Canadian exploration company Lucara Diamond has completed a preliminary economic assessment (PEA) in relation to the development of an underground mine at its Karowe operation in Botswana.

The development of the underground mine is expected to allow the company to begin production, following completion of the current open-pit mine.

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Based on the PEA, the mine is estimated to have an after-tax undiscounted net cash-flow of $820m, after-tax net present value (NPV), at 5% discount rate, of $451m and internal rate of revenue (IRR) of 38.9%.

The results also determined that the underground project needs pre-production capital costs of $195m.

Lucara Diamond president and CEO William Lamb said: “The results of the PEA demonstrate the potential economic viability for the development of an underground mine at Karowe.

“The results of the PEA demonstrate the potential economic viability for the development of an underground mine at Karowe.”

“Underground operations are focused on the high-value south lobe, which remains open at depth below the current design, and is a further indication of the potential longevity of the resource and cash-flow generation at Karowe.”

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Over the life of mine (LoM), the projected production is around 2.72 million carats.

Lamb further added: “We have seen on-going improvement in the value of diamonds from the south lobe and the development of an underground mine has the potential to add significantly to the life of mine at Karowe.”

The company is contemplating the development of a sub-level caving (SLC) operation to extract the AK06 kimberlite resource after the depletion of the current open-pit operations in 2026.

It will proceed with the development of a pre-feasibility study (PFS), which is set for completion in the second quarter of next year.