Executives: William Lamb - President, Chief Executive Officer and Director John Armstrong - Vice President, Mineral Resources Glenn Kondo - Chief Financial

Officer
Analysts: Geordie Mark - Haywood Securities, Inc. Des Kilalea - RBC Capital Markets Craig Johnston - Scotia Capital, Inc. Richard Hatch - RBC Capital Markets Ola Södermark - Swedbank Edward Sterck - BMO Capital

Markets
Operator: Good morning, ladies and gentlemen, and welcome to the Lucara Q3 2016 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

[Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to your host Mr. William Lamb, President and CEO.

William Lamb: Thank you, Kelly. And, again, everybody, thank you very much for taking the time to listen to our Q3 results call.

I’m sure that there is a lot of other things on your terminals which you must all need to pay attention to as well. So we’ll just jump straight into the presentation, I’ll go to Slide 3, just to go through the highlights. And interestingly enough, even with the very large volume of diamonds, which has been sold into the market both by sort of the normal producers and then specifically by De Beers and ALROSA. We have seen very, very resilient diamond processing through the quarter, and I’ll touch on sort of what it looks like for the two sales that we have for quarter four 2016 in terms of bookings, which really shows again demand for diamonds in the market. So for Q3 we only had one regular tender and along with that we had money that was left over from the sale, which we concluded at the end of Q2.

So total revenues for the quarter coming in at $38.1 million or $332 a carat. And I think this is one of the things which we might want to just talk about. Lucara will always as we go forward, specifically because of the type of production which we have. Have very volatile numbers both in terms of the carats, the average dollar per carat as well as whether we actually had an exceptional stone tender. And one or two single stones in a regular tender can actually push that average up by anyway from $50 to $100 a carat, which is exactly what we sold with the very first sale of the year this year.

So when we look at the year-to-date, if we exclude the Constellation diamond, we sold round about $166 million. That is what we would compare to the $158 million from the first nine months of 2015. And with that Constellation diamond revenue is now sitting just under $230 million. We’ve had a very strong cost discipline on site. It’s one of the areas which we focused on that is also driven by the focus on - of maintaining uptime in the process plant, really looking at the overall utilization.

We are sitting at around about $25 a tonne milled so far this year. We’ve also now lowered our guidance again from the $29 to $31 down to where we believe we’ll come in roundabout $25 to $28 per tonne. In terms of earnings per share, it’s a little bit of a negative for us this quarter, primarily driven by tax payments. We are still maintaining a 42% tax rate, so we are paying that. In addition to the withholding taxes which were paid for the movement of the money, which we use for paying the dividends, and then of course $7.6 million non-cash exchange rate differential, which resulted in a loss of $0.01 for the quarter.

So sitting at $0.16 for the year, where we were at $0.15 for the same period last year. One of the big highlights of Q3 was the payment of the special dividend, CAD$0.45 dividend, in addition to the regular $0.015 from our progressive dividend. And I think a point to note here, since we started paying dividends in 2014, the company has now paid out in excess of US$185 million, which is more than the total sum of money, which we’ve ever raised in the market within the company. So I think that’s again demonstrating the quality of the assets as well as the free cash flow ability, which the resource has. On our exploration and drilling we’ve really started to advance those projects.

I will hand over to John Armstrong, who is also in the meeting to take us through the exploration a little bit later. And sorry, I should have mentioned Glenn Kondo, he is also with me. So for all those really technical detailed financial questions, Glenn will be able to take care of those. Moving onto Slide #4, looking at the revenue chart there as I mentioned, if we take out to the Constellation diamond of $63.1 million, on a like-for-like basis based on one exceptional stone tender in July 2015 and one exceptional stone tender in the second quarter of 2016 and we are comparing a $166.3 million of regular diamond sales to the $158.6 million, which is what we see there, $229 million then including the Constellation diamond. One of the areas, we’d like to point out is in terms of net income even with the higher sales, those two numbers are very, very similar year-on-year.

