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Lucara extends repayment schedule on $220m debt package

Karowe underground diamond mine

Photo by Bloomberg

10th January 2024

By: Darren Parker

Creamer Media Contributing Editor Online

     

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Diamond mining company Lucara Diamond has executed amended documentation related to its senior secured project financing debt package, initially established in July 2021 at a value of $220-million. 

While the total amount of the facilities remains unchanged, Lucara has extended the repayment profile in accordance with the rebase schedule released on July 17 last year. This adjustment aligns with the company's aim to continue the development of the Karowe underground expansion project (UGP).  

The funding for this expansion will be sourced from the project loan, supplemented by anticipated excess cash flow generated from the ongoing operations of the Karowe openpit mine and stockpiles processed during the underground construction period. 

The entities involved in these facilities include Lucara Botswana as the borrower and a syndicate of five international financial institutions, namely the African Export-Import Bank (Afreximbank), Africa Finance, ING, Natixis, and Societe Generale, London Branch. Afreximbank is also serving as the facility agent in connection with these facilities. 

The debt package comprises two facilities: a project finance facility of $190-million (previously $170-million) earmarked for the development of the UGP at the Karowe mine and a $30-million (previously $50-million) senior secured working capital facility (WCF) intended to support ongoing operations. 

As of the latest update, Lucara has used $125-million from the project loan and $15-million from the WCF. The balance in the cost overrun reserve account (Cora) currently stands at $33.6-million. 

"The recent signing of the amended facilities agreement for the Karowe mine's underground development project marks a significant step in our company's exciting transformation. This achievement continues to underscore the exceptional quality of the Karowe asset," Lucara president and CEO William Lamb said on January 9. 

He said that the adjusting repayment schedule aligns with the expected cash flow from the underground production profile, where Lucara is set to process the most valuable ore from the underground expansion in the first three years of operations. 

"With the solid financial backing from our largest shareholder, who has provided interim funding and guarantees, we can confirm that the UGP is fully funded," Lamb said. 

The key terms of the project loan include provisions for up to $190-million to fund the UGP's development, construction costs, and operating costs. The loan has an eight-year maturity, with quarterly repayments starting on September 30, 2028, and carries an interest rate and margin based on the London interbank offered rate (Libor) plus 6.5% yearly from the rebase date to project completion. Other terms include a commitment fee, a cost overrun reserve amounting to $61.7-million to be funded by June 30, 2025, and various covenants and conditions. 

The WCF comprises up to $30-million, with an interest rate and margin based on Libor plus 6.5% yearly for the period from the date of amendment to project completion. Similar to the project loan, the WCF includes a commitment fee, with Lucara Botswana required to pay 35% a year of the margin applicable to the WCF on the available commitment for the facility. 

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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