TSX- and BSE-listed Lucara Diamond has said there is “significant doubt” about its ability to continue as a going concern, after a drop in diamond sales and increased reliance on limited funding sources raised pressure on the company's cash flow and working capital.

In the first quarter of 2025, revenue dropped to $30.3-million from $39.5-million a year earlier, driven by lower carat sales and a shift to lower-grade ore as unusually high rainfall disrupted mining at the Karowe openpit, in Botswana. The company sold 72 871 ct in the period, down from 93 560 ct in the first quarter of 2024.

Lucara revised its full-year revenue guidance to between $150-million and $160-million, down from prior expectations, and said this outlook prompted a re-evaluation of its liquidity position and the company’s ability to fund ongoing operations and the underground expansion of the Karowe mine (UGP).

“These conditions cast significant doubt on the company’s ability to continue as a going concern,” Lucara said in its quarterly report on Friday.

Lucara's project financing has been fully drawn, with continued progress on the UGP dependent on cash flow from existing operations, access to the cost overrun reserve account (CORA), and additional debt or equity financing. On April 3, lenders approved a draw of up to $28.0-million from CORA after the company’s largest shareholder, Nemesia, agreed to extend its shareholder standby undertaking until project completion.

Under the terms of the standby facility, Nemesia has committed up to $63.0-million, including $28.0-million for CORA replenishment and $35.0-million to support any project funding shortfall.

“The underground project at Karowe is progressing, with advancements in shaft connecting lateral development during the quarter. Surface infrastructure construction progressed as planned,” said president and CEO William Lamb. "We anticipate reaching shaft bottom in the coming months, though we remain mindful of the complexity inherent in such major development projects.”

Lucara recovered 93 716 ct in the quarter, including six stones over 100 ct and a 1 476 ct non-gem diamond, which was sold on tender for $1.11-million. The recovery of 139 specials – stones greater than 10.8 ct – accounted for 5.6% of the carats recovered from direct ore feed.

Lamb cautioned that the transition from openpit to underground operations would bring a difficult two-year period.

“As we navigate the transition from openpit to underground operations, shareholders are reminded that 2026 and 2027 will present significant challenges, with production relying primarily on lower-value stockpile material,” he said. “This interim period will require careful management of resources and expectations until the underground project begins contributing to our production profile.”

Lucara is exploring options to raise additional financing but warned that future efforts may not succeed or may fall short of the required amounts.

“Lucara remains focused on prudently managing this crucial transition phase while continuing our commitment to recovering high-quality diamonds, though we recognise the path ahead involves navigating considerable operational and financial adjustments before we can realise the full potential of our underground resources,” Lamb said.