on this particular slide the combined underground and open pit laid out similar to the previous one we have 7.84 million carats that can be recovered at an average price of $670 a carat.

This is the combined open pit and stockpile scenario which were the end of the mine life with 1.2 billion post-tax cash flow. 56 million tons treated, $5.25 billion in gross revenue and an after tax NPV of 5% of $780 million.

And again, less than a three year payback an average like mine operating costs of just $28.43 ton ore processed. This slide can be married with the previous pie diagram showing the breakdown of the pre-production estimated capital.

And we can also show here estimations on sustaining costs for both the underground and open pit operations. So the 514 of pre-production cap and an estimation of $208 million over life of mine for sustaining and closure costs.

I think will emphasize here that the underground operation will continue what's been established by the open pit is a high margin producer with respect to operating costs per carat. And you can see the breakdown on the left hand side of that -- or the right hand side of the slide of the cost per carat from the various aspects of the operation and again with an over in excess of $500 carat margin.

This is -- the next slide depicts the operating costs for the underground, the unit costs for ton mill, the unit costs dollar per carat and life of mine estimates. Then now we're showing the underground only operating estimates again for underground mining processing G&A and the total numbers reflected on this particular diagram.

This slide shows the open pit underground post-tax cash flow. As I indicated the estimated schedule maintains the mill throughput of 2.6 to 2.7 million tons a year without a production dip.

The main takeaway from this is the big capital spend that you can see in the early part, mainly coming through in 2021 during the shaft sinking period, and then strong post-tax cash flows in the year to years of the underground. This is the influence of the higher grade higher value plus 400,000 carat production per annum that will come in the early years dominated by the EMPKS.

In terms of sensitivities, this is also presented in the press release. Obviously, the domain sensitivity is diamond price and then I think we should talk a little bit about some of the project risks.

Obviously, project execution which involves procurement, labor, financing are key risks that we will have identified and we’ll work very hard to mitigate against. The schedule in terms of dewatering and assuring no different production, the dewatering schedule is tight and requires us to get down to that 680 meter level which allow us the longest period of time possible for dewatering of the sand stones and the mud stones that will be mining through with the underground stoping and the open pit.

Opportunities there are short term opportunities with respect to the newly updated resource model in terms of pit optimization and scheduling, and this work is ongoing. Opportunities exist below the 310 level for additional ore access from the underground workings.

There's a potential for increased production rates post 2029 the shafts at 2.7 million tons a year of convenience or not at full capacity. So there's the ability for additional hoisting and then we would look at increasing mill throughput, we have resource potential in the North of Center lobes that will require drilling and work from underground and obviously the recovery of high value stones will have positive impacts to project economics.

Looking at the indicative schedule, is the timing. We can basically look at this and I will speak to a little bit in the next steps.

We can see from this particular schedule that 2020 is not extremely capital intensive and that main expenses come through in the second half of the year as we prepare for shaft sinking. And then we can see that the early works with the camp construction and some of the other surface work and the power line coming in mid-2022 to align with finishing and completion of the shaft spinning in the shafts and getting ready for the ramp up of underground production through 2023 and 2024 ramping up to full capacity 25 to 26.

With that, I would like to thank JDS and Gord for the excellent work that he and his team have done delivering this quality study and an extremely compressed timeframe to, like I said, a very quality piece of work. It shows the way forward I think for Lucara, and delivering positive economic results in a very unique asset with some very unique geology and some very unique diamonds.

With that, I will pass the call back over to Eira.

Thank you, John. To sum up, Lucara is highly encouraged by the results of the Karowe underground feasibility study which is outlined a much larger economic opportunity than first envisage, and represents an exciting world class growth project for our company.

A significant portion of the cost to expand our mine underground can be funded from cash flow, and the investment is expected to be paid back in under three years as we've mentioned numerous times. The mining method is ideal for allowing us to exploit the highest value part of the ore body first.

