More annual reports from Lucapa Diamond Company:
2023 ReportANNUAL
REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
OUR FUTURE
IS CLEAR
2 | Lucapa Diamond Company Limited | Annual Report 2021
Lucapa Diamond Company Limited | Annual Report 2021 | 3
2021 at a
GLANCE
4 | Lucapa Diamond Company Limited | Annual Report 2021
A$65m
Record attributable revenue
A$22.3m
Record attributable EBITDA
32,567
Recovered attributable carats
Merlin
Transformative acquisition
0.21
LTIFR Lulo
0.16
LTIFR Mothae
Lulo employees
(incl contractors)
by gender
94% Male
6% Female
Mothae employees
(incl contractors)
by gender
69% Male
31% Female
Our Purpose
Lucapa produces natural diamonds sustainably
and cares for its people, communities,
and the countries in which we operate
Our Vision
Lucapa’s vision is to become a pre-eminent mid-tier
diamond company with multiple assets, vertically
integrating through the supply chain, to bring greater
value to all stakeholders.
Our Values
Safety
We conduct operations in a safe,
responsible and environmentally
conscious manner.
Integrity
We interact with all stakeholders with integrity,
honesty, transparency and fairness.
Teamwork
We attract and employ the best
skillsets, encourage teamwork, diversity,
and reward performance.
Partnership
We partner with the local communities
and governments in the countries
where we operate, for mutual benefit.
Contents
Company Overview
Chairman’s Letter
Group Highlights
Review of Operations
Lulo Alluvial Mine, Angola
Mothae Kimberlite Mine, Lesotho
Merlin Kimberlite Project, Australia
Lulo Joint Venture, Angola
Brooking Diamond Project, WA
Orapa Area F Project, Botswana
Mineral Resources
Sales and Marketing
07
08
09
10
12
14
16
19
20
20
22
25
Environment, Social and Governance
26
CEO’s Letter
Health and Safety
Case Study: COVID-19 Response
Case Study: Agricultural Kickstart Program
Case Study: Xamiquelqengue Village
and School contributions
Corporate Governance
Financial Report
28
32
33
36
37
39
49
Lucapa Diamond Company Limited | Annual Report 2021 | 5
6 | Lucapa Diamond Company Limited | Annual Report 2021
Company
Overview
Lucapa Diamond Company Limited is listed under the ticker LOM on the Australian Securities Exchange (ASX). The
Company is a diamond miner and explorer with assets across Africa and Australia. It has interests in two producing
diamond mines in Angola (Lulo – 40%) and Lesotho (Mothae – 70%). The large, high-value diamonds produced from
these two niche mines attract some of the highest prices per carat for rough diamonds globally.
The Lulo mine has been in commercial
production since 2015, while the Mothae
mine commenced commercial production
in 2019.
recently acquired
Lucapa
the Merlin
Diamond Project in the Northern Territory
of Australia. The Merlin mineral lease and
exploration licence contain 13 previously
discovered kimberlite pipes containing
a 4.4 million carat JORC 2012 compliant
resource. There are also numerous
unresolved geophysical anomalies on the
tenements.
Lucapa and its project partners are also
exploring for potential primary source
kimberlites or lamproites at the prolific
Lulo concession in Angola, the Brooking
project in Australia and the Orapa Area F
project in Botswana.
Lucapa has a cutting and polishing
partnership with Safdico International, a
subsidiary of leading international high-
end jeweller Graff. Safdico can purchase
up to 60 percent of Lulo’s alluvial rough
production as a preferred buyer and has an
agreement to buy 100 percent of Mothae’s
rough production, both at full market
value. The mines then share in a significant
portion of the additional margins derived
by the partnership from beyond the mine
gate.
its corporate offices
Lucapa has
in
Perth, Western Australia. The Board,
management team and key stakeholders in
Lucapa have deep global diamond industry
experience and networks through the value
chain from exploration to retail.
Lucapa Diamond Company Limited | Annual Report 2021 | 7
Chairman’s
Letter
Dear Fellow Shareholders,
In 2021, your Company made great strides
towards meeting its objective of becoming
a pre-eminent mid-tier diamond company.
By successfully furthering our exploration
programs, expanding production of large,
high-quality gem diamonds, from both our
mines, and continuing our downstream
initiatives, we have evolved
into a
meaningful vertically integrated diamond
explorer, miner, producer, polisher and seller.
to
the
strong
Thanks
operational
performances and a resurgent diamond
market as we emerged from the pandemic,
rough diamond sales (on a 100% basis)
from both mines exceeded A$135 million
for the year under review, 193% up on the
A$46 million achieved in 2020. Combined
carat production increased to 57,065 carats,
up 54% from 37,125 carats produced in the
previous year. Against a worldwide average
diamond price mined of A$190 per carat,
your Company’s run-of-mine production
achieved an overall average price of A$2,150
a carat, which is more than ten times higher
than the world average, demonstrating our
niche diamond producer status.
Our proportionate share or interest in these
achievements resulted in an attributable
EBITDA for the year of A$22.3 million,
against a loss of A$0.4 million the previous
year, a strong turnaround of some ~A$22.7
million year on year. Along with our
expanded operations, we too have grown
our strong operational team members,
where at Lulo in Angola we now employ 489
persons and 107 contractors, and at Mothae
in Lesotho we employ 311 persons and 118
contractors. These thousand or so persons
are capably managed by a small head
office compliment of nine and I’m pleased
to report that Lucapa took an active role
in protecting its employees and the local
community from COVID-19 from the outset
of the pandemic.
In May, we announced that, subject to
certain conditions precedent, we had agreed
to acquire 100% of Merlin for A$8.5 million
representing a purchase price of about
A$2 per carat for the 4.4 million carat JORC
compliant resource. In the five months of
intensive work between December 2020
and May 2021, our head office team did
an enormous amount of work on Merlin,
as evidenced in the results of the Scoping
Study published later in 2021, just a year
after our first involvement. The results
of the Scoping Study showed that Merlin
has potential to deliver multiples of the
production from our two existing mines.
As a result of the strength in the diamond
market and rapid increases in diamond
prices, we updated the Merlin Scoping Study
in early 2022. In essence, on our Base case
pricing scenario, the Updated Scoping Study
showed Merlin should produce on average
~153,000 carats of diamonds a year over an
initial 14-year mine life, generating ~A$2.0
billion in revenues (or around A$143 million
a year) and ~A$857 million in pre-tax free
cash flow. Of material significance, is that
unlike Angola where we hold a 40% interest,
and Lesotho where we hold a 70% interest
– at Merlin we own 100% of the opportunity.
The acquisition of Merlin, which was
completed in December 2021, and which
we plan to be in full operation in 2024, is a
massively transformative development and
will elevate Lucapa into a mid-tier diamond
company.
On the primary source exploration front
we had great success on two projects. In
November 2021, we announced positive
initial
and significant results from the
processing of the L028 kimberlite bulk
sample at the Lulo concession in Angola.
Thirteen diamonds with a total weight of
4.15 carats were recovered from the L028
sample. The largest stone recovered was a
0.93 carat white diamond with the largest
Type IIa diamond recovered weighing 0.59
carats. Importantly, eight of the 13 stones
(>60%) recovered were classified by a
Yehuda Colorimeter as Type IIa diamonds.
This is a significant result as Type IIa
diamonds are rare, form less than 2% of
global natural rough diamond production
and are sought after because of their
colour, quality and
normally superior
size when compared to Type I diamonds.
Consistent Type IIa diamond recoveries are
the major driver of the exceptional average
rough diamond prices achieved for the
alluvial (secondary deposit) diamonds on
the Lulo concession.
We have spent over a decade meticulously
and logically working through over 500
anomalies, drilling over 120 targets and
discovering more than
100 kimberlite
pipes that have the potential to shed
our Lulo alluvial diamonds which are on
average, the most beautiful and valuable
in the world. We have purchased additional
excavating and mining fleet for this
kimberlite exploration program, along with
a standalone bulk sampling plant (with a
crushing circuit) which should enable us to
quickly treat the remainder of priority bulk
samples this calendar year without holding
up alluvial mining and processing. A major
discovery here, will transform this Company
and reward the patience of so many of you
who have travelled this journey with us.
Also
in November 2021, we announced
the results of gravity and electromagnetic
surveys that had identified three new high-
interest primary source lamproite targets at
the Brooking Diamond Project in Western
Australia’s West Kimberley
lamproite
province. These targets will be drilled or
pitted in 2022.
We are both conscious and proud of the
contribution we make to enhance the lives of
those who work for us and the surrounding
communities. We are proud to include in
this annual report for the very first time,
our Environment, Social and Governance
report detailing the very good work Lucapa,
our partners and the Mothae and SML
management teams do to ensure we have
a positive impact on those who work for us
and the surrounding communities.
Let me give you a glimpse into the future.
In preparation for diamond production
from Merlin, as the major, if not only,
diamond producer in Australia, we intend to
provide for all Australians and international
consumers, the opportunity to buy an
ethically sourced and provenance assured
diamond from us. You will hear more from
us as this develops.
Finally, to our shareholders, partners, valued
teams in Angola, Lesotho, Botswana and in
Australia – thank you for your continuing
ethos and well done on our shared
achievements. You have been magnificent.
With best wishes,
Miles Kennedy
8 | Lucapa Diamond Company Limited | Annual Report 2021
2021 GROUP HIGHLIGHTS
A$135m
Record full year revenues
at A$2,150/ carat
(on a 100% project basis)
A$65m
Record full year
Attributable revenues
at A$1,780/ carat
A$22.3m
Record full year Attributable
EBITDA generated
A$5.9m
Repaid to its debt
providers
Maiden
Full year guidance
published
A$8.5m
Cost of Merlin
acquisition
Merlin Scoping Study
Publication of the Merlin Scoping Study demonstrating strong economics for a long-life mine (refer ASX
announcement 17 December 2021). This was subsequently updated in March 2022 as a result of significant
and rapid increase in diamond prices (refer ASX announcement on 3 March 2022). Using the Base case pricing
scenario, the Updated Scoping Study delivered the following key outcomes:
~14 year
Life-of-mine
~A$2b
Revenues
A$96m
Initial capital estimate
(includes A$18 million
waste pre-strip)
~A$1.0b
EBITDA
~A$541m
NPV7% (pre-tax)
NT
Significant value and
benefits for nearby
communities and
Northern Territory
18 priority kimberlites
being sampled
Lulo exploration sampling includes the discovery of 13
diamonds from the LO28 kimberlite in the Canguige
catchment area, including eight rare Type IIa diamonds.
A$21.7m
Completed capital raising
(before costs) to fund the Merlin
acquisition, expedite exploration
programs, advance feasibility
studies and general working capital.
+40%
Rough diamond price index
increase in 2021. Significantly
positive year for the diamond
industry with a strong outlook
for 2022.
Record
Record operational
performances from
both SML and
Mothae with record
volumes processed,
carats recovered and
sold and exceptional
diamond recoveries
2.1m ct
Production target from
14 million tonnes treated
Expected payback
(pre-tax) by end
of second year of
production
Progressing with
a feasibility study.