And that has been impacted by a couple of things. Roundabout $7 million of tax payments which were made, this is withholding taxes for the movement of the dividend money up into the corporate entity for the payment of the large dividends. We are looking at the foreign exchange loss. And then we are now starting to get - and if we look at the loss this year on the ForEx there was actually a gain last year, and if we look at the overall outcome from the assets, about a $12 million difference. And that’s really what causes those numbers to do or to be fairly similar.

In terms of the total carats sold and the dollar per carat, $815 [ph] again, if we strip out the Constellation diamond that number drops down to around about $618 per carat. Again, when we - as I’ll mention it further on, as we’ve now started to purchase more material from the south lobe, we are seeing those better quality diamond, which is the reason for that increase in the overall dollar per carat for the regular and exceptional stones, excluding the two very large stones, which we - one of which is sold, one of which sits in inventory. Now, moving on to Slide 5, in terms of our financials, still sitting with a very strong cash balance after paying out CAD178 million in dividends or US$137. We are sitting with just under $50 million in the bank. We feel very comfortable with that number, even with our capital expenditure through this year going into next year with two sales to be conducted in Q4, one exceptional stone tender and one regular tender.

Moving on to Slide 7, our CSR and Safety, I think this is something that we are very, very proud of, the lost time - we had lost time injury with now 4.5 million man-hours ago. Safety on site has been paramount. And we really started to focus on behavioral safety training, which is really adding dividends in the long-term. In terms of corporate social, we have now handed over the Letlhakane abattoir to the local communities, and the district council for operation. We’re seeing very, very good numbers coming out of there and very positive feedback from the communities.

And then in terms of ongoing support for local endeavors, Botswana this year celebrated their 50th year of independence, so the golden jubilee and we sponsored on the weekend of their big celebrations, a half marathon, over 2,000 entrants into the three races, 21, 10 and 5 [ph] that we had there. Very, very positive response, and again, just increasing the profile of the company in Botswana specifically to those people who participated, but also to the government officials who were in attendance. Moving on to Slide 8, there is a lot of information the slide. So I’ll just sort of touch on the specifics. As I mentioned previously, if we look at the revenue per carat sitting at $618 a carat, if we take out the Constellation and we compare that again to the $560 which we had for the first nine months of 2015, when you look up a couple of lines at the actual feed grade to the plant, the 13.7 versus 16.5, that is what we would expect based on the resource and the areas which we are mining.

As we do start to mine more of the south lobe material that is where the grade is, slightly lower than what we would normally experience in the center, and quite a bit lower than what we would get from the north. But as a trade-off there, the value of the diamonds, which we are recovering from the south lobe much higher than what we would get in the other one, so it’s really a function of mining higher dollar per tonne material versus the overall grade which goes into the process plant. In terms of the total ore processed, sitting at just under 2 million tonnes, about 300,000 tonnes ahead where we were last year. And this again is indicative of the programs, which we’ve had on site, where we’ve been focusing on maintaining uptime in the process plant, really looking at the engineering aspect, making sure that engineering uptime is available and managing the maintenance schedules, et cetera. And that is really paid dividend through the year.

And again, what the increase in the number of tonnes processed, that had a positive effect on our overall dollar per tonne processed. Really looking at the bottom line there, specifically again driven by the sale of the Constellation diamond, still looking at $707 per carat margin, which is an exceptional result, knowing that we actually still have two truly exceptional stones in the inventory, and I’ll touch on that a little bit later. Moving on to Slide 9, the sales which we’ve had, so far this year three regular tenders, one exceptional stone tender, very, very good results for that exceptional stone tender, which closed in the second quarter. We have and are in the process of running the tender for our second exceptional stone tender of the year. We have 12 stone there, a little bit under 1,100 carats for sale, some very nice diamonds.

And again, the traction in the market and demand for large stones seems to be very, very high. If we look at what other large stones have actually been announced in terms of recoveries, it’s been a lot less than what we would normally see. So we do see sort of some very good traction and sort of just shy of 60 clients attending that tender which is very close to what we would normally get as the max, obviously no way close to what we get for the regular tenders. When I mentioned earlier on the call that I’d come back to the demand which we see for diamonds, I would like to say that it was demand just for the Lucara stones, but I think a lot of the other producers are seeing this as well. We haven’t yet sent out the invites for the final tender of the year, which will close mid-December, and we’ve already got 70 bookings for that tender.