It is important to reiterate that the study has used conservative assumptions around diamond price and important lever in the economic analysis. A return to diamond prices reserves in 2015 would significantly reduce or even eliminate the requirement for external financing and would more than double the NPV at a 5% discount.

In the first half of 2020 as John had stated the company will focus on detailed engineering and early procurement initiatives as financing options are explored. The anticipated capital requirements represent less than 10% of the initial CapEx estimate to the underground project overall, and the company anticipates funding these initial expenses from cash flow.

I too, would like to thank Gord and JDS, and I would like to now turn it over to Zara Boldt, our CFO who is going to take us through a summary of our Q3 results.

Thank you very much, Eira. Starting on slide 31.

Here we've got some highlights from our third quarter. Operating performance in the third quarter was strong, with mining and processing activities and our operating costs per ton of our process at $31.06 all tracking well to guidance.

Revenue in the current quarter was also identical to total revenue same quarter last year despite the number higher and number of carats sold. We sold five diamonds for more than a million each and one diamond for more than $2 million in the third quarter tender.

The Gem quality blue and pink diamonds recovered in the third quarter will be sold in our December tender. We completed five sales to Clara in the quarter, and the total value transacted on the platform doubled to $2.4 million.

Our customer base has also grown significantly, with 27 participants on the platform as of September 30 and it's now over 30 participants at the present time. You all have noted our decision to suspend the payment of the quarterly dividend effective immediately.

With the results of a positive feasibility study for development of an underground mine at Karowe now in hand, our Board of Directors determined that the suspension of the dividend would be in the best interest of the company and its shareholders. We are the view that the best use of our available cash is directed to early works including detailed engineering, procurement initiatives and project financing.

The anticipated capital requirements in 2020 represent less than 10% of the preproduction CapEx estimate. And we do expect that our cash flow next year will be sufficient to support that work, while we arrange external financing to supplement the expected contribution of our cash flow from operations to develop the underground.

We anticipate that our external financing requirements could be met with some form of debt financing. At this time, we are not contemplating an equity issuance.

We will provide further guidance as these progresses. Moving to slide 32, we look at our financial highlights for the nine months ended September 30 2019.Similar to our third quarter results, our revenue of $136.5 million on a year-to-date basis is almost identical to the same period last year.

Consistent with the last few quarters, we continue to recover smaller lower value diamonds while still profitable, the smaller goods do impact the average price per carat sold and you can see that impact in the decrease from $564 to $436 per carat sold in the chart at the bottom left. Our net income to-date is $4 million, or $0.01 per share.

Consistent with previous quarters this year, our net income has been significantly impacted by depletion and amortization expense of $38.1 million. In the third quarter, we recorded a 24% increase in our quarterly operating expense as compared to Q3, 2018.

This increase results from a combination of several things including an increase in the average cost per ton mined, lower volumes of total tones mined and increase in total tons processed. An anticipated increases in certain consumables, and labor expense.

Despite this increase our year-to-date cost per ton processed at $31.6 U.S. is trending to the lower end of our guidance.

Our adjusted EBITDA is about 10% less than our 2018 comparative at $50.2 million U.S. with a main driver of this difference, the increase in operating expenses.

Cash flow per share from operations was $0.08 per share in the current nine month period, as compared to $0.09 per share in 2018. Moving to Slide 33, we have our operational highlights presented on a year-to-date basis.

The results are fairly consistent with our operational performance during the first half of this year. And we've spoken previously about the differences when compared to the same period last year.

Moving to Slide 34, we have our 2019 outlook. We have revised our 2019 guidance for revenue, narrowing our range to between $170 million and $180 million for the year.

We have also narrowed our guidance per carats recovered and sold, estimating that we should be between 400,000 and 425,000 carats for those ranges due to consistently higher recoveries, mainly in the smaller size classes. We've also narrowed our waste mining guidance to be between 6.5 million and 7.5 million tons this year.

Finally, we expect our cost per ton mined to be at the lower end of our revised guidance of $32 to $34 per ton process. Moving to Slide 35, we've got our capital structure.

