Lucara Diamond Corp. (TSX: LUC) (BSE:  LUC) (Nasdaq Stockholm: LUC) is pleased to announce that it has signed loan documentation in relation to its previously announced senior secured project financing debt package of US$220 million between Lucara Botswana Proprietary Limited as the Borrower and a syndicate of five mandated lead arrangers. The MLAs are: African Export-Import Bank, Africa Finance Corp., ING, Natixis, and Societe Generale, London Branch.  Afreximbank is acting as Facility Agent in connection with the Facilities.

The Facilities include two tranches: a project finance facility of US$170 million to fund the development of the underground project, and a US$50 million working capital facility to re-finance the Company’s existing debt and to support on-going operations.  The Facilities, combined with the recently announced equity financings totaling approximately US$30 million (link to news release), and projected cash flows from the Karowe open pit mine, during the underground construction period, result in the Karowe Underground Expansion Project being fully financed.

Eira Thomas, President and CEO commented: “Lucara is excited to be moving forward with a fully financed underground expansion project, extending Karowe’s mine life to at least 2040 and projected to deliver at least US$4 billion in additional revenues using conservative diamond price assumptions. Securing credit commitments for the arrangement of US$220 million senior debt facilities from five leading international financial institutions, with significant mining and metals track records and experience in Africa, is an important achievement for Lucara and reflects confidence in the large-stone resource at Karowe and the considerable efforts undertaken over the last five years to scope and define this attractive, highly economic growth opportunity for the company. It also reflects confidence in the strong, safe and reliable operating environment that has prevailed at Karowe over the last eight years, adhering to high standards in respect of ESG and striving to deliver long-term economic benefits to Botswana and the communities in which we operate.  The development of the underground expansion project will adhere to all required environmental regulations and comply with Equator Principles.

As a final comment, we believe this expansion project comes at the right time in the market cycle, with improving supply and demand fundamentals helping to stabilize and support stronger diamond prices in the short and longer term.  The Karowe mine remains one of the highest margin diamond mines in the world, having yielded 5 of the 10 largest diamonds in recorded history and is the only mine to have recovered three diamonds greater than 1,000 carats.”

First drawdown under the Facilities is expected to occur early in the third quarter this year, following satisfaction of certain conditions precedent customary to a financing of this nature, including the closing and receipt of the Initial Equity Contribution.

In connection with the Facilities, the Company’s largest shareholder, Nemesia S.a.r.l. has agreed to provide a limited standby undertaking in the event of a funding shortfall occurring up to thirty-six months from Financial Close.

Key terms of the project finance facility:

• Lucara Botswana Proprietary Limited, 100% owner of the Karowe Mine is the Borrower, with Lucara Diamond Corp. as the Sponsor and the Guarantor until the Project Completion Date;
• Up to US$170 million provided to fund the development, construction costs and construction phase operating costs of the UGP as well as financing costs in relation to the Facilities;
• 8 year maturity after Financial Close, with quarterly repayments commencing on June 30, 2026;
• Interest rate and Margin: LIBOR (or replacement benchmark) plus margin of 5.5% annually for the period commencing on Financial Close and ending on the Project Completion Date, and 5.0% annually thereafter;
• First ranking security over all assets of the Borrower on a fixed and floating basis, as well as all shares in and shareholder loans into the Borrower and all shares in and shareholder loans into the intermediary companies between the Sponsor and the Borrower;
• The project facility will require interest rate hedging of at least 75% of the Borrower’s exposure for a period of at least six (6) years to be arranged as a condition subsequent to Financial Close;
• Positive and negative covenants, including financial ratios, as well as events of default and a cash flow waterfall customary to a financing of this nature are set out in the Facilities agreement.
• Key terms of the working capital facility:
• Borrower: Lucara Botswana
• Up to US$50 million for a senior, secured WCF to be used initially to re-finance the Sponsor’s existing working capital facility and thereafter, for working capital and other corporate purposes of the Borrower;
• Interest rate and Margin: LIBOR (or replacement benchmark) plus margin of 3.5% annually.

Shareholder Undertaking from Nemesia

Nemesia has agreed to provide up to US$25 million in the Shareholder Undertaking for a period of up to thirty-six months from Financial Close in support of the Facilities.  The Shareholder Undertaking is unsecured and subordinated to the Facilities.  As consideration for providing the Shareholder Undertaking, and subject to receipt of all required regulatory approvals, Lucara has agreed to issue 600,000 common shares as a fee upon execution of the Shareholder Undertaking and a further 600,000 common shares should the Shareholder Undertaking be called upon in the event of a funding shortfall.  As an additional fee, Lucara, as the Sponsor, has agreed to issue 5,000 common shares for each US$500,000 drawn down per month until the amounts borrowed are repaid.

Nemesia is an insider of the Company and, as a result of their provision of the Shareholder Undertaking and receipt of 600,000 common shares in connection with the execution thereof, the transaction contemplated by the Shareholder Undertaking will be considered a “related party transaction” under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions. The Company intends to rely on the exemptions set forth in sections 5.5(a) and 5.7(1)(a) of MI 61-101 from the valuation and minority shareholder approval requirements of MI 61-101 in respect of Nemesia’s provision of the Shareholder Undertaking as the aggregate fair market value of the common shares issued to Nemesia upon signing of the Shareholder Undertaking was less than 25% of the Company’s market capitalization.

A material change report in respect of the signing of the loan documentation in relation to the Facilities, including the provision of the Shareholder Undertaking, will be filed in accordance with MI 61-101, but is not expected to be filed 21 days in advance of the closing of the Facilities as the Company wanted to close the Facilities on an expedited basis for sound business reasons.

Terrafranca Advisory Limited acted as financial advisor to the Company. Norton Rose Fulbright acted as legal counsel to the Company with support from Lawrence Khupe Attorneys in Botswana.  Mayer Brown LLP acted as legal counsel for the MLAs with support from the Botswana law firm Armstrongs.

ABOUT LUCARA

Lucara is a leading independent producer of large exceptional quality Type IIa diamonds from its 100% owned Karowe Mine in Botswana. The Company has an experienced board and management team with extensive diamond development and operations expertise.  The Company operates transparently and in accordance with international best practices in the areas of sustainability, health and safety, environment and community relations.