Cash troubles hit Karowe, operations threatened
Pauline Dikuelo - Mbongeni Mguni | Monday May 19, 2025 07:40
Lucara initially expected its revenues this year to reach as much as $225 million (P3.1 billion), but this week, executives revised that down to a maximum of $160 million (P2.2 billion).
Lucara has largely escaped the troubles that have hit other diamond miners in the country and beyond since 2023, causing a prolonged slump in prices and production. Instead, the company and the mine responsible for major finds such as Lesedi La Rona and Constellation, was able to keep ticking along thanks to huge discoveries in Boteti, whilst credit facilities helped to keep working on the underground expansion.
The underground mine, expected to cost $683 million, represents Karowe’s future and is expected to yield additional revenues of $4 billion (P52.4 billion) up to at least 2040. However, two years ago, Lucara announced that costs for the project had gone up by 25%, whilst the underground ore was expected to be accessed two years after initially expected, in 2028.
Until then, activities at Karowe will largely rely on lower quality ore, with Lucara executives revealing that in the first quarter of the year, revenues slowed to $30.3 million (P407.7 million), a decline from $39.5 million (P537 million) recorded in the prior corresponding period.
The excessively wet weather in the first quarter impacted mining activities at Karowe, forcing the miner to rely on processing lower-grade stockpile material. However, even the mining activities were also in a lower grade zone.
“These factors resulted in the company’s 2025 revenue guidance being revised to $150–$160 million,” the company said in a first quarter update released this week. “This lower revenue outlook has led management to assess the company's ability to continue as a going concern, with concerns raised about sufficient working capital, cash flow from operations, and liquidity to meet obligations and ongoing underground development.”
Lucara president and CEO, William Lamb said the company estimates that its working capital as at March 31, 2025, cash flow from operations, and other committed sources of liquidity will not be sufficient to meet its obligations, commitments, and planned expenditures
“These conditions cast significant doubt on the company's ability to continue as a going concern,” he said. “As we navigate the transition from open pit to underground operations, shareholders are reminded that 2026 and 2027 will present significant challenges, with production relying primarily on lower-value stockpile material. “This interim period will require careful management of resources and expectations until the underground project begins contributing to our production profile.”
Lucara’s challenge is that low grades are expected to be dominate recovery from Karowe until the underground project kicks off in 2028. The already fragile cash flow will also be impacted by the need to boost funding for the underground project.
With previously arranged credit facilities for the underground project and working capital fully drawn, Lucara plans to complete the Karowe underground expansion using internally generated working capital, approved access to a Cost Overrun Reserve Account and additional financing.
“The company continues to develop plans to raise additional debt or equity financing required for UGP completion. “Whilst the company has previously been successful in raising debt and equity financing, future fundraising efforts may not succeed or may fall short of the required amounts,” executives said.
The new from Lucara is another blow for Botswana, where the economy is already reeling from the prolonged slump in diamond sales.