So the demand for good quality diamonds, rough diamonds, is very much still there. And we are hoping to see that trend continue into the first quarter of 2017. I’m going to now just quickly handover to John Armstrong, John will take us through the current status of both the deep drilling on the AK06 resource and this is to extend our indicated resource from 400 to 600 meters which will give us sufficient volume of 43-101 compliant resource for a pre-feasibility level underground study and then onto the exploration. Thank you, John.

John Armstrong: Yes.

Thank you, William. So we’ll move onto Slide 11. And we’ll touch on, just quickly the prospecting licenses. This is to refresh everybody’s memory we were awarded these licenses in September 2015. And we’ve been progressing with our - 2014, pardon me, we’ve been progressing ever since.

During the third quarter, we undertook some additional sampling at BK02, which I’ll touch on in a second, and we commenced and completed a drill program - the first-ever drill program at AK11. Moving onto Slide 12, William mentioned the resource expansion drill program that we’re conducting. At the end of the third quarter that was the 55% complete drilling for that 10,000 meter program. We have three active drill rigs on sites and we anticipate completing the drilling aspect of the program before the end of the fourth quarter. And without getting into the details, I’ll say that there has been no fundamental surprises in terms of country rock kimberlite contacts at depth, so we’re quite pleased with that.

And as we get more information from the logging, we’ll release that into the market when appropriate. Moving onto Slide #13, BK02, in the second quarter this year we released the results of a 5,000 tonne surface sample that we collected in process to our bulk sample plant that had a sample grade of 4.6cpht and what we saw there was quite a core size distribution which was something that we had wondered if it was existed at BK02 when we undertook the application for the prospecting license. We undertook the decision to collecting additional 5,000 tonnes in quarter three, and started processing that through the bulk sample plant. Although 28% at the end of the quarter done the processing of that second sample. And we anticipate to complete the processing at the end of the fourth quarter of this year and then release the diamond results when appropriate.

And I think what we’re seeing there is a confirmation of the course nature of the size distribution at BK02, and we should be in a position to have a parcel to get a preliminary evaluation on those goods sometime with the first or second quarter of next year. We initiated a drill program at the very beginning of the fourth quarter. And so far - again, basically it’s - there had been some historic drilling at BK02, but very little information outside of the geophysical anomaly was known about the contacts, and we’ve been able to extend both the western and the southern boundaries of BK02. And that drill program is still underway and we’ll release the results of that program once it’s done in its entirety. Moving on to AK11, again in the historic data that was available for this particular kimberlite what we’ve shown with our drill program there, basically the discovery level of drilling and never been any core drilling into AK11, is that the historic data prove to be incorrect.

And what we have identified at AK11 is 2.5 hectare of pipe. So the size hasn’t really grown too much there. But there are two distinct pipe infills, extremely well-preserved crater sequence with preserved graded bedding amongst other features, and at depth a more magmatic/pyroclastic kimberlite. So there is about 90 odd meters of crater material and then an additional - well, the deepest hole we drilled was 204 meters where we got into that more magmatic kimberlite. The logging of that particular material is taking place now and we’ll submit some samples for microdiamond analysis and then make a decision about how to foresee at AK11.

But I think that overall we’ve been pleasantly surprised with the new information that we’re gleaning from the drilling phase of our activities on both prospect and licenses. So I’ll hand it back to you William.

William Lamb: Okay. Thank you very much. And sort of - I thought it’s easier for John to go through the geology stuff.

I’m sure I could have explained it, but not as well as John. Thank you, John. And so really sort of if I jump straight to Slide 16, just to reiterate sort of where we are for the year, in terms of revenue and this now excludes the Constellation and the Lesedi. I’m sure people would love to know what we’re doing with the Lesedi La Rona diamond. That stone has now been moved into Europe.

We all are going to get it analyzed. We feel that one of the challenges in the sales process which we followed at beginning of the year is the standard mechanisms which diamonds here is used for evaluating the stone are just not available for them for a stone of that size. So for them to actually understand what the stone could truly yield was one of the questions which came out better along with other components of the quality. So we are going to get the stone fully analyzed and then we expect the stone to be brought back to the market sometime, most probably the first-half of next year. As we have demonstrated through the presentation, the financial strength of the company doesn’t mean that we are forced to sell it for that stone.