Three
New high-interest
targets identified at
Brooking, WA
Lucapa Diamond Company Limited | Annual Report 2021 | 9
REVIEW OF
OPERATIONS
10 | Lucapa Diamond Company Limited | Annual Report 2021
Lucapa’s Board and management team have decades of global experience across all facets of the diamond industry and
have successfully advanced Lucapa’s growth vision to become a pre-eminent mid-tier diamond company, with both
high-value diamond production and exciting new primary source exploration programs.
Lucapa currently has two unique operating diamond mines – the
Lulo alluvial mine in Angola (“SML”) and the Mothae kimberlite mine
in Lesotho (“Mothae”). Both mines are in the top three US$/ carat
diamond resources globally and are regular producers of exceptional,
large and high-value diamonds, with more than 75% of rough
revenues originating from the recovery of diamonds larger than 4.8
carats.
In keeping with Lucapa’s growth objectives:
• In addition to the recently concluded expansions to both operating
mines, the Company has successfully advanced through the
diamond pipeline with both mines generating returns from unique
cutting & polishing partnerships with a high-end diamantaire. The
Company will progress this initiative to attract margins from well
beyond the mine-gate in 2022;
• The Company also recently acquired 100% of the historic Merlin
mine in the Northern Territory, Australia (refer ASX announcement
on 13 December 2021). Lucapa has plans for Merlin to be the
Company’s third project that it has evaluated, designed, funded,
developed and brought into commercial production in the last
seven years. Once in production, Merlin will be Australia’s largest
diamond producer;
• Lucapa has significant blue-sky potential with its three primary
source exploration activities in Angola, Australia and Botswana.
The most advanced exploration program is the highly-prospective
primary source exploration program being conducted over
the Lulo diamondiferous kimberlite province
lying directly
beneath the mining blocks where the large and high-value Lulo
alluvial diamonds are being recovered by SML. Merlin, where all
kimberlites discovered to date are diamondiferous and with ~70
unresolved geophysical anomalies, presents an exciting source
discovery opportunity too.
With the Company assets well maintained and capacity expansions
completed through the pandemic, the Group experienced a swift
return to profitability in 2021 as a result of stellar operational
performances at both of the mining operations and a re-balancing
of the entire diamond industry which saw, for the first time in over a
decade, a robust and positive pricing environment for both rough and
polished diamonds.
Both mines are in the top three US$/
carat diamond resources globally and
are regular producers of exceptional,
large and high-value diamonds.
Mothae Mine, Lesotho.
Lucapa Diamond Company Limited | Annual Report 2021 | 11
REVIEW OF OPERATIONS
Lulo Alluvial Mine,
Angola
Lucapa
40%
Endiama 32%
Rosas and Petalas 28%
The operations at Lulo ran well during 2021, through the continued impacts of the COVID pandemic. Initially, the
operations were challenged with staff shortages due to travel restrictions and quarantining requirements, but after
a successful vaccination program rollout, staffing levels normalised and notwithstanding these challenges, the mine
treated a new record of ~ 486,000 cubic metres of gravel, producing 24,595 carats at a grade of 5.1 cphm³.
The additional mining fleet acquired in the prior year continued to
positively impact gravel mining and overburden handling in 2021 and an
annual record of 4.1 million cubic metres of material moved (both gravel
and overburden) was achieved for the year. This is a 20% increase over
the previous year.
With the southern terraces and lezirias (flood plains) contributing a
greater proportion of the future mine plan, an infield screening plant
has been purchased to improve productivity, increase production
and decrease tramming distances. This is being established in close
proximity to the more southern terrace mining blocks of MB46 and
MB28 and their associated lezirias, negating the need to transport
large volumes of gravel over 20 kilometres to the alluvial treatment
plant for processing. Instead, a much lower volume of washed and
screened gravel will be transported using a more suitable truck fleet
to the alluvial treatment plant, thereby freeing up mining equipment
to increase mining production. The infield screening plant will be
operational in 2022.
Carats recovered were also up by 4% in comparison to 2020 at 24,595
carats with a total of 783 stones recovered weighing more than 4.8
carats, including 261 Specials (stones weighing more than 10.8 carats).
As a consequence of the strong operational performances and improved
pricing environment, SML achieved a record EBITDA of US$37.2 million
(A$50.0 million) in 2021 (2020: US$6.2 million (A$8.2 million)). Lucapa’s
attributable portion amounted to US$14.9 million (A$19.9 million).
12 | Lucapa Diamond Company Limited | Annual Report 2021
An updated JORC classified mineral
resource for the Lulo operation was
published by Lucapa in March 2022,
estimating an inferred resource
of ~151,040 carats at a modelled
value of US$1,930/carat as at 31
December 2021. Notwithstanding the
~24,600 carats recovered in 2021, this
represents an 11% increase in resource
carats and a 34% increase in value
per carat when compared to the 31
December 2020 published resource.
The mine treated a new record of ~ 486,000
cubic metres of gravel, producing 24,595
carats at a grade of 5.1 cphm³.
The Cutting and Polishing
partnership continues to
deliver additional margins.
Carats recovered were also up
by 4% in comparison to 2020 at
24,595 carats with a total of 783
stones recovered weighing
more than 4.8 carats.
Lucapa Diamond Company Limited | Annual Report 2021 | 13
REVIEW OF OPERATIONS
Mothae Kimberlite
Mine, Lesotho
Lucapa
70%
Government of Lesotho 30%
Early 2021 saw Mothae come through a challenging period with a two-week
shut down due to COVID and a treatment plant upgrade increasing the
maximum throughput by 45% from 1.1 mtpa to 1.6 mtpa, which entailed an
additional tie-in shutdown during the first quarter.
Over the course of the second and third
quarter the plant was gradually ramped
up to take advantage of the new capacity,
with concurrent mass balance adjustments
being made, and production continued to
increase throughout the remainder of 2021
with new records for daily and monthly
throughputs set.
Late in the fourth quarter the planned
repairs and improvements to the primary
crusher foundations were brought forward
and the crusher was taken offline to
complete
Production
continued through a second primary feed
option, although at a reduced tonnage. The
foundations were successfully repaired
as planned and the plant returned to
operation midway through December.
repairs.
those
affected
Mothae recovered 32,470 carats in 2021,
representing a new annual record and
an increase of 141% over the previous
pandemic
year. Recoveries
included 628 stones weighing more than
4.8 carats, of which 168 were Specials. The
largest stone recovered for the year was a
215 carat D colour Type IIa stone recovered
in February.
Although the unplanned first quarter
shutdowns and reduced throughput in the
fourth quarter had a negative effect on
the total annual throughput, Mothae still
set annual records for carats produced and
revenues generated, and in combination
with the strength of a more balanced
diamond market, achieved an EBITDA of
US$5.6 million (A$7.6 million) for 2021
(2020: US$1.1 million (A$1.5 million) loss).
Lucapa’s attributable portion amounted to
US$3.9 million (A$5.3 million).
This 21 carat fancy intense
yellow polished diamond
was crafted from a 38
carat rough diamond
recovered from Mothae.
14 | Lucapa Diamond Company Limited | Annual Report 2021
Over the course of the year the project to move the
camp to a new location outside of the pit blast zone
was completed and the old camp location is in the
process of being rehabilitated.
A project to test the suitability and overall benefits
of mechanical continuous mining as opposed to
conventional drill and blast was initiated during
the latter part of the year and is due for completion
during the first quarter of 2022. If shown to be
suitable, this technology has the potential to
bring with it operational and cost improvements in
mining the kimberlite at Mothae, as well as having
additional processing benefits.
Mothae recovered 32,470 carats
in 2021, representing a new
annual record and an increase
of 141% over the previous
pandemic affected year.
Lucapa Diamond Company Limited | Annual Report 2021 | 15
REVIEW OF OPERATIONS
Merlin Kimberlite
Project, Australia
Lucapa
100%
acquisition
The A$8.5 million strategic and
of
transformative
the Merlin Diamond Project
was completed in December by
Lucapa’s wholly owned subsidiary,
Australian Natural Diamonds Pty
Ltd (“AusND”).
Under the Asset Sale Agreement, AusND
acquired a 24km2 mineral lease and 283km2
exploration
licence encompassing the
mineral lease. The purchase also includes
all existing equipment, infrastructure and
assets on the mineral lease and exploration
licence.
The two tenements contain 13 previously
discovered kimberlite pipes with an
existing 4.4 million carat
JORC 2012
compliant mineral resource. Merlin also
contains significant exploration potential
with over 70 unresolved anomalies where
all kimberlite discoveries on the mineral
lease and exploration licence are known to
be diamondiferous.
AusND and Legend International Holdings
Inc
to
(“Legend”) mutually agreed
in relation
terminate the agreements
to the Legend buy-back options and
milestone payment rights over the Merlin
mineral lease and exploration licence.
Prior to competition of the acquisition,
to
AusND was granted permission
commence geotechnical drilling on the site
and to carry out certain site works.
The two tenements contain 13
previously discovered kimberlite pipes
with an existing 4.4 million carat JORC
2012 compliant mineral resource.
16 | Lucapa Diamond Company Limited | Annual Report 2021
The existing camp was
recommissioned, services such
as access roads, power, water
and communications were
re-established.
The existing camp was recommissioned, services such as access
roads, power, water and communications were re-established, and
the geotechnical drilling program was completed by the end of
the year.
A Scoping Study was carried out in the second half of the year
and the findings published in December 2021. The Scoping Study,
which is a preliminary technical and economic study, demonstrates
long-life mine
positive economics and strong potential for
development using conventional open pit and vertical pit mining
methods. In 2022, as a result of the significant and rapid increase in
diamond prices, the Company released an Updated Scoping Study,
re-enforcing the strong economics of a mine development. The
results of a feasibility study, which commenced in the last quarter
of the year, will be published in 2022.
The largest diamond ever
recovered in Australia was
this 104 carat Type IIa from
Merlin in 2002.
Lucapa Diamond Company Limited | Annual Report 2021 | 17
18 | Lucapa Diamond Company Limited | Annual Report 2021
KIMBERLITE EXPLORATION
Lulo Joint Venture,
Angola
Lucapa
39%
Endiama 51%
Rosas and Petalas 10%
The Project Lulo Joint Venture
JV”) kimberlite
(“Project Lulo
exploration activities continued
with
formulated
following the technical review in
2019.
the program
Delineation drilling of the remaining eight
priority kimberlites was completed during
the year. A total of 46 core holes (1,768m)
were drilled to locate suitable areas in
each pipe for bulk sampling. In total, 18
high-priority kimberlites were selected for
bulk sampling during the 2019 exploration
review.
Clearing, preparing and building access
roads suitable for hauling the priority
kimberlite bulk samples within
the
Canguige catchment area, has formed a
major part of the 2021 work program.
A kimberlite bulk sample totalling 2,192m3
was excavated from kimberlite L028.
Thirteen diamonds comprising 4.15 carats
were recovered during initial processing.
Eight of the stones were classified as rare
Type IIa by a Yehuda colorimeter. This is
the best result so far recovered from the
bulk sampling program in the Canguige
catchment area.