As of September 30, we had cash of $4.8 million nothing drawn on the working capital facility but $50 million available. Despite the current downturn in the diamond market, we are generating enough cash to operate our business, develop the Clara platform and to have been a steady dividend payer.

The feasibility study has outlined strong economics and we are confident that our external financing requirement will be modest, with attractive financing options available to supplement the expected contribution of our cash flow from operations to fund the underground project. With that, we have concluded the formal portion of the presentation and we’ll now open the floor for questions.

Thank you.

Hi, there, everyone. Thanks for taking the question.

Just wanted to ask a bit of a detailed question on the blasting phase. So that presumably that is all happening up front before you start drawing or and I just wanted to ask whether the cost of the blasting is included in the capital cost.

And then if not just to I guess that the cash -- online cash costs are going to be higher during that blasting phase and before the serious drawdown of the rock power commences?

So I think, Ed I’ll answer the first part and then I'll have Gord, speak to the second part of your question. On a daily basis, the plan would be to blast approximately 21,000 tons of material and then muck the swell of approximately 7500 tons a day and get that over the stoke so that there's a void space created for the next series of blasts.

So there is, as you can see from the production profile will be pulling on a daily basis to maintain that 2.7 million tons and then you do end up with a volume of a broken mark in the stoke at the end of that all the blasting around 2029 and maybe Gord you can supplement my answer or provide some more information.

Yes, sure. Can you hear me?

I can.

Yes, so that's right. So as we're initiating the blasting, it happens in the pre-production period.

And the Stoke starts to ramp up during that period and those costs are included in the capital and we don't start counting those operating costs until we reach our basically commercial production of the underground, which is in the first half of 2025.

Okay, thank you. So just to be completely clear on this post 2029 there's really no more blasting cost.

Do you have any underground mining costs so really just operating the fleet and noised in your surface?

That's correct. And the costs have been scheduled according to the amount of drilling and blasting mucking every year, every month and that's correct.

Thank you very much.

Thanks very much for the call and the detail. First question is just on the prices.

So just to be clear, in table four where you talk to the table four of the release. When you talk to the prices of the EMPKS and EMPKS increasing from $618 and $513 account respectively to the 777 and 631.

That's because you think the market for larger diamonds is going to improve. Is that correct?

Yes, that Richard that is that's correct that so the underlying thinking there is that the behavior that we're seeing and the pricing that we're getting in the large, high quality goods. It's our view that by the time 2023 to '24 rose around that we will see improvement in those prices.

In the model, the average price that's assigned to those goods, still doesn't reach the market high of say 2015 and is still off of the 2018 pricing. So I view it is that we anticipate that those prices rebound but not to levels that we've seen previously.

Okay, and what's the thinking of not adjusting the North and Central lobe if you taking that view on this outlay.

There's a minor adjustment, so the Central lobe but for the North lobe is, I mean, is not a large known producer. Number one, so it's not as heavily influenced by those particular goods and the volume of material is pretty nominal that comes out of the North low but predominantly, it doesn't produce big stones.

Okay. I mean, just playing [indiscernible] do you not think that that's kind of a aggressively optimistic assumption that prices kind of improved by over 20% over the course of three years?

Well, something in fall of 20% three years and hopefully can rise 20% in three years. So that would be one answer.

I mean, look, I would still say that at the end that the pricing that’s use there is conservative against what we are seeing even six months ago so the expectation would be that they're going to rebound and I don't take it to the top or be over the top for the model.

Okay. And then also just a question on the updated reserve and resource statement.

The -- it would appear that the prices are broadly the same as they used in the previous reserve and resource statement of December 2017. Correct me if I'm wrong.

But with maybe a small uplift in the South lobe, but the market softened since that point. So, like down maybe like 5% to 7% this year.

So, what is the way -- what is the reason for not reducing the prices of your price that given the market movement year-to-date?

