Canada-headquartered Lucara Diamond has recovered its second diamond of more than 2 000 ct from the Karowe mine in Botswana, underscoring the asset’s reputation for producing some of the world’s largest and highest-value stones, even as the company faces covenant breaches and uncertainty over its ability to continue as a going concern.

“The Karowe diamond mine continues to validate its world-class status with the recovery of a second diamond exceeding 2 000 ct,” president and CEO William Lamb reported on Friday.

The 2 036 ct near-gem diamond was recovered from processing EM/PK kimberlite and is the third largest rough diamond ever unearthed and the second largest rough diamond to be recovered in Botswana.

The EM/PK material is the target of the Karowe Underground Project (UGP) that has now produced seven of the world’s largest recorded natural diamond recoveries.

In addition, Lucara recovered 242 so-called specials, which are defined as rough diamonds larger than 10.8 ct. The specials equated to 9.4% by weight of the total carats recovered from direct ore feed in the second quarter. The company recovered 15 stones over 100 ct, including two stones that exceeded 200 ct, in the three months ended June. A total of 85 024 ct were recovered in the quarter under review.

“The continued and consistent recovery of ‘specials’ reflects not only the quality of the Karowe asset, but also reflects the strength of our operational team, amid a complex and ever-changing global environment,” said Lamb.

He also reported “strong” progress on the UPG project, with key milestones reached in shaft sinking, station development and lateral work, and more than 2 000 days without a lost-time injury on the project in July.

However, Lucara breached a financial covenant after failing to deliver an approved UGP financial model to lenders by the June 30 deadline. The company did not resolve the breach within the 30-day grace period, leading to the reclassification of the entire outstanding project facility as a current liability under IFRS.

The company said that lenders had not demanded early repayment, and that it was working to secure a waiver. The company had access to $96.7-million in additional liquidity, including $63-million from shareholder undertakings and $33.7-million, subject to lender approval, from the cost overrun account.

Management cautioned, however, that current cash, working capital, and committed funding would not be sufficient to meet its obligations over the next 12 months without additional financing, raising “substantial doubt” about its ability to continue as a going concern.

Meanwhile, the UGP, designed to access the highest-value portion of the orebody, reached the bottom of its production shaft in late July. Lucara is reviewing ore extraction methods, geomechanics, and caving scenarios to refine mine plans but said development continued as scheduled.

In the second quarter, ended June 30, Lucara posted revenue of $43.7-million, from $41.3-million in the same period a year earlier. The year-on-year increase was mostly owing to the sale of a 1 094 ct diamond, named Seriti, to HB for an initial polished value of $12-million. The final sale value of Seriti will be determined once the polished outcomes are sold to end buyers.

In the second quarter, the company spent $13.6-million on UGP works, including station development, lateral excavation, and infrastructure construction. Planned third-quarter activities include connecting the ventilation and production shafts at the 310-level, advancing lateral development toward kimberlite, and preparing for shaft equipping.

“As we transition from openpit to underground operations, we remain focused on disciplined execution and strategic resource management,” Lamb said. “We recognise that realising the full potential of our underground resource will involve navigating both the operational and financial complexities ahead.”