Another sample was excavated and treated
from L031, producing 1 stone weighing 0.21
carats. A significant amount of oversize
was generated from this sample. The
oversize will be processed through the
new kimberlite bulk sampling plant once
commissioned in Q2 2022.
To ensure the kimberlite bulk samples
can be excavated and processed without
reliance on the capacity of the alluvial
fleet and Lulo alluvial plant, a new
standalone kimberlite bulk
sampling
plant and additional dedicated kimberlite
earthmoving fleet were ordered in 2021.
The crushing component of this new
standalone kimberlite bulk sample plant,
which was pre-ordered, has already arrived
at Lulo and has been constructed. Other
modules are en-route to Lulo with the full
standalone kimberlite bulk sampling plant
expected to be operational in Q2 2022.
In addition, drilling of geophysical targets
continued with 16 holes drilled on 14
additional targets. 11 new kimberlite
discoveries were made during the year.
Further investigation of these bodies will
be undertaken to confirm whether bulk
sampling of them is warranted.
Some of the additional earthmoving fleet
dedicated to the kimberlite exploration
program has already arrived in Luanda and
will be delivered to Lulo. The all-terrain
transport trucks are scheduled to arrive in
the second quarter of 2022.
Preparations for sampling the other priority
targets in 2022 continue. Clearing of haul
roads and sampling site preparations,
including
excavation
overburden
continues. Sampling and transportation
will be ramped up to coincide with the
commissioning of the bulk sampling plant.
A kimberlite bulk sample totalling 2,192m3
was excavated from kimberlite L028.
Thirteen diamonds comprising 4.15 carats
were recovered during initial processing.
Lulo Kimberlite
Project
Bulk Sampling and
Discovery Drilling Status
Lulo Exploration License
Canguige Catchment
Bulk Sampling Status
Proposed
Initial Processing Complete
In Progress
(1 1 )
(4)
(3)
Alluvial Mining Block
Discovery Drilling Status
Not Drilled (16)
(1 1 )
Drilled
0
10
kilometers
Figure 1: Lulo JV kimberlite exploration status map
Lucapa Diamond Company Limited | Annual Report 2021 | 19
LAMPROITE EXPLORATION
Brooking Diamond
Project, WA
Lucapa
80%
Leopold Diamond
Company 20%
Gravity and ground electromagnetic surveys over six targets were
undertaken at the Brooking Project in Western Australia.
The areas targeted were identified from satellite photo and airborne geophysics
interpretation in areas where micro- and macro-diamonds and 72 chrome spinels
were recovered by Lucapa in the 2020 loam and stream sampling program.
Three high-interest targets were identified during the interpretation while a further
three targets warrant further investigation.
In addition, some whole rock geochemistry sampling was undertaken on previously
recovered core. Results indicate further work is required on these targets which will
be scoped and conducted during 2022.
The next phase of exploration will include UAV borne magnetic surveys planned to
cover the gravity and electromagnetic targets plus an additional target, followed
by drilling and/ or pitting to confirm whether the identified targets at Brooking are
lamproites.
KIMBERLITE EXPLORATION
Orapa Area F
Project, Botswana
Lucapa
100%
No field work was undertaken at the Orapa Area F project and an application for extension of the prospecting licence is
still pending approval.
The next phase of exploration will seek to confirm via drilling whether the identified targets at Orapa are kimberlites.
20 | Lucapa Diamond Company Limited | Annual Report 2021
Lucapa Diamond Company Limited | Annual Report 2021 | 21
Mineral
Resources
The Lulo Classified Inferred Diamond Resource (“Lulo Diamond Resource”) has been independently estimated and
reconciled on a depletion and addition basis as at 31 December 2021 by external consultants Z Star Mineral Resource
Consultants (Pty) Ltd (“Z Star”) of Cape Town, South Africa, updating the previous Lulo Diamond Resource dated 31
December 2020.
Changes in the Lulo Diamond Resource reflect alluvial mining depletion in 2021 and additional resources informed by drilling, mining, processing
and sales during 2021. Resources have been reconciled and depleted as at 31 December 2021.
The diamond value model has been escalated using a global rough diamond price index provided by GTD Consultants, an independent diamond
valuation consultancy, up to 31 December 2021.
The Lulo partners are continuing an expanded pitting and auger drilling program around the known diamond areas at Lulo, to grow the Lulo
Diamond Resource. The exploration program will continue through 2022.
Lucapa reported an
inferred resource of 151,040
carats for Lulo representing
an increase of 11% on the
previous year.
Lulo Alluvial Resource Update
Alluvial drilling and pitting continued throughout
2021 comprising 7,044 auger drill holes and 1,545 pits,
both to better define the alluvial resource channels
ahead of mining and to update the JORC inferred
resource. Notwithstanding the depletion of 24,595
carats in calendar year 2021, the new updated JORC
Resource Statement compiled to 31 December 2021
has total inferred resource of 151,040 carats at an
average value of US$1,930 per carat. This represents
an increase in the inferred resource carats of 11% and
a 34% increase in the average modelled value.
Lulo Concession
Alluvial Diamond Resource
as at 31st December 2021
Blocks included in Lulo Diamond Resource
Blocks being or to be assessed
0
10
kilometers
Figure 2: Lulo alluvial resource blocks and those informing the Lulo Diamond Resource estimate.
LULO CLASSIFIED DIAMOND RESOURCE – 31 DECEMBER 2021
LUCAPA 40% ATTRIBUTABLE
RESOURCE
CLASSIFICATION
DATE
AREA
(m2)
DILUTED
VOLUME
(m3)
CARATS
PER
STONE
STONES
CARATS
DILUTED
VOLUME
(cphm3)
MODELLED
VALUES
(US$/carat)*
Inferred
Inferred
31-Dec-21
2,150,000
2,199,000
31-Dec-20
1,979,200
1,980,000
1.26
1.23
119,700
110.300
151,040
135,900
6.87
6.86
1,930
1,440
Diluted volumes have been estimated based on historical mining production data to better reflect recoverable volumes and grades.
Notes:
(i) m2 = square metres; m3 = cubic metres; cphm3 = carats per 100 cubic metres.
(ii)
(iii) Bottom cut off screen size: effective 1.5mm.
(iv) Table contains rounded figures.
* Special stones are not excluded in the modelling stage, in terms of size or assortment.
22 | Lucapa Diamond Company Limited | Annual Report 2021
MOTHAE CLASSIFIED DIAMOND RESOURCE – 31 DECEMBER 2021
LUCAPA 70% ATTRIBUTABLE
RESOURCE
CLASSIFICATION
Indicated
Inferred
TOTAL
Indicated
Inferred
TOTAL
DATE
31-Dec-21
30-Sep-20
TONNES
(MT)
GRADE
(CPHT)
CARATS
(MILLION)
MODELLED
VALUES
(US$/carat)
8.05
39.27
47.32
9.16
39.35
48.51
3.1
2.4
2.6
3.1
2.4
2.6
0.25
0.96
1.21
0.28
0.96
1.24
635
601
608
635
601
609
Notes:
(i) Table contains rounded figures.
(ii) The grade and average modelled value estimates are quoted at a 3mm BCOS but with incidental diamond recoveries in the +9 and +11 DTC sieves included.
(iii) The update is solely based on resource depletion due to mining between 30 Sep 2020 and 31 Dec 2021.
(iv) The Indicated Resource contains material to 75m below pit bottom (at 30 Sep 2020) in the South Lobe only. The Inferred Resource contains the remaining material to 300m below
surface in the South, Neck and North lobes.
(v) The tonnes and grades are quoted as dry tonnes and dry grades.
(vi) Unclassified kimberlite exists from a depth of 300m to 500m below surface.
(vii) This resource was first published on 15 October 2020.
MERLIN CLASSIFIED DIAMOND RESOURCE – 31 DECEMBER 2021
LUCAPA 100% ATTRIBUTABLE
RESOURCE
CLASSIFICATION
Indicated
Inferred
TOTAL
DATE
31-Dec-21
TONNES
(MT)
13.4
14.4
27.8
GRADE
(CPHT)
17
15
16
CARATS
(MILLION)
2.28
2.07
4.35
Notes:
(i) Mineral Resource reported in Lucapa’s ASX announcement “Acquisition of Merlin Diamond Project and A$23M Capital Raising” on 24 May 2021. No changes to the resource have been
made since.
(ii) Mineral Resource grades based on previous mining operations recovery using a +0.95mm slotted bottom screen and +5DTC cut-off;
(iii) Insufficient grade data available to determine +5DTC cut-off grade for Tristram and Bedevere pipes therefore full-cut-off grades are used;
(iv) Rounding of tonnage and carats may result in computational inaccuracies.
lnformation included in this report on Classified Diamond Resources is based on and fairly represents information and supporting documentation
prepared, compiled and supervised by Richard Price MAuslMM, who is a Member of the Australasian lnstitute of Mining and Metallurgy. Mr Price
is an employee of Lucapa Diamond Company Limited. Mr Price has sufficient experience which is relevant to the style of mineralisation and type
of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the
JORC Code. Mr. Price consents to the inclusion in this report of the matters based on this information in the form and context in which it appears.
lnformation included in this report that relates to the stone frequency, grade and size frequency valuation and validation in the Lulo Diamond
Resource estimate is based on, and fairly represents, information and supporting documentation prepared and compiled by Sean Duggan (Pri.Sci.
Nat 400035/01) and David Bush (Pri.Sci.Nat 400071/00).
Messrs, Duggan and Bush are directors and employees of Z Star Mineral Resource Consultants (Pty) Ltd, of Cape Town, South Africa. Both hold
qualifications and experience such that both qualify as members of a Recognised Overseas Professional Organisation (“ROPO”) under relevant ASX
listing rules. Messrs. Duggan and Bush both have sufficient experience which is relevant to the style of mineralisation and type of deposit under
consideration and to the activity which they are undertaking to each qualify as a Competent Person as defined in the 2012 Edition of the JORC Code.
Messrs. Duggan and Bush both consent to the inclusion in the announcement of the matters based on this information in the form and context
in which it appears.
Lucapa Diamond Company Limited | Annual Report 2021 | 23
24 | Lucapa Diamond Company Limited | Annual Report 2021
Sales and
Marketing
The Group markets its diamonds through both unique cutting & polishing partnerships as well as tenders.
innovative partnership with high-
The
end diamantaire Safdico
International,
a subsidiary of renowned fine jeweller
Graff, continues to reap benefits for both
the mines from beyond the mine gate.
Under the cutting & polishing partnership,
SML and Mothae are paid up front for
the current rough market value of the
diamonds, with both companies sharing
in the resultant margins generated by the
polished diamonds.
Safdico, as a preferred buyer of SML, can
purchase up to 60% of Lulo’s annual rough
production from SML, as is permitted
under Angola’s
diamond marketing
regulations. Under a committed buying
and selling agreement with Mothae, the
entire diamond production from Mothae is
also sold into a unique cutting & polishing
partnership with Safdico.
to
advance
continues
Lucapa
its
downstream activities as it moves towards
in March 2022,
the consumer - and
commenced
discussions
collaborative
with the Kimberley Syndicate, a venture
between
Singaporean
based fund manager Tribeca Investment
Partners and Margot McKinney OAM, one
of Australia’s finest jewellers, to explore
unique provenance offering at retail.