I think a stone of its caliber we would most probably look to take our time to fully understand whether there is an alternative mechanism for selling that one, very similar to what we attempted to do through the auction process. So just coming back on revenue excluding those stones of 200, 220, if we look at the numbers now, we’re looking sort of well within that ballpark, maybe a little bit of an upside on top of that. In terms of carats sold, 340,000 to 380,000 carats, looking good there. In terms of the tonnes processed the guidance is 2.2 to 2.4. We do expect to exceed that based on the increase in availability, which we seen through the process plant so far this year.

In terms of ore mined, again 3 million to 3.5 million tonnes; waste mined between 13 and 14 million tonnes. And as mentioned, especially because of the increase in tonnes processed through the processing facility, we have reduced our guidance for cost per tonne process down to the $25 to $28 per tonne. In terms of our capital expenditure, the large diamond recovery circuits, that actually - we had announcement earlier in the quarter that that has now been completed. The plant can now process material anyway up to about 90 millimeters in size, which is equivalent to roundabout a 3,000, 3,100 carats diamond. That has already been completed slightly under budget for that one.

But the main two projects, which we’re running at the moment, is the Mega Diamond Recovery, that one running at about $15 million and the sub-middles XRT. So really putting XRT technology into replace some of the DMS capacity, which is again very much dependent on the yield profile, the density profile of the material being processed. So treating 4 to 8 millimeter material potentially allows us to have a lot more flexibility in the process plant. And once that’s in there we’ll be able to assess just how we can actually utilize that flexibility to improve the throughput of the current processing facility. In terms of sustaining capital, the more re-liner is actually in - they’re using it today, and yesterday we’re busy with a show liner of replacement; much, much safer in terms of not having to manhandle 20 tonne liners around, especially when we do discharge [ph] great, so that is actually completed and working very, very effectively; and the $1.5 million, which we spent on consolidating all of our offices.

The new sales office is very, very complementary from the declines we’re running. Our very first tender, the exceptional stone tender out of that office at this time. And that is actually been done very, very well. In terms of exploration, all the stuff that John mentioned, we are looking at up to $7 million of expenditure there. I’m not so sure if John touched under the BK02 sample.

We do expect the processing to be completed during this year. Main reason for this is a parcel for valuation. But we expect that valuation only to be out, most probably, first quarter of next year, and that’s really going to start to identify what the opportunities are for those. And then on the deep drilling, and this is really resource extension, life of mine extension at Karowe. Most of that deep drilling taking place in the south lobe that is very important for us, because this is where we have an opportunity to extend the life of mine by sort of 8 to 10 years through underground development.

So that study phase will almost only kick-off as the drilling comes to an end. We expect that to be completed along with the resource statement update end Q3, but most probably - end of Q1, but most probably into Q2 of 2017. So that brings us to the end of the presentation. Kelly, I’d like to hand it back to you for the Q&A, please.

Operator: [Operator Instructions] And our first question comes from the line of Geordie Mark from Haywood Securities.

Your line is open.

Geordie Mark: Yes. Good day, William, John and Glenn. Yes, just a couple of questions there. Firstly, I mean with the kind of exceptional stone tender, how many clients do you have at on site at the moment, I might have missed that in the call.

William Lamb: So far - the last time we’ve got an update we had 57 clients booked for exceptional stone tender. On average we sit somewhere between 50 and 60. It is sort of [par for the course,] [ph] but again a lot of the clients for the EST may just be people who are coming in to have a look. It comes down to the quality of the clients. And we look at that compared to people who have wanted ESTs.

And all of the main players are in the mix.

Geordie Mark: Okay. That’s great. And just into our second question, just like to have a chat about the Q3 mine survey results, and just to get an idea of what the total change in the recognized volume of ore and waste moved was. So I can see the last four quarters, but if there was any change there.