So the average price per carat that is shown in the reserves statement is basically for the feasibility study, so you can refer back to table four of the press release to see those pull through. The pricing there are Lucara rough diamond price book that we use is conservative in many of the science classes.

So if I look at the how our pricing some of the goods say in the minus 10.8 categories, that overall the pluses and minuses of the market are a bit of a wash against our price book. And I'm comfortable using the similar or same pricing for some of those goods that we've used previously because of the conservatism built into the price book.

Okay, thanks John. And then also just can I ask, I mean, noted as the projects yet to be board approved and I suppose that comes with more detail work, but when is the expectation for the underground project to be put to the board?

Richard, it has been -- we've obviously discussed this with our board and they are very encouraged by the results that we've presented. As we've stated previously, we expect to move into detailed engineering, project financing initiatives, and basically supportive early works.

We would expect that once we've got a financing plan together, and I would note that based on the cost, the expected cash flows that we're seeing, we do not expect the quantum of financing required to be significant that we would be looking at a decision probably mid next year.

Okay, thanks, Zara. Well, I've got you just on the funding.

The cash at banks about $5 million, and I suppose, can you perhaps just give us a bit of a shape of your expectation of cash flow generation over the next three years or so just based on the kind of the mining mix and I believe last time we spoke we talked about more central lobe and being mine which was going to impact the average realized price and just the kind of your expectation of internal cash flow and then kind of -- if you can give any kind of flavor of roughly how much debt kind of could potentially be the problem to the balance sheet which obviously with a CapEx number of like $520 million in cash in the bank of five is quite a lot of money that you've got to generate to derive a modest debt financing solution. Is that makes sense?

Yeah, actually, I -- Richard, when we looked at the cash flows, having gone through the feasibility study and updating the reserve and a resource statements, the cash flows for the remainder of the open pit life or were actually to me surprisingly robust, they are definitely better than we had been expecting 6 to 12 months ago. And from that perspective, when we are looking at the shorter term in the next three years.

A significant amount of the capital required to develop the underground should come from available cash. So, obviously, we've talked today about the fact that our board has suspended the dividend that was running, $30 million to $32 million a year.

And I think we've, as most people are aware, we've come through, through fairly difficult years, I think when we look at the diamond market and the operating environment. But we still at the end of the day, Lucara is a high margin operation, and we still make money.

So while it's September 30, the balance -- the cash balance is quite skinny. As we move into 2020, we do expect that to improve and we do expect to be able to put some debt on this asset without overly burdening our capital structure.

Okay, thanks. And appreciate, I'm hoping to call so I've got a couple more so right now get back in the queue.

The first one is just on Slide 22. I'm a little confused because the sustaining closure CapEx numbers are different to that in the press release.

So the process on is 87.8 versus 46.5. And then the tailings numbers bit different.

But also like, what is the CapEx of the process plant and what is that going to be frontend loaded. Perhaps you can just give me a bit guidance there and also the owners' costs that are taking their front end loaded as well.

So I'll answer the first part of the question, and then I can answer. I mean basically this particular table is a little different representation than what's in the press release.

The press release only shows the underground sustaining CapEx. And this particular exhibit shows the open pit and underground sustaining CapEx.

The owners' costs would be front end loaded basically for the execution of the underground projects through that 5.5 years. And then on the process plant that is mainly relates to trying to -- there's an explanation and just maybe Gord if you speak to that.

I think that's just the sustaining costs of the plant over time and including the period which is the remaining open pit which is in the underground omni scenario.

Okay, thanks. My last one before I turn it over.

Just on the realized price for the quarter just coming back from the Q3. Again the kind of increased recovery of smaller diamonds impacts the average price and you get a great bump off back of it.

I mean, what do you need to see before you can -- before this is sort of more of a consistent theme within the broader Karowe ore body and that will drive you to, adjust that average soul of the caret and the average grade for the reserve and resource. Because I suppose every quarter I'm kind of surprised to the upside on the grape downsides, the average price.

And can you give me a bit of help there? Maybe.