Sydney
and
Mothae Diamond Sales
Nine diamond sales were held during
the year, where under the unique buying
contract with Safdico, all goods were sold
into the cutting & polishing partnership.
A total of 36,154 carats were sold for gross
proceeds of US$24.9 million or US$688/
carat. An additional US$1.6 million accrued
to Mothae during the year in respect of
its partnership margins. Notable polished
stones produced as part of the partnership
for the year, were the two main 15 carat
D-colour internally flawless ovals produced
from the 215 carat rough stone and a 21
carat fancy yellow produced from the 38
carat rough stone.
Lulo Diamond Sales
Ten run-of-mine sales were concluded
by SML during the year, along with
two Special stone tenders organised
by SODIAM that included 13 large and
high-value stones extracted from Lulo
production over the course of the year. The
two tenders achieved US$34.2 million at
an average price of US$35,770/ carat and
Lulo set an annual record for total revenue
of US$78.1 million at an average diamond
price of US$2,808/ carat (A$3,768/ carat)
for the year, reconfirming Lulo’s position as
the highest $/ carat alluvial diamond mine
in the world.
Diamond prices continued to strengthen
over the course of 2021 and even
accelerated towards the end of the year.
This trend has continued into 2022, with
the overall rough diamond index reaching
record highs in early 2022.
An additional US$2.5 million accrued to
SML during the year under the unique
partnership with Safdico.
Diamond prices
continued to
strengthen over
the course of
2021 and even
accelerated
towards the end
of the year.
Lucapa Diamond Company Limited | Annual Report 2021 | 25
ENVIRONMENT,
SOCIAL &
GOVERNANCE
26 | Lucapa Diamond Company Limited | ESG Report 2021
Lucapa Diamond Company Limited | ESG Report 2021 | 27
CEO’s
Letter
Lucapa is proud to present its inaugural
Environment, Social and Governance
(“ESG”) Report which demonstrates our
ongoing commitment to protecting our
people, planet, and purpose. As a mining
company with two mining operations
in Africa, Lucapa has always felt the
responsibility and commitment to be an
honourable corporate citizen. Although
this is the first ESG report that Lucapa
has published, we have supported our
communities through various programs for
many years.
that
to ensure
Lucapa strives
the
diamond’s journey from our mine to the
market is carried out with integrity. This
means that our employees, communities,
and the environment surrounding our
mining operations is protected. We have a
zero-injury target in relation to health and
safety and zero-tolerance when it comes to
child labour, violence, and discrimination.
As we mature as a company and grow
our operations, ESG activities are being
throughout with budgets
formalized
and targeted annual programs being
introduced to meet various goals. Lucapa
has a holistic approach to ESG and in
practice we have adopted and will report
against the International Council on Mining
and Metals (“ICMM”) Principles. These
principles encompass the United Nations
17 Sustainable Development Goals and are
tailored to the mining industry.
As a diamond miner, Lucapa adheres to
the Kimberley Process (“KP”) which was
established in 2003 to eradicate conflict
diamonds from the global diamond supply
chain. The establishment of the KP was
Compared with other mineral extraction
industries, diamond mining is low impact,
in that the extraction methods used do not
require the use of significant quantities of
potentially hazardous chemicals. Less than
5 litres of acid is used per year to clean
our diamonds at the end of the recovery
process – at Lulo, this occurs on site, for
Mothae diamonds, the acid wash occurs in
Antwerp.
We hope you enjoy reading some of the
stories about our communities and this
ESG report gives you an insight into how
we contribute to the lives of our neighbours
and employees. Our ESG journey is young
and there is still room for improvement,
however we will commit to keeping our
shareholders up to date on community
and health and safety in our quarterly
reports as well as a dedicated annual ESG
report so we can chart our progress and
performance.
Yours faithfully,
Stephen Wetherall
CEO
an important first step for the diamond
industry in the sustainability journey. It
placed parameters upon governments,
miners and manufacturers to adhere
introduced conscious
to. The KP also
consumerism to the diamond purchaser
which has continued to evolve. More and
more, jewellery buyers are demanding to
know the story behind the stone and to
trace the origin of their gemstones.
Lucapa operates under the World Diamond
Council’s System of Warranties which
requires the company to keep records
of the rough diamonds we sell and is
subjected to annual audits by our own
auditors. The System of Warranties was
introduced in order to comply with, support
and strengthen the Kimberley Process
Certification Scheme.
Lucapa only operates in countries which
are signatories to the Kimberley Process,
however we recognize that
in recent
years consumers are demanding more
information about the provenance behind
the products they are buying. It is not
enough just to recover the diamonds, it’s
also every company’s responsibility to
ensure that in the communities and the
environment in which we operate, our
people and reputation are protected.
Technology has become a major driver for
change and transparency in our industry
and it has the power to help us to reach
our ESG goals. From using blockchain
to trace the origin of our diamonds for
consumers to using solar power to lower
our carbon emissions, Lucapa recognises
that introducing technology makes good
business sense.
Lucapa strives to ensure that the
diamond’s journey from our mine to
the market is carried out with integrity.
28 | Lucapa Diamond Company Limited | ESG Report 2021
MINE TO MARKET
Lucapa Diamond Company Limited | ESG Report 2021 | 29
The historical threat to human rights from conflict diamonds is recognised
and all diamond mining and sales activities involving the Lucapa Group are
performed to the highest standards, in accordance with the Kimberley Process
and in adherence to the World Diamond Council’s System of Warranties.
Our Purpose
Lucapa produces natural
diamonds sustainably
and cares for its people,
communities, and the
countries in which we operate
Our Vision
Lucapa’s vision is to become a
pre-eminent mid-tier diamond company
with multiple assets, vertically integrating
through the supply chain, to bring greater
value to all stakeholders.
Our Values
Safety
We conduct operations in a safe,
responsible, and environmentally
conscious manner.
Integrity
We interact with all stakeholders
with integrity, respect, honesty,
transparency, and fairness.
Teamwork
We attract and employ the best
skillsets, encourage teamwork,
diversity, and reward performance.
Partnership
We partner with the local
communities and governments
in the countries where we
operate, for mutual benefit.
MINING PRINCIPLES
Lucapa’s sustainability program is aligned with the objectives
of the United Nations Sustainable Development Goals and has
adopted the International Council on Mining and Metals (ICMM)
Principles framework.
ETHICAL
BUSINESS
DECISION-
MAKING
HUMAN
RIGHTS
RISK
MANAGEMENT
HEALTH
& SAFETY
ENVIRONMENTAL
PERFORMANCE
CONSERVATION
OF BIODIVERSITY
RESPONSIBLE
PRODUCTION
SOCIAL
PERFORMANCE
STAKEHOLDER
ENGAGEMENT
30 | Lucapa Diamond Company Limited | ESG Report 2021
Governance and ethics
Lucapa is committed to operating in the most
ethical, safe and environmentally
responsible
manner at all times.
Lucapa has a Board of Directors which are ultimately
responsible for strategic decisions of the company.
Each subsidiary company in the group also has
boards with oversight of the respective operations.
Policies and procedures have been put in place
to ensure that all businesses within the Group
comply with the legislation of host countries and
incorporates international best practice in respect
of human rights.
The historical threat to human rights from conflict
diamonds is recognised and all diamond mining
and sales in the Group are performed in accordance
with the Kimberley Process and highest ethical
standards.
Employment Cost
A$30,605,358
Lulo and Mothae Total
Government Royalties and Commissions
A$12,201,276
Lulo and Mothae Total
People
Lucapa employs more than 1,000 staff and
contractors across our operations. The workforce
consists of a diverse range of staff and is managed
on an ongoing basis to maintain an appropriate
balance in terms of gender, age, ethnicity and
cultural background.
Social Impact
2021 financial and in-kind contributions
A$290,500
Lulo
A$257,550
Mothae
Workforce (including contractors)
Nationals
Expats
20%
225
Total contractors
at Lulo and Mothae
3
Corporate
Women
489
Lulo total number
of employees
311
Mothae total number
of employees
30
Lulo
Women
97
Mothae
Women
80%
Lulo
3%
11%
18%
40%
Employees by age
< 20 years
20 - 30
30 - 40
40 - 50
50 - 60
60 - 70
28%
28%
1%
99%
Mothae
2%
5%
20%
45%
Lulo
Mothae
Lucapa Diamond Company Limited | ESG Report 2021 | 31
ENVIRONMENT, SOCIAL AND GOVERNANCE
Health
and Safety
Lucapa acknowledges that our mining and processing activities have the potential
to expose our employees, contractors and communities to health and safety risks.
Our aim is for zero harm across our sites.
The Company works diligently to
identify,
control and mitigate these risks and regularly
assesses employees’ fitness for work.
Due to the inherent security risks associated
with diamonds, special safety measures and
processes have been implemented to ensure
the security of all staff and other stakeholders.
The Group continues to encourage and
empower its employees to “own” the safety
program and to look out for each other.
Lucapa has established a culture of regular
education, training, coaching and monitoring
at our operations and encourages continuous
improvement. To date, the operations have
recorded zero operational fatalities.
In 2021, Mothae recorded a Long Term Injury
Frequency Rate (“LTIFR”) of 0.21 amongst its
workforce of 429 employees and contractors.
The 12 month rolling LTIFR at Lulo was 0.16
among a workforce of 596 Lulo employees
and contractors. There was one Lost Time
Injury recorded for the year at Lulo and a total
of 11 minor and serious injuries recorded for
2021. The All-Injury Frequency Rate among
employees and contractors at Lulo in 2021 was
1.76.
At Mothae, one lost time injury occurred during
the year, and 24 minor injuries which didn’t
require time off work. Mothae also recorded 231
Health and Safety near misses.
to vaccinate
the COVID-19 pandemic, Lucapa
During
supported the efforts by the Lesotho and
Angolan governments
the
population in the remote areas where we
operate. Lucapa provided
vaccines and
encouraged our employees to visit our on-
site health clinics for vaccinations. We also
participated in the immunisation programs of
the local communities.
Each of our African mines has an on-site health
clinic which is staffed by qualified doctors
and other medically trained staff. Staff and
contractors are free to visit the clinics for
consultations and pre-employment checks are
also conducted at the clinics.
2,643
Number of consultations
at clinic Lulo
2,221
Number of consultations
at clinic Mothae
98%
COVID-19 response
vaccinations rate – Lulo
99%
COVID-19 response
vaccinations rate – Mothae
0.16
LTIFR – Lulo
0.21
LTIFR – Mothae
32 | Lucapa Diamond Company Limited | ESG Report 2021
CASE STUDY
COVID-19
Response
Lucapa took an active role in
protecting its employees and the
local community from COVID-19
from the outset of the pandemic.
This involved the daily screening
of all employees and contractors
at the Lulo and Mothae mine gates
and transport pick-up points.
Protocols were also introduced to minimise
the spread of infection of the various
strains of the virus in line with government
recommendations.
Lulo’s team assisted the local municipality
in a COVID-19 vaccination program for
employees and contractors and the local
population in the nearby villages, resulting
in more than 98 percent of Lulo personnel
being vaccinated.