A follow-on, I guess, what impact does that has for stockpile volumes and all characterizations, where were the deltas from in terms of what loads and grade and, will there be an adjustment I guess in Q4 for any changes in unit cost for the year based on that, [what will be the way to think?] [ph]

William Lamb: Okay. So what we did was, there was a follow-up or a primary survey completed. There were one or two discrepancies in terms of some of the volumes moved. How that actually affects the stockpile? A very, very little, we are looking at most probably less than 2% to 5% variance in the stockpile or that the material which has been stockpiled and hence the grade associated with that. There is an exercise ongoing just to make sure, we actually have processed some of the stockpile material, again just confirming what we have both in terms of the mine core for that material as well as the associated grade.

Going forward in terms of Q4 statement, I’m going to ask Glenn just answer on that.

Glenn Kondo: Yes, Geordie, just in terms of cost, the cost have already been worked in to the cost you see coming through the profit and loss. And overall stock valuations, they reflect the changes, but they have been there as well, so that the costs are in our account.

Geordie Mark: Okay, great. Thank you.

Operator: Your next question comes from the line of Jason Vercof [ph]. Your line is open.

Unidentified Analyst: Hi, yes, good morning, good afternoon, gents. Just a couple of quick ones, first I’m looking at the technical report, which is a couple of years old now. And thinking about how the mines evolving versus what you laid out there, and for one, it seems like you’re getting a lot more throughput from the plant and it sounds like that’s not it.

So you are actually going to be chewing through the ore reserves a bit more quickly than we all thought. So, I mean, one, how do you think about life after the open pit and you’re touching on it a little bit here with the deeper level exploration. Beyond that, how else is the mine changed and versus what you might have expected in the technical report.

William Lamb: Okay. It’s going to be quite a long answer.

But I’ll start off with the resource side of things. When the original exploration was done, the deepest hole that they drilled in the south lobe was down to 758 meters. So we know that the south lobe actually does extend down, I’d love to say to the center of the earth, but much deeper than what we currently have as our surface mine. Surface mine goes down to roundabout 320, 325 meters under the current mine plan. The reason for that is at about 280 meters we have a mudstone layer, which means that the pushback to go any deeper on a surface mine is will result in a very large volume of waste having to be moved.

So with the drilling, which we’re doing now the deep drilling it’s to take that indicated - the bottom of the indicated resource which currently sits at 400 meters down to 600. It will give us roundabout eight to 10 years of further all in the South Lobe, which we can mine, and the reason why we’re doing that is - and this is also a change since that 43-101 was completed. It’s the value of the diamond. The grade and the volume of diamond, which we’re recovering has not materially changed. There were one or two areas where the original people who did the exploration overestimated the grade that was primarily because of very, very high components of breakage, which resulted in - if you had a 10 carat stone, you normally have it as an outline, you would remove it from your carat.

They broke that into 10 or 15 pieces which resulted in a finer size distribution which is what we’re seeing in terms of the size distribution/value differential. But are also then overestimated the grade in certain areas. So we’ve made sort of allowances for that. So the total quantum of what we’re getting out all of the resource is relatively static. It’s the value of those diamonds and as we look at the exponential increase in value as your diamonds get closer.

When we acquired the project we were looking at maybe between 1.8 and 2.1 weight percent specials. What we’re averaging to-date, we’re mining in the Center and the South Lobe which constitutes about 95% of the reserve is anyway above 5%. Last month alone, we were in excess of 6 weight percent special so if you do the math, if you’re recovering in round numbers 400,000 carats and those 5% of those diamonds are now sitting above 10.8%. When you assign 5,000 or - it’s roundabout $8,000 a carat to those numbers, it’s very, very quickly escalated the value of the resource, and that’s really what’s driving the underground development specifically on the South Lobe resource.

Unidentified Analyst: Okay.

Thanks a lot.

William Lamb: Okay.

Operator: Your next question comes from the line of Des Kilalea. Your line is open.

Des Kilalea: Thanks, good morning, good afternoon everybody.

William, just really following a little bit on Jason’s and maybe for John as well. Do you expect material differences to the profile of AK06 at depth from this drilling? Are there any indications that you - that the ore body is going to be bigger at depth than you think it might be now, given the historical drilling. And then just go back to the Lesedi sale, is the Botswana government giving you a lot of lead way as to how you can selling, where you can selling the stone? Thanks.