Yeah, I think that I mean, in terms of the updated resource model, you can see the grades we've modified a little bit in terms of the technique on the estimation based on driven by new information which has rolled through into like I said, we'll do the pit optimization in terms of some of the grade variances in toward the bottom of the pit. In terms of the fine diamonds, we've also made an adjustment to the recoverable great model based on the current plant production.

So we get a little bit of boost in the recovery grade against the model grade, which flows through into this. In terms of the impact on the average price per caret, again, that volume of increased carets and the impact on the AP isn’t that significant in these price models, especially when we talk about the flow.

Because those prices are really skewed by the plus 10.8. So what you have to read into that is that the downturn in the big stones is having an impact on our achieved average price at the moment.

Thanks, Joe.

And Richard, just to just to add to that, Lucara is not discounting that impact and in fact, all of our estimates that we report in 2020 and 2021 are very conservative, recognizing that it will take time to work that through.

Okay. Thank you, Eira.

Hi guys. Good morning, everyone.

Thanks for hosting the call and congrats on completing this feasibility study. Just a few questions for me mainly on the realize pricing related or on your pricing assumptions rather.

So just so I understand just looking at that table for in the release, that sort of implying that you've seen greater than 20% market price decrease for the South lobe material year-over-year is that am I interpreting that correctly?

Scott yes, you're interpret that correctly. And it's basically what that comes down to is my commentary.

As I walk through the slides on the weakness in that part of the market, and it's basically driven by the weakness in the plus 10.8 carat high quality goods that we've seen, and so that will your assessment is absolutely fair.

And so for in the 10.8 it's greater than 20%, down year-over-year, then, I guess?

Yes, it's in that well, I mean, it gets basically it's in our ballpark. And in terms of what we've done, we've made adjustments.

And I'll give you a range of 25% to 35%, downward adjustments in some of those higher quality goods and you can go to the rap report, and you can look at what Rap has listed for his polish prices in 5 and plus 5 carat plus 10 carat DIF goods and you'll see quite a remarkable decrease in the price interruptions. So what you see in the Polish market is reflected through into the rough.

Okay, and what percentage on the EMPKS size frequency distribution? What percentages in plus 10.8?

It's about 8%. So I guess the one comment that I should have made during my discussion is that when we look at the way 8% plus 10.8% in those samples of those production runs that I put together for the MPKS and the EMPKS, that basically the achieved or the actual recovered 8% over 10.8% is greater than the percentage of using the models.

So the models are actually conservative against the achieved 8% plus 10.8%. But for the EMPKS, it's around 8%.

And what is it for the MPKS now?

The MPKS is sitting around 7. So it's a little bit coarser than it was used previously.

Right, okay. So and have you looked at what the project IRR would be if you did not assume this recovery and in the plus 10.8%?

I wouldn't do that, because that's what we recovered in those production parcels. And the assumption is that the size distribution will be stable at that.

Sorry, I meant in increase price recovery over the next few years of the 10.8.

Yes, I mean, I think, Scott, I'm going to jump in here. I mean, what we've tried to do and what we have done is we've taken I think a very sober look at what we're currently achieving what we have achieved and where we ultimately think this market is going to go but I think what you see in the base case, is a very conservative approach.

And what we tried to highlight there is that if we get back to a diamond pricing environment that we saw similar to 2015, this project is highly leveraged diamond price, and that can ultimately double the net present value of this project. So I think that's really an important statement, the project works on the basis of today's operating environment.

But if you have a positive long term outlook on diamond prices as we do, this project really starts to make a lot of money.

Right. So you say it reflects like the base case reflects the current environment, but just to be clear, you are assuming that the 10 prices for the 10.8 are going to go up significantly over the next year in the base case?

Yes, we have. Because it's an extremely unusual year, with the prices being achieved right now for those goods, but we're not assuming that they recover immediately 2020 we have a very conservative outlook .

And we're slowly becoming more optimistic as we trend into, a period of time where we know, we're going to see supply shortfall. So, I think it is a very balanced, conservative approach.