In Lesotho, more than 99 percent of the
Mothae workforce are vaccinated, thanks
to the Government of Lesotho sponsored
vaccine roll out.
Employees at both mines were given the
Johnson & Johnson vaccine. Several mass
vaccination events were orchestrated
to help protect employees and the local
community.
There were cases of the Omicron strain
of COVID-19 detected at both of Lucapa’s
mine sites, however there were no
fatalities on site and only mild symptoms
were experienced by personnel, who
returned to work after a short period of
illness and quarantine.
Lucapa Diamond Company Limited | ESG Report 2021 | 33
Environment
the
Protecting
environment
in which we operate is key to
the sustainable success of the
Company.
Lucapa continues to mitigate against the
impacts of mining on the environment by:
• Protecting Biodiversity – effectively
managing risks and employing both
internal and external experts to carry
out baseline surveys and monitor
the exploration, development and
operational areas;
• Managing Water Responsibly – water
is a critical resource and its effective
management
is fundamental to the
sustainability of our operations, the
environment and the communities in
which we operate;
–
• Tailings Management
the
tailings
Lucapa
effective
recognises
that
management of
facilities
incorporates detailed design practises,
monitoring and management programs,
strict
and
independent auditing;
governance
corporate
• Sustainable Land Rehabilitation –
ensuring that responsible rehabilitation
practices are implemented and that the
progress is monitored by both internal
and external experts.
Water management is one of the main
environmental activities on both sites. Both
Mothae and Lulo monitor water quality
regularly and the tests are conducted by
independent
laboratories. Average site
water consumption at Mothae in 2021 was
0.98 m3/ tonne of headfeed while Lulo
recorded 1.1 m3/ tonne of headfeed.
Both sites experience extreme weather
events during the year. With temperatures
at Mothae dropping to well below freezing
with regular snowfall over the winter
months.
Tailings Dams
The dams at Mothae have been designed,
built and are monitored by a reputable
Australian consulting company and comply
with the Australian National Committee
on Large Dams (ANCOLD) Guidelines on
Tailings Dams as well as the International
Committee on Large Dams (ICOLD). Besides
the onsite operations review of the dam
audits, an Annual Dams Audit Report is
tabled and reviewed by the Mothae Board
of Directors.
The Mothae tailings dam is built using the
downstream method and
is monitored
daily by onsite operators who report any
deviations. The
logbooks are checked
by the external consultant weekly and a
monthly report is issued highlighting any
remedial actions required.
Rainfall Lulo
Rainfall Lulo 2021
400
350
300
250
200
150
100
50
0
m
m
J
F
M
A
M
J
J
A
S
O
N
D
Rainfall Mothae
Rainfall Mothae 2021
250
200
150
100
50
0
m
m
J
F
M
A
M
J
J
A
S
O
N
D
1.1 m3/ tonne
of headfeed
Total Water Consumption - Lulo
0.98m3/ tonne
of headfeed
Total Water Consumption - Mothae
1
Major environmental
incidents reported - Lulo
0
Major environmental
incidents reported - Mothae
This
is followed up and an on-site
meeting with the designer’s appointed
representative is held every quarter.
Drills are carried out and procedures in the
case of failure are in place.
As at 31 December 2021, the freeboard
between the water elevation and the top
of the wall at the Mothae Mine was 12.6
metres.
The tailings dam at Lulo is an impoundment
dam which has been placed over an area
that has filled up the craters left behind
by previous artisanal mining. This was
upgraded to a dam, incorporating drains
during 2021 and will be raised using the
downstream method as well.
34 | Lucapa Diamond Company Limited | ESG Report 2021
Lucapa is investigating renewable solutions.
Energy usage
The Lulo and Mothae operations are both in
remote areas of their countries which don’t
have power supply from the grid. Both sites
are operated by diesel powered generators.
Lucapa is investigating renewable energy
solutions to supplement power supply at
both sites.
Mine rehabilitation plan
Mining has a finite lifespan and integrated
rehabilitation plans have been developed
for both mine sites to ensure the eventual
restoration of the land used is in accordance
with local legislation and best practice.
Restoration plans are designed to manage
the environmental impact of mining in a
cost-effective manner and are reviewed
annually.
4.1L
Diesel usage per tonne
of ore treated - Mothae
11.2L
Diesel usage per m3
of ore treated - Lulo
Lucapa Diamond Company Limited | ESG Report 2021 | 35
SOCIAL IMPACT – CASE STUDY
Agricultural kickstart
program
In 2019, Mothae Mine encouraged local
farmers to participate in its agricultural
kickstart program as part of its efforts to
relieve poverty and engage the community.
Under the program, the mine supplied seed and fertilizer
to farmers to grow fruit and vegetables. The Mothae
mine’s kitchen then purchases the produce from the
farmers. This initiative gives assured financial support
and provides certainty for the farmers, in addition to
providing fresh and healthy food to feed the Mothae
employees. During 2021, Mothae Mine purchased
produce for more than one million Lesotho Maloti,
which is equivalent to A$95,000 from local farmers and
the program is on-going. Examples of the food produced
include, carrots, cabbage and mustard.
36 | Lucapa Diamond Company Limited | ESG Report 2021
SOCIAL IMPACT – CASE STUDY
Xamiquelqengue Village
and School contributions
In Angola, SML, which runs the
Lulo mine, is focused on enriching
the lives of school children and
the community. The village of
Xamiquelqengue is where some
80% of Lulo’s workforce reside.
As part of a program to upgrade the
Xamiquelqengue Primary School, Lulo
made in-kind and financial contributions to
ensure the children and teachers had access
to fresh clean water. The mine supplied
and installed a water reticulation system
for the use of the students, teachers and
wider community. Mine personnel drilled
boreholes near the school, connected a
solar powered pump to the well and erected
a water storage tank to supply the school.
The company also made repairs and
upgrades to the Xamiquelquengue Health
Clinic and continued to donate and deliver
sand to the village for the community to
use. Sand is a by-product of operations at
the Lulo Mine but is a vital ingredient in
bricks and concrete for home building, that
is usually expensive and difficult to procure
for the local community.
Lucapa Diamond Company Limited | ESG Report 2021 | 37
38 | Lucapa Diamond Company Limited | ESG Report 2021
Corporate Governance
Statement
In fulfilling its obligations and responsibilities to its
various stakeholders, the Board of Lucapa is a strong
advocate of good corporate governance.
The Board has adopted corporate governance policies and practices
consistent with the ASX Corporate Governance Council’s “Corporate
Governance Principles and Recommendations” (“Recommendations”)
where considered appropriate for a Company of Lucapa’s size and
complexity.
implemented
the ASX Corporate Governance
Lucapa has
Council’s Fourth Edition Corporate Principles (“Fourth Edition”)
and Recommendations. Accordingly, this Corporate Governance
Statement has been prepared on the basis of disclosure under
the Fourth Edition of these principles. Details of the Company’s
compliance with these principles are summarised in the Appendix 4G
announced to the ASX in conjunction with the Annual Report.
This statement describes how Lucapa has addressed the Council’s
guidelines and eight corporate governance principles and where
the Company’s corporate governance practices depart from the
Recommendations, the Company discloses the reason for adoption
of its own practices on an “if not, why not” basis.
Given the size, complexity and development nature of the Group
and the cost of strict compliance with all the Recommendations,
the Board has adopted a range of modified procedures and practices
which it considers appropriate to enable it to meet the principles
of good corporate governance. At the end of this statement is a
checklist setting out the Recommendations with which the Company
does or does not comply. The information in this statement is current
as at 20 April 2022.
Background
Lucapa has a highly experienced and well credentialed Board and
management team, with a proven history of developing diamond
projects successfully, quickly and cost effectively in a corporately
responsible manner.
Lucapa recognises the importance of its people in building a strong
and successful organisation. To achieve this, Lucapa has focused
on developing the right culture across the organisation, which is
strongly based on a vision, mission and values communicated in our
teams in Australia and Africa to ensure they know what is expected
of them, both operationally and behaviourally, and are recognised for
their good work.
Vision
Lucapa’s vision is to become a pre-eminent mid-tier diamond
company with multiple assets, vertically integrating through the
supply chain, to bring greater value to all stakeholders.
Mission
Lucapa’s mission is to explore and grow our production of niche
high-value diamonds in a safe, responsible, innovative and profitable
manner for the benefit of all stakeholders.
Values
Integrity
We interact with all stakeholders with integrity, honesty, transparency
and fairness.
Safety
We conduct operations in a safe, responsible and environmentally
conscious manner.
Teamwork
We attract and employ the best skillsets, encourage teamwork,
diversity and reward performance.
Partnership
We work with the local communities in which we operate for common
benefit.
The Board is targeting the highest standards of corporate governance
to continue their track record of delivering this value.
In 2021, the Company remained resilient throughout the COVID-19
crisis. The Company continued to prioritise the health and wellbeing
of staff, contractors and stakeholders by maintaining stringent
protocols to limit the impact of the COVID-19 pandemic on sites.
There were no employees that had to be retrenched as a result of
the global pandemic. Employees pivoted to assist local communities
with food hampers where possible. Travel between Australia and
Africa was restricted but managed through the dedication of key
employees on our sites. The Company has achieved significant
vaccination rates to assist with managing the pandemic into 2022.
The following governance-related documents can be found on the
Company’s website at www.lucapa.com.au under the section marked
“Corporate Governance”.
Charters
• Board
Board
• Code of Conduct
• Policy and Procedure for Selection and (Re)Appointment of
Directors
• Policy on Assessing the Independence of Directors
• Securities Trading Policy
• Risk Management Policy
• Procedure for the Selection, Appointment and Rotation of External
Auditor
• Policy on Continuous Disclosure
• Shareholder Communication Policy
• Diversity Policy
• Whistle Blower Policy
• Anti-Bribery and Corruption Policy
• Anti-Slavery Policy
Lucapa Diamond Company Limited | ESG Report 2021 | 39
Principle 1
Lay solid foundations for management and oversight
The main function of the Board is to lead and oversee the management
and strategic direction of the Group. The Board regularly measures
the performance of management in implementation of the strategy
through regular Board meetings.
Lucapa has adopted a formal Board charter delineating the roles,
responsibilities, practices and expectations of the Board collectively,
the individual Directors and management.
The Board of Lucapa ensures that each member understands their
roles and responsibilities and ensures regular meetings so as to
retain full and effective control of the Company.
Role of the Board
The Board responsibilities are as follows:
• Setting the strategic aims of Lucapa and overseeing management’s
performance within that framework;
• Making sure that the necessary resources (financial and human)
are available to the Group and management to meet its strategic
objectives;
• Overseeing and measuring management’s performance
in
delivering the Company’s strategic objectives;
• Selecting and appointing a Managing Director with the appropriate
experience and skills to help the Group in the pursuit of its
strategic objectives;
• Controlling and approving financial and compliance reporting,
capital structures and material contracts;
• Ensuring that a sound system of risk management and internal
controls is in place;
• Setting the Company’s vision, core values and standards;
• Undertaking regular review of the corporate governance policies
to ensure adherence to the ASX Corporate Governance Council
principles;
• Ensuring that the Company’s obligations to shareholders are
understood and met;
• Ensuring the health, safety and well-being of employees in
conjunction with management, developing, overseeing and
reviewing the effectiveness of the Group’s occupational health
and safety systems to assure the well-being of all employees;
• Ensuring an adequate system is in place for the proper delegation
of duties for the effective day to day running of the Group without
the Board losing sight of the direction that the Group is taking;
• Establishing a diversity policy and setting objectives for achieving
diversity.