William Lamb: Okay. Thanks, Des.

John, I’m going to hand over to you having recently to have a look at some of the core. I think, it is a little bit early to make any estimates onto the overall volume. I think the plus and minuses across, but John could you just make one or two comments about the continuity of the geology and what we would expect.

John Armstrong: Yes. Certainly, I would tell you that in terms of the continuity of the geology just take it off.

That we haven’t seen any surprises, Des. So I don’t anticipate once we get the final surveys in from the deep drilling that there is going to be any significant changes to the pipe shape in terms of additions or subtractions from the inferred - sits at inferred, right now. The internal geology may change a bit certainly because of we’re drilling from the outside through the Kimberlites we’re getting a good cross section through the deliver part of the pipe with each drill hole. So there might be some modifications to the internal geology, but that’s - I can’t comment further, because the program is still underway and we haven’t completed the lot [ph].

William Lamb: Okay.

Thanks, John. And then Des, in terms of the sale of the Lesedi, as with our mining lease the government does stated all diamonds need to be sold from in the country, because of the - I guess the specialty nature of this diamond. We did go to the government and they’ve pretty much given us cotblonch [ph] leeway to sell the diamond in anyway, we believe we’ll maximize the value of it. There is no specific timeline for when we started as well. We do have open dialogue with the government.

I know that they have just recently changed and then shuffled the government around. We met last week with the Ministry of Labor. Unfortunately they were busy in cabinet, so we couldn’t meet with the Minister of Mines or the new Minister of Mines. But when we do get that opportunity, hopefully within the next few weeks, we’ll just explain the process which we are going through as well. But in terms of the overall sales mechanism, it’s really been left to the company.

There is no specific direction being given by the government.

Des Kilalea: Sorry. Can I just fit in a quick other one? Are you going to be replacing the Chief Operating Officer? Are you searching for somebody or do you think you can manage without appointing somebody?

William Lamb: It’s a good point. And this is a great opportunity for us. When we originally require or sort of recruited a COO, we were hoping at that point that there was a - that the world without hoist and there’ll be lot of sort of corporate opportunities.

We were not saying that we are not looking at that. But what we are looking at doing is splitting the role into a Technical Director which will be very much a pure technical person and then also brining in a government liaison. And the technical person will enable us to a lot more due diligence at a much higher level going forward. So that’s really what we are doing. So we are going to be replacing them with somebody who is more - most probably [size-based just auto-foot] [ph] but also give us a little bit more depth in terms of the real hands-on stuff.

Des Kilalea: Thank you.

William Lamb: Thanks, Des.

Operator: Your next question comes from the line of Craig Johnston. Your line is open.

Craig Johnston: Yes, thanks for taking my question, guys.

Des asked most of my questions. But just one and more for modeling purposes, but if you could give us how much percentage of specials you recovered in Q3 that would be great.

William Lamb: Craig, I might actually have to come back to you just to confirm. I think in Q3 it was roundabout 4.8%. I don’t know.

John, do you have that information sort of at your fingertips?

John Armstrong: I’m just getting it out now. To be honest, if you have another question…

William Lamb: Craig, we’ll get…

Craig Johnston: Okay. And then, while John is doing that, maybe just a question on costs. Could you give us more color in terms of what’s been driving that cost per tonne down. I know part of it is tonnes - increased tonnes processed.

And then secondly on the cost question, your guidance implies increased costs quarter-over-quarter. Is that something that your reality or are you just being conservative on the cost front?

William Lamb: Look, I think sort of when we look at the costs, when we start off the year, and we go to the board for approval of our budget for the following year, what they do is - again through 2015 and 2016, we were busy adding in a lot more complexity into the overall process plant. And it was bit of a question mark, even though we went back to basics as to what it was actually going to cost to run those one. So there is a certain level of conservatism, when putting in those new processes. And oddly enough, I don’t see it being too different.

We must only be a little bit more conservative when going to the board for the 2017 numbers, again, because we are adding into sub-middles as well as the Mega Diamond Recovery. So we got to really get a handle on those and we will start to see that range narrow as we get out of 2017. In terms of the overall cost drivers