ANNUAL 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 62 67 101 102 107 108 Lucapa Diamond Company Limited | Financial Report 2021 | 49 50 | Lucapa Diamond Company Limited | Financial Report 2021 Directors’ Report • • • • • • • • • • • • • o o o o o o o o o Lucapa Diamond Company Limited | Financial Report 2021 | 51 Directors’ Report • • • • 52 | Lucapa Diamond Company Limited | Financial Report 2021 Directors’ Report • • • • • • • Lucapa Diamond Company Limited | Financial Report 2021 | 53 Directors’ Report 54 | Lucapa Diamond Company Limited | Financial Report 2021 Directors’ Report • • • Lucapa Diamond Company Limited | Financial Report 2021 | 55 Directors’ Report 56 | Lucapa Diamond Company Limited | Financial Report 2021 Directors’ Report Lucapa Diamond Company Limited | Financial Report 2021 | 57 Directors’ Report 58 | Lucapa Diamond Company Limited | Financial Report 2021 Directors’ Report Lucapa Diamond Company Limited | Financial Report 2021 | 59 Directors’ Report 60 | Lucapa Diamond Company Limited | Financial Report 2021 Directors’ Report Lucapa Diamond Company Limited | Financial Report 2021 | 61 Directors’ Report Consolidated Financial Statements FOR THE YEAR ENDED 31 DECEMBER 2021 • • • • 62 | Lucapa Diamond Company Limited | Financial Report 2021 Lucapa Diamond Company Limited | Financial Report 2021 | 63 Consolidated Financial Statements 64 | Lucapa Diamond Company Limited | Financial Report 2021 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 • • • • • • • • • • 68 | 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 | 69 Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 70 | 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 | 71 Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 72 | 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 | 73 Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 74 | 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 | 75 Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 liabilities • • 76 | 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 | 77 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 o o o o o o o • • • • • • • • • • • • • • • • • • • • 82 | 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 | 83 Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 84 | 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 | 85 Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 • • • 86 | 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 | 87 Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 88 | 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 | 89 Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 90 | 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 | 91 Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 92 | 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 | 93 Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 94 | 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 | 95 Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 96 | 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 | 97 Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 98 | 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 | 99 Notes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2021 • • • 100 | Lucapa Diamond Company Limited | Financial Report 2021 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 • • • • • • • • • • • Lucapa Diamond Company Limited | Financial Report 2021 | 103 Independent Auditor’s Report FOR THE YEAR ENDED 31 DECEMBER 2021 104 | Lucapa Diamond Company Limited | Financial Report 2021 Independent Auditor’s Report FOR THE YEAR ENDED 31 DECEMBER 2021 • • • • • Lucapa Diamond Company Limited | Financial Report 2021 | 105 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 LIMITEDCITICORP NOMINEES PTY LIMITED TAZGA TWO PTY LTD UBS NOMINEES PTY LTD SHADBOLT FUTURE FUND (TOTTENHAM) PTY LTD SAFDICO INTERNATIONAL LIMITED PONDEROSA INVESTMENTS (WA) PTY LTD BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM BNP PARIBAS NOMINEES PTY LTD BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD SUI HEE LEE PULLINGTON INVESTMENTS PTY LTD ASHANTI INVESTMENT FUND PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 MR ALEXANDER JAMES WENTWORTH HILL MR BARNABY COLMAN CADDICK PULLINGTON INVESTMENTS PTY LTD PS SUPER NOMINEE PTY LTD SAGILI PTY LTD Listed $0.10 Options Expiring 5 June 2022 Name PROF TERRY STIRLING WALTER MR CHRISTOPHER PAUL LAWRENCE TAZGA TWO PTY LTD GREGORACH PTY LTD MR TIMOTHY MICHAEL DEMPSEY MR DEREK DECLAN BRUTON FAR EAST CAPITAL LIMITED MR MALCOLM WILLIAM GREEN SUMBING PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED GOLDFIRE ENTERPRISES PTY LTD MR MARK ANDREW RAVESI STONERIDGE MINING PTY LTD MR ROSS JAMES MULLER MR NORMAN COLBURN MAYNE DEBT MANAGEMENT ASIA CORPORATION SOLEQUEST PTY LTD CITICORP NOMINEES PTY LIMITED TT NICHOLLS PTY LTD GREGORACH PTY LTD MR DOUGLAS COLIN MARKS & MRS JOYLENE FAY MARKS Number Held 128,929,447 116,366,116 84,465,251 67,607,014 60,084,703 54,065,776 49,609,592 48,392,671 19,887,327 15,554,406 15,382,422 14,000,000 13,435,463 12,900,000 12,125,258 12,000,000 11,800,000 10,6761,87 9,934,224 9,090,909 % of Issued Capital 9.04% 8.16% 5.92% 4.74% 4.21% 3.79% 3.48% 3.39% 1.39% 1.09% 1.08% 0.98% 0.94% 0.90% 0.85% 0.84% 0.83% 0.75% 0.70% 0.64% 766,306,766 53.73% Number Held 11,300,000 10,000,000 9,287,683 5,754,775 4,876,328 4,618,780 3,439,000 3,406,259 2,549,457 2,184,365 2,125,000 2,050,000 2,000,000 1,908,000 1,600,000 1,500,000 1,500,000 1,354,962 1,197,225 1,131,882 1,130,767 74,914,483 % of Issued Capital 9.91% 8.77% 8.15% 5.05% 4.28% 4.05% 3.02% 2.99% 2.24% 1.92% 1.86% 1.80% 1.75% 1.67% 1.40% 1.32% 1.32% 1.19% 1.05% 0.99% 0.99% 65.73% Unlisted option holders There is 1 holder of 5,000,000 $0.08 unlisted options expiring 30 July 2025. There are 89 holders of 48,680,475 $0.08 unlisted options expiring 18 December 2022. Lucapa Diamond Company Limited | Financial Report 2021 | 109 110 | Lucapa Diamond Company Limited | Annual Report 2021 Lucapa Diamond Company Limited | Annual Report 2021 | 111 Lucapa Diamond Company ACN 111 501 663 34 Bagot Road, Subiaco WA 6008 Tel: +61 8 9381 5995 Fax: +61 8 9380 9314 Email: general@lucapa.com.au www.lucapa.com.au