Delegation to management
Other than matters specifically reserved for the Board, responsibility
for the operation and administration of the Company has been
delegated to the Managing Director. This responsibility is subject to
an approved delegation of authority which is reviewed regularly.
Internal control processes are designed to allow management to
operate within the parameters approved by the Board and the
Managing Director cannot commit the Group to additional activities
or obligations in excess of these delegated authorities without
specific approval of the Board.
40 | Lucapa Diamond Company Limited | ESG Report 2021
Election of Directors
The Board is responsible for overseeing the selection process of new
Directors, and undertakes appropriate checks before appointing a
new Director, or putting forward a candidate for election as a Director.
All relevant information is provided in the Notice of Meeting seeking
the election or re-election of a Director including:
• Biographical details including qualifications and experience;
• Other directorships and material interests;
• Term of office;
• Statement by the Board on independence of the Director;
• Statement by the Board as to whether it supports the election or
re-election; and
• Any other material information.
Terms of appointment
Non-executive Directors
To facilitate a clear understanding of roles and responsibilities all
non-executive Directors have signed a letter of appointment. This
letter of appointment includes acknowledgement of:
• Director responsibilities under the Corporations Act, Listing Rules,
the Company’s Constitution and other applicable laws;
• Corporate governance processes and Group policies;
• Board and Board sub-committee
(if applicable) meeting
obligations;
• Conflicts and confidentiality procedures;
• Securities trading and required disclosures;
• Access to independent advice and employees;
• Confidentiality obligations;
• Directors fees;
• Expenses reimbursement;
• Directors and officers insurance arrangements;
• Other directorships and time commitments; and
• Board performance review.
Executive Directors
The Executive Directors have a signed services agreement.
For further information refer to the Remuneration Report.
Role of Company Secretary
The Company Secretary is accountable to the Board for:
• Advising the Board and committees on corporate governance
matters;
• The completion and distribution of Board and committee papers;
• Completion of Board and committee minutes; and
• The facilitation of Director induction processes and ongoing
professional development of Directors.
• All Directors have access to the Company Secretary who has a
direct reporting line to the Chairman.
Diversity
The Board values diversity in all aspects of its business and is
committed to creating a working environment that recognises
and utilises the contribution of its employees. The purpose of
this is to provide diversity and equality relating to all employment
matters. The Group’s policy is to recruit and manage on the
basis of experience, ability and qualification for the position and
performance, irrespective of gender, age, marital status, sexuality,
nationality, race/ cultural background, religious or political opinions,
family responsibilities or disability. The Group opposes all forms of
unlawful and unfair discrimination.
The Board comprises four Directors, all of whom are male. The Board has determined that the composition of the current Board represents the best
mix of Directors that have an appropriate range of qualifications and expertise in the industries and the jurisdictions in which the Group operates,
can understand and competently deal with current and emerging business matters and can effectively assess the performance of management.
The Group’s diversity objective is to improve gender diversity at all levels of its business on a year-on-year basis whilst recognising that it operates
in very competitive labour markets in remote locations, with strong cultural sensitivities, where positions are sometimes difficult to fill. There
is periodic reporting at the Group’s operations to measure the gender mix within various levels of the organisation. The Group is committed to
continually assessing and proactively monitoring these diversity trends and advocates that every candidate suitably qualified for a position has an
equal opportunity of appointment regardless of gender, age, ethnicity or cultural background.
During the reporting period several female candidates were considered as part of the Board competencies analysis for the independent Non-
executive director position. These candidates were not selected due to their unavailability due to existing commitments, conflicts of interest or
concerns in relation to over-boarding
31 DECEMBER 2021
31 DECEMBER 2020
GENDER
REPRESENTATION
Board representation
Group representation
FEMALE
MALE
FEMALE
MALE
NO.
0
130
%
0
16
NO.
4
670
%
100
84
NO.
0
103
%
0
15.3
NO.
4
571
%
100
84.7
The Board is aware that many studies suggest that greater gender diversity at Board and management level creates a positive force for driving
corporate performance as qualified and committed directors with different backgrounds, experiences and knowledge will likely enhance corporate
performance. In that regard, the Board remains focused on resolving the gender imbalance on the Board by continuing to identify a pipeline of
suitably qualified candidates with careful consideration of those who strengthen the Board skills matrix.
The Company continues to support the Australian Institute of Company Director’s Board diversity initiatives and will continue to evolve its Board
in alignment with the Company’s needs and diversity best practice.
Performance review
Board and Board committees
A review of the Board’s performance and effectiveness is conducted annually and the performance of individual Directors is undertaken regularly.
The Board has the discretion for these reviews to be conducted either independently or on a self-assessment basis.
The review focuses on:
• Strategic alignment and engagement;
• Board composition and structure;
• Processes and practices;
• Culture and dynamics; relationship with management; and
• Personal effectiveness.
A review of the Board’s performance and effectiveness in respect of the year ended 31 December 2021 was conducted.
Managing Director and senior executives
Performance evaluations of the Managing Director and senior executives is undertaken annually through a performance appraisal process which
involves reviewing and assessment of performance against agreed corporate objectives and individual key performance indicators or deliverables.
A review of the Managing Director and Chief Operating Officer’s performance and effectiveness in respect of the year ended 31 December 2021 was
conducted.
Retirement and rotation of directors
Retirement and rotation of directors are governed by the Corporations Act 2001 and the Constitution of the Company. Each year, one third of
Directors must retire and may offer themselves for re-election. Any casual vacancy filled will be subject to shareholder vote at the next Annual
General Meeting of the Company. It is intended that Mr Nick Selby will stand for re-election by rotation at the Company’s Annual General Meeting,
scheduled for 30 May 2022.
Lucapa Diamond Company Limited | ESG Report 2021 | 41
Independent professional advice
Each Director of the Company or a controlled entity has the right to
seek independent professional advice at the expense of the Company
or the controlled entity. However, prior approval of the Chairman is
required which will not be unreasonably withheld.
Access to employees
Directors have the right of access to any employee. Any employee
shall report any breach of corporate governance principles or
Company policies to the Chairman or as outlined under the
Whistleblower policy. If the breach is not rectified to the satisfaction
of the employee, they shall have the right to report any breach to an
independent Director without further reference to senior executives
of the Company.
Directors’ and officers’ liability insurance
Directors’ and officers’ liability insurance is maintained by the
Company for the Directors and senior executives at the Company’s
expense.
Board meetings
The frequency of Board meetings and the extent of reporting from
management at Board meetings are as follows:
• A minimum of four scheduled meetings are to be held per each
financial year;
• Other meetings will be held as required;
• Meetings can be held where practicable by electronic means;
• Information provided to the Board
includes all material
information related to the operations of the Group including
exploration, evaluation, development and mining operations,
budgets, forecasts, cash flows, funding requirements, investment
and divestment proposals, new business development activities,
investor
relations, financial accounts, sales and market
information, taxation, external audits, internal controls, risk
assessments, people and health, safety and environmental
reports, statistics and new business;
• Once established or as necessary, the Chairman of the appropriate
Board sub-committee or other meeting will report at the
subsequent Board meeting the outcomes of that meeting.
The number of Directors’ meetings (including meetings of committees
of Directors where applicable) and the number of meetings attended
by each of the Directors of the Company during the financial year are
set out in the Directors’ Report.
Principle 2
Structure the Board to be effective
and add value
The names of the Directors of the Company and their qualifications
are set out in the section headed “Information on Directors” in the
Directors’ Report.
The ASX Corporate Governance Council guidelines recommend that
the Board should constitute a majority of independent Directors and
that the Chairperson should be independent. The Board consists of
four Directors of whom one is considered independent, being Mr
Miles Kennedy (non-executive Chairman - appointed as a director
on 12 September 2008 and served as Executive Director until 11
December 2014). The Board considers that whilst Mr Kennedy has
served as a Director for a long period, he remains independent from
management and substantial shareholders and is therefore able to
bring an independent judgement to bear on issues before the Board
and to act in the best interests of the Company as a whole rather
than in the interests of an individual shareholder or other party. Mr
Ross Stanley (non-Executive Director – appointed 26 July 2018) has
a substantial shareholding in the Company and therefore does not
meet the criteria for an independent Director. Mr Stephen Wetherall
(appointed 13 October 2014) is Managing Director and therefore does
not meet the criteria for an independent Director due to his executive
role. Mr Nick Selby (appointed 4 September 2017) is an Executive
Director and therefore does not meet the criteria for an independent
Director due to his executive role.
Board skills and experience
The Company objective is to have an appropriate mix of experience
and expertise on the Board and Committees so that the Board
can effectively discharge its strategic, corporate governance and
oversight responsibilities.
The composition of the Board has been structured so as to provide
the Company with an adequate mix of non-executive and executive
industry
Directors with exploration, development and mining
knowledge, country specific knowledge, technical, commercial,
capital markets and financial skills together with integrity and
judgment considered necessary to represent shareholders and fulfil
the business objectives of the Group.
The Board acknowledges that it is not comprised by a majority of
independent directors. However, the Chairman is independent and
the Board comprises Directors who each have extensive exploration,
development and mining industry knowledge, country specific
knowledge, technical, financial, capital markets and commercial
expertise. The Board will address the skills commensurate with the
growth and development of the Group’s activities to ensure those
skill sets are complemented by additional industry or other expertise
in the sector.
As the Company transitions from an emerging miner/explorer
to mid-tier producer, the Board will set about identifying and
assessing suitable independent non-executive director candidates
to complement the existing competencies of the Board to drive
performance, create shareholder value and lead ethically by example.
42 | Lucapa Diamond Company Limited | ESG Report 2021
This mix is described in the Board skills matrix as follows:
SKILLS
Resources industry
and Africa experience
Diamond industry and marketing
Strategy
Mergers and acquisitions
Finance
Risk Management
Government relations
Capital projects; financing/
project management
Sustainable development
Previous board experience
Governance
Policy
Executive leadership
Remuneration
DIRECTORS HOLDING
THIS SKILL
4
4
4
4
4
4
4
4
4
4
4
4
4
4
The competencies that the current Board members have formulated
their analysis are based upon the criteria judged as important by the
Board given the Company’s current stage of growth, in conjunction
with independent industry guidance as follows:
• Resources Industry Experience - experience in the resources
industry, including broad knowledge of exploration, operations,
project development, markets, shipping and competition.
• Diamond Industry Experience - specific experience
in the
diamond industry, including an in-depth knowledge of exploration,
operations, project development, markets, cutting and polishing,
competitors and relevant technology.
• Strategy – identifying and critically assessing the strategic
opportunities and threats to the organisation and developing and
implementing successful strategies in context to an organisation’s
policies and business objectives.
• Mergers & Acquisition – experience managing, directing or
advising on mergers, acquisitions, divestments and portfolio
optimisations.
• Finance – senior executive or other experience in financial
accounting and reporting, internal financial and risk controls,
corporate finance and restructuring corporate transactions.
• Risk Management - experience working with and applying broad
risk management frameworks in various countries, regulatory or
business environments, identifying key risks to an organisation,
monitoring risks and compliance and knowledge of legal and
regulatory requirements.
• Government Relations – senior management or equivalent
in politically,
experience (particularly transactional) working
culturally and regulatory diverse business environments.
• Capital Projects; Financing / Project Management – experience
with projects involving contractual negotiations, significant capital
outlays, procuring project investment and securing partners with
long investment horizons.
• Sustainable Development – senior management or equivalent
experience in economic, social and environmental sustainability
and workplace health and safety practices.
• Previous Board Experience – serving on boards of varying size and
composition in varying industries and for a range of organisations.
Awareness of global practices, benchmarking, some international
experience.
• Governance – implementing the high standards of governance
in a major organisation that is subject to rigorous governance
standards and assessing the effectiveness of senior management.
• Policy – identifying key issues for an organisation and developing
appropriate policy parameters within which the organisation
should operate.
• Executive Leadership – experience in corporate structuring,
overseeing strategic human capital planning, evaluating the
performance of senior management,
relations,
organisational change management and sustainable success in
business at senior level.
industrial
• Remuneration –
strategy,
remuneration governance frameworks, Corporations Act and
employment law, performance and incentive schemes.
remuneration
experience
in
The Board Skills Matrix is an important driver to formalise the
director nomination processes. It was applied during the reporting
period as several candidates were considered for the independent
Non-executive director position to complement the existing skill sets
on the Board. The Board will continue to seek to identify suitable
candidates in alignment with the Company’s needs and best practice.
Nomination of other Board members
Membership of the Board of Directors is reviewed on an on-going
basis by the Chairperson of the Board to determine if additional core
strengths are required to be added to the Board in light of the nature
of the Group’s businesses and its objectives and diversity.
As the Company transitions to become a mid-tier producer, the Board
will focus on a measured process to ensure it maintains a strong,
well-credentialed Board to oversee the Company’s next growth
phase led by the development of the Merlin Project that is value
accretive for shareholders.
The appointment of an independent Non-executive Director was
not achieved during this reporting period. However the Board
Skills Matrix will form an integral basis in the identification and
assessment of suitable candidates based on readily available
information on respective backgrounds, current Board positions
and visible competencies. The Board currently performs the role of
a Nomination Committee given the Company’s size and stage of
growth. However this will be reviewed to ensure there is a continued
emphasis on board membership which aligns with the Company’s
corporate culture and addresses independence and diversity.
Director induction and ongoing professional
development
The Company does not have a formal induction program for Directors
but does provide Directors with information detailing policies,
corporate governance and various other corporate requirements of
being a director of an ASX listed company. To the extent required,
new Directors are provided access to the diamond industry centres
and given audiences with key management, industry participants
and players as part of the induction. Due to the size and nature of the
business, Directors are expected to already possess a level of both
industry, technical, corporate and commercial expertise before being
considered for a directorship of the Company. Directors are provided
with the opportunity to access employees of the business and any
information as they require on the business including being given
access to regular operational updates, industry update, news articles
and publications where considered relevant.
Lucapa Diamond Company Limited | ESG Report 2021 | 43
Principle 4
Safeguard the integrity of
corporate reports
Lucapa has a financial reporting process which includes quarterly,
half year and full year reports which are signed off by the Board
before they are released to the market.
The Company’s Continuous Disclosure policy ensures that any
corporate reports that are released to the market that are not
audited or reviewed by an external auditor are reviewed by the Board
and appointed responsible officers, which are the Managing Director,
the Company Secretary and Chief Financial Officer (or equivalent), to
verify the accuracy of information before being released.
The Board does not have a separate Audit Committee given the
current size of the Board. However it is intended that a committee
will be established comprised by a majority of independent directors
as the Company transitions to become a mid-tier producer.
In the interim, the four Board members, who each have extensive
corporate, commercial and financial expertise, manage the financial
oversight as well as advise on the modification and maintenance
internal control structure,
of the Group’s financial reporting,
external audit functions, and appropriate ethical standards for the
management of the Group.
In discharging its oversight role, the Board is empowered to
investigate any matter brought to its attention with full access to
all books, records, facilities, and personnel of the Group and the
authority to engage independent counsel and other advisers as it
determines necessary to carry out its duties.
The Managing Director and Chief Financial Officer (or equivalent)
reports on the propriety of compliance on internal controls and
reporting systems and ensures that they are working efficiently and
effectively in all material respects.
The Company has established procedures for the selection,
appointment and rotation of its external auditor. The Board is
responsible for the initial appointment of the external auditor and
the appointment of a new external auditor when any vacancy arises.
Candidates for the position of external auditor must demonstrate
complete independence from the Company through the engagement
period. The Board may otherwise select an external auditor based
on criteria relevant to the Company’s and Group’s business and
circumstances. The performance of the external auditor is reviewed
on an annual basis by the Board.
The Company’s external auditor attends each Annual General
meeting and is available to answer questions from shareholders
relevant to the conduct of the external audit, the preparation and
content of the Auditor’s Report, the accounting policies adopted by
the Company and the independence of the auditor.
Principle 3
Instil a culture of acting lawfully,
ethically and responsibly
Directors, officers, employees and consultants to the Group are
required to observe high standards of behaviour and business ethics
in conducting business on behalf of the Group and they are required
to maintain a reputation of integrity on the part of both the Group
and themselves. The Group does not contract with or otherwise
engage any person or party where it considers integrity may be
compromised.
Lucapa recognises the importance of its people in building a strong
and successful organisation. To achieve this, Lucapa has focused
on developing the right culture across the organisation, which is
strongly based on a vision, mission and values communicated in our
teams in Australia and Africa to ensure they know what is expected
of them, both operationally and behaviourally, and are recognised for
their good work.
Code of Conduct
The Company’s Code of Conduct policy has been endorsed by
the Board and applies to all Directors, officers, employees and
consultants.
Whistleblower policy
In line with the Code of Conduct, the Company has a Whistleblower
policy that ensures that all eligible whistleblowers who make a report
in good faith can do so without fear of intimidation, disadvantage or
reprisal.
Anti-Bribery and Corruption and Anti-Slavery policies
The Company’s Anti-Bribery and Corruption and Anti-Slavery policies
have been endorsed by the Board and applies to all Directors, Group
employees, consultants, contractors and third-parties.
Conflicts of interest
Directors are required to disclose to the Board actual or potential
conflicts of interest that may or might reasonably be thought to
exist between the interests of the Director or the interests of any
other party in so far as it affects the activities of the Group and to
act in accordance with the Corporations Act if the conflict cannot be
removed or if it persists. That involves taking no part in the decision-
making process or discussions where a conflict does arise.
Trading in Company securities
Directors are required to make disclosure of any trading in the
Company’s shares. The Company policy in relation to share trading
is that Directors, key management personnel, officers, employees,
consultants and contractors of the Group (“Staff”) are prohibited
to trade whilst
in possession of unpublished price sensitive
information concerning the Group or within a certain period of the
release of results i.e. the blackout period. That is information which
a reasonable person would expect to have a material effect on the
price or value of the Company’s shares.
Staff must receive authority to acquire or sell shares from the
Chairman or the Company Secretary prior to doing so to ensure that
there is no price sensitive information of which Staff might not be
aware. The undertaking of any trading in shares by a Director must
be notified to the ASX.
44 | Lucapa Diamond Company Limited | ESG Report 2021
Principle 5
Make timely and balanced disclosure
The Company has adopted a formal policy dealing with its disclosure
responsibilities. The Board has designated the Company Secretary
as the person responsible for overseeing and coordinating disclosure
of information to the ASX as well as communicating with the ASX.
In accordance with the ASX Listing Rules the Company immediately
notifies the ASX of non-public information:
• Concerning the Group that a reasonable person would expect to
have a material effect on the price or value of the Company’s
securities; and
• That would, or would be likely to, influence persons who commonly
invest in securities in deciding whether to acquire or dispose of the
Company’s securities.
The policy also addresses the Company’s obligations to prevent
the creation of a false market in its securities. The Company also
publishes other information to assist investors to make an informed
decision on its website.
The Managing Director has ultimate authority and responsibility for
recommending market disclosure to the Board which, in practice, is
exercised in conjunction with the Board and Company Secretary.
In addition, the Board will also consider whether there are any
matters requiring continuous disclosure in respect of each and every
item of business that it considers.
Principle 6
Respect the rights of security holders
The Board’s fundamental responsibility to shareholders is to work
towards meeting the Company’s strategic objectives to add value for
them. The Board maintains an investor relation program which will
inform shareholders of all major developments affecting the Group
by:
• Preparing half yearly and yearly financial reports;
• Preparing quarterly cash flow reports and reports as to activities;
• Making announcements in accordance with the listing rules and
the continuous disclosure obligations;
• Posting all the above on the Company’s website once released to
the ASX;
• Annually, and more regularly if required, holding a general meeting
of shareholders and forwarding to them the annual report, if
requested, together with notice of meeting and proxy form; and
• Voluntarily releasing other information which it believes is in the
interest of shareholders.
The Annual General Meeting enables shareholders to discuss the
annual report and participate in the meetings either by attendance
or by written communication. The Company provides all shareholders
with a Notice of Meeting so they can be fully informed and be able to
vote on all resolutions at the Annual General Meeting. Shareholders
are able to discuss any matter with the Directors and/ or the auditor
of the Company who is also invited to attend the Annual General
Meeting.
Shareholders have the option to receive all Company and share
registry communications electronically and may also communicate
with the Company by contacting the Company via email
Principle 7
Recognise and manage risk
The Board has adopted a Risk Management policy, which sets out
the Group’s risk profile. Under the policy, the Board is responsible for
approving the Group’s policies on risk oversight and management and
satisfying itself that management has developed and implemented
a sound system of risk management and internal control.
Under the policy, the Board delegate’s day-to-day management of
risk to the Managing Director, who is responsible for identifying,
assessing, monitoring and managing risks with other executive
management. The executive is also responsible for updating the
Group’s material business risks to reflect any material changes, with
the approval of the Board.
In fulfilling the duties of risk management, the executive has
unrestricted access to Group employees, contractors and records and
may obtain independent expert advice on any matter they believe
appropriate.
The Board does not have a separate Risk Management Committee as
the Board monitors and reviews the integrity of financial reporting
and the Group’s internal financial control systems. Management
assess the effectiveness of the internal financial control on an
annual basis and table any concerns and/ or recommendations at
Board meetings where required.
In addition, the following risk management measures have been
adopted by the Board to manage the Group’s material business risks:
• Establishment of financial control procedures and authority limits
for management;
• Approval of an annual budget;
• Adoption of a compliance procedure for the purpose of ensuring
compliance with the Company’s continuous disclosure obligations;
• Adoption of a corporate governance manual which contains
other policies to assist the Group to establish and maintain its
governance practices; and
• Compilation, maintenance and review of a risk register to
identify the Group’s material business and operational risks and
risk management strategies for these risks. The risk register
is reviewed half yearly and updated as required. The Executive
reports to the Board on material business risks at each Board
meeting.
The Board has required the executive to design, implement and
maintain risk management and internal control systems to manage
the material business risks of the Group. The Board also requires
management to report to it confirming that those risks are being
managed effectively.
The Chief Financial Officer (or equivalent) has provided a declaration
to the Board in accordance with section 295A of the Corporations
Act and has assured the Board that such declaration is founded on a
sound system of risk management and internal control and that the
system is operating effectively in all material respects in relation to
financial risks.
The Board monitors the adequacy of its risk management framework
regularly to ensure that it continues to be sound and deals adequately
with contemporary and emerging risks and that the Company is
operating with due regard to the risk appetite set by the Board and
discloses that reviews have taken place at the end of each reporting
period.
Internal Audit
The Group does not have an internal audit function as the Board
believes the business is neither the size nor complexity that requires
such a function. The Board is currently responsible for monitoring the
effectiveness of internal controls, risk management procedures and
governance.
Lucapa Diamond Company Limited | ESG Report 2021 | 45
Sustainability and Industry risks
The Group’s operations are and will continue to be subject to a
range of the hazards and risks normally incidental to exploring for,
evaluating, developing and mining diamond resources.
The Company and its subsidiaries have detailed risk matrices which
are regularly reviewed, and which highlight critical risk factors that
the Group faces at any particular time. Principal risks to the business
include, amongst others, those relating to:
• Macroeconomic factors, sovereign and partner risk, global diamond
market and diamond demand and pricing;
• The ability to raise capital and/ or required additional funding
for continued exploration, evaluation, development and mining
operations;
• Operational issues such as severe weather conditions, supply
delays, major equipment breakdowns and labour disputes;
• The ability to replace resource and reserves as they are depleted or
become uneconomical and/ or achieve exploration success;
• Environmental, health and safety and social issues (see below);
and
• Retention and reliance on key executives.
As the Group expands its activities either within existing projects or
with the addition of new projects, it is expected that the sustainability
risks will change accordingly.
The Board reviews the overall sustainability of both the diamond
business and more specifically, the Group, in its normal course of
business.
Details of the Group’s sustainability activities and strategic direction
are set out in the ESG Report.
Environmental and Social Risks
The Group strives to operate in accordance with the highest standards
of environmental practice and comply in all material respects with
applicable environmental laws and regulations. Such regulations
typically cover a wide variety of matters including, without limitation,
prevention of waste, pollution and protection of the environment,
labour regulations and worker safety. The Company may also be
subject under such regulations to clean-up costs and liability for
toxic or hazardous substances which may exist on or under any of
its properties or which may be produced as a result of its operations.
The Company has adopted a formal Anti-Bribery and Corruption
and Anti-Slavery policies which apply to all staff, consultants and
contractors that work with the Group. The policies seek to ensure
that the Company operates in an ethical and transparent manner
in all business dealings and that the Company has a Whistleblower
policy and mechanism for staff to alert management should any
issues or incidents occur.
The Board monitors the adequacy of its environmental and social
risk management to ensure that it continues to be sound and deals
adequately with contemporary and emerging risks in the respective
jurisdictions the Group operates within.
46 | Lucapa Diamond Company Limited | ESG Report 2021
The FY22 framework for STI’s in the form of cash and equity, Project
Based Incentives in the form of equity and LTI’s in the form of equity,
are to be measured against the Company’s relevant targets in FY22
such as;
STI;
• Production
• Expenditures/ Capex
• ESG and Safety
• Exploration
PBI;
• Production at the Merlin Project
LTI;
• Absolute shareholder return
The independent review has considered Non-executive directors
total fixed remuneration in relation to benchmarked peers in which
non-executives are encouraged to hold shares in the Group to partake
in the future growth of the Group and, to participate in the Group’s
profits and dividends that may be realised in future years. In FY22,
the non-executive directors will be offered the ability to split their
fixed remuneration between cash and equity subject to shareholder
approval.
Principle 8
Remunerate fairly and responsibly
The Company does not have a Remuneration Committee given the
size of the Board. However it is intended that a committee will be
established comprised by a majority of independent directors as the
Company transitions to become a mid-tier producer. In the interim,
the Board monitors and reviews the remuneration level and policy of
the Group.
Details of the remuneration policy are contained in the Remuneration
Report included in the Directors’ Report. The Company’s policy
is to remunerate non-executive Directors at a fixed fee for time,
commitment and responsibilities. Any services over and above
their agreed responsibility is remunerated separately on normal
commercial terms. Remuneration for non-executive Directors is not
linked to individual performance. The Company may grant options
and performance rights to non-executive Directors. The grant of
options and performance is designed to recognise and reward
efforts as well as to provide non-executive Directors with additional
incentive to continue those efforts for the benefit of shareholders
and the Group.
The maximum aggregate amount of fees (including superannuation
payments) that can be paid to non-executive Directors is subject to
approval by the shareholders at general meeting.
Pay and rewards for executive Directors and senior executives
consists of a base salary, performance and retention incentives.
Medium and long-term performance incentives may include options
and/ or performance rights granted at the discretion of the Board
and subject to obtaining the relevant approvals. The grant of options
and/ or performance rights is designed to recognise and reward
efforts as well as to provide additional incentives and retentions and
may be subject to the successful completion of performance hurdles.
Executives are offered a competitive level of base pay at market
rates (for comparable companies and industry) and are reviewed
annually to ensure market competitiveness. The Company’s policy is
not to allow transactions in associated products which limit the risk
of participating in unvested elements of equity-based compensation
plans.
The Directors are not entitled to a termination bonus or retirement
benefit (other than for superannuation). The Directors’ contracts
contain a service bonus in the event of a takeover or change of
control, subject to shareholder approval where required.
Subsequent to year end, the Board engaged an independent
remuneration consultant, BDO Remuneration and Reward Pty
Limited, to review the pay and rewards for Directors and senior
executives including independent benchmarking as the Company
continues to maximise operating performance from its existing
mines and moves toward its key strategic objective, which is the
development of and ultimately the production from the Company’s
recently acquired Merlin Project in the Northern Territory, Australia.
The Company is entering an important phase and the Board believes
that whilst the remuneration framework is appropriate and fit-for-
purpose based on the Company’s development and growth profile
and to drive and deliver the outcomes desired by all shareholders,
it has adopted the recommendations from the
independent
remuneration consultant which focus on providing directors, key
management personnel and senior management with clear short
term, project based and long-term incentives to drive alignment of
the Company’s key objectives.
Lucapa Diamond Company Limited | ESG Report 2021 | 47
GROWING VALUE AND
POSITIONING FOR THE FUTURE
48 | Lucapa Diamond Company Limited | Financial Report 2021
Financial
Report
Directors’ Report
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Director’s Declaration
Independent Auditor’s Report
Definitions and Abbreviations
ASX Additional Information
50
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101
102
107
108
Lucapa Diamond Company Limited | Financial Report 2021 | 49
50 | Lucapa Diamond Company Limited | Financial Report 2021
Directors’ Report
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Directors’ Report
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Directors’ Report
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Directors’ Report
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Directors’ Report
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Directors’ Report
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Directors’ Report
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Directors’ Report
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Directors’ Report
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Directors’ Report
Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
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Consolidated Financial Statements
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Consolidated Financial Statements Lucapa Diamond Company Limited | Financial Report 2021 | 65
Consolidated Financial Statements 66 | Lucapa Diamond Company Limited | Financial Report 2021
Consolidated Financial Statements Lucapa Diamond Company Limited | Financial Report 2021 | 67
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 •
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Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021
70 | Lucapa Diamond Company Limited | Financial Report 2021
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Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 72 | Lucapa Diamond Company Limited | Financial Report 2021
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Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021
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Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 liabilities
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Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021
78 | Lucapa Diamond Company Limited | Financial Report 2021
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 Lucapa Diamond Company Limited | Financial Report 2021 | 79
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021
80 | Lucapa Diamond Company Limited | Financial Report 2021
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021
Lucapa Diamond Company Limited | Financial Report 2021 | 81
Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021
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Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 84 | Lucapa Diamond Company Limited | Financial Report 2021
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Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021
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Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021
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Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021
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Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 94 | Lucapa Diamond Company Limited | Financial Report 2021
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Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021
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Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021
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Lucapa Diamond Company Limited | Financial Report 2021 | 99
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Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 Director’s Declaration
FOR THE YEAR ENDED 31 DECEMBER 2021
Lucapa Diamond Company Limited | Financial Report 2021 | 101
Independent Auditor’s Report
FOR THE YEAR ENDED 31 DECEMBER 2021
102 | Lucapa Diamond Company Limited | Financial Report 2021
Independent Auditor’s Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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Independent Auditor’s Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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Independent Auditor’s Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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Independent Auditor’s Report
FOR THE YEAR ENDED 31 DECEMBER 2021
106 | Lucapa Diamond Company Limited | Financial Report 2021
Definitions and Abbreviations
Lucapa Diamond Company Limited | Financial Report 2021 | 107
ASX Additional Information
Additional information current as at 21 March 2022 required by Australia Securities Exchange Limited Rules and
not disclosed elsewhere in this Report.1
Capital structure
Ordinary Share Capital
1,426,164,813 ordinary fully paid shares held by 5,649 shareholders.
Spread
1
1,001
5,001
10,001
100,001 and above
to
to
to
to
1,000
5,000
10,000
100,000
Number of
Holders
141
1,305
963
2,308
932
Number of
Shares
35,693
4,013,028
7,680,559
84,593,134
1,329,842,399
As at 21 March 2022 there were 1,684 fully paid ordinary shareholders holding less than a marketable parcel.
Listed $0.10 Options expiring 5 June 2022
113,971,605 listed options held by 887 shareholders.
Spread
1
1,001
5,001
10,001
100,001 and above
to
to
to
to
1,000
5,000
10,000
100,000
Number of
Holders
151
222
135
267
112
Number of
Shares
93,061
615,259
1,074,655
9,695,749
102,492,881
Voting rights
Ordinary Shares
On a show of hands, every member present in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Options and Performance Rights
Options and performance rights carry no voting rights and convert to one ordinary share upon exercise.
On-market buy-back
There is no current on-market buy back.
Substantial shareholders
As at 21 March 2022, substantial shareholder notices had been lodged with ASX by the following shareholders:
Fully Paid Ordinary Shares
Name
Regal Funds Management Pty Ltd
Shadbolt Future Fund (Tottenham) Pty Ltd
Ilwella Pty Ltd
Tazga Two Pty Ltd as trustee For Tazga Two Trust
Number Held
115,769,516
64,000,000
61,394,405
55,007,014
% of Issued Capital
8.12%
5.02%
7.62%
5.35%
Note: The above details may not reconcile to the information in the Top 20 holders of quoted securities list
as the shares may be held across multiple associated holdings or if updated substantial shareholder notices
have not been required to be lodged with ASX.
108 | Lucapa Diamond Company Limited | Financial Report 2021
ASX Additional Information
Top 20 holders of quoted securities
Fully Paid Ordinary Shares
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CS THIRD NOMINEES PTY LIMITED
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