And I think my own personal view is that, we expect to do much better.

Okay, so have you started to see some improvement in that segment of the market lately at all or any indication that it's sort of bottomed out?

I think the view and the consensus and I think it's too early to call a trend, Scott, is that the consensus amongst our peer producers is that we are seeing stabilization. I think we'll have more insight obviously with the fourth quarter sale, but our present view is that yes, we have seen stabilization.

Okay, and maybe just the last one. So if we're -- if it's next year and it's time to make project development decision and you're looking at financing packages and we haven't seen any improvement yet or we've seen continued weakening.

How would that sort of affect your amount of debt you think you’re going to handle, how you finances project or whether or not you go ahead with it?

Scott, this is not a big amount of money to raise I think if you look at the cash flows, 2021. Yes, we need some additional cash to support the development but this is we have no debt on our balance sheet.

And we're in a very strong fiscal position to go out and seek that financing. We do not see that is instrumentable task at all and maybe I'll just ask Zara speak to that.

As she will be now engaged and going after in the short term.

Thanks Eira. I think we're very comfortable with where the cash flow fits our estimates around pricing are conservative.

And I think we just, we will look at that in the context of a current market that we're in, but I think Scott when you look at, although 514 million in initial CapEx is a big number. Karowe does generate a lot of cash flow, and it is a high margin producer.

And so I think what we need to do is find the optimal mix and work potentially with the lenders, to identify the most effective way of doing that and that's what we intend to do. We are very confident that this is something that can be done and it is something that can be done in the next 6 to 12 months.

And Scott just maybe one thing we maybe haven't stressed enough is that, this is a much bigger economic opportunity than we first envisaged and that's owing to the fact that this ore body is just so much more valuable at debt. So we're going after a much bigger prize, the payback of under three years is a really important element to the economics here, so when you can, look at the 7 years of it, of achieved revenues, and then, project forward on the basis of conservative assumptions, reserves just pointed out.

This is a very robust opportunity, and we have no debt on the balance sheet at the present time. So we feel we're in a very good position to use our balance sheet to go after and address the capital needs for this type of project.

Great. Okay, thanks for all that color and congrats again.

That's it for me.

Thank you.

Hi, everyone. I guess just one question on current operations.

I think you said reprocessing of tailings material represented about maybe about 10% of production in the quarter. Can you just remind me, if tailings production was about 10% of overall production in the previous couple of years, and then I guess how that number is going to look going forward the next couple of years?

Yes, Paul, its John here. Basically what we've done, this tailings is recovery tailing, so it's basically dense media concentrated material that as reported to the recovery part of the plant and gone through the X-ray room in essence machines.

And then its deposited into a specific area. In 2014 and ’15, we processed some of those recovery tails and then we ran another campaign over the last year or so.

And, most of the tailings that the diamonds are coming from predate the implementation of the XRT circuit in 2015, the commissioning of the first XRT circuit. And the second round included, some of those tailings and tailings that were recovery tails, they were deposited prior to the commissioning of the 4 to 8 XRT circuit.

At the present time, we have processed all historic recovery tails and we don’t anticipate getting any additional diamonds out of the recovery tails over the remainder of this year. And the volume of Clara that we recovered in those previous campaigns in 2014 and 2015 were not that significant.

Got it, okay, all right that helps thank you very much.

Okay, well listen I would like to thank everybody for joining us today. Just to reiterate, Lucara is extremely excited about this opportunity.

Our long-term outlook for the diamond market and diamond prices is very optimistic. No new diamond mines size have been found in the last 10 years, we know what’s coming down the line and contrast to that, we’ve got deep reading, mature mines in Canada and Australia and elsewhere in the world.

The supply demand fundamentals are going to shift and we think with a long life project like Karowe, we’re very well positioned to benefit on the macro fundamentals as we look out to this underground project and getting our mine to 2040. So, thank you very much for participating today and everyone have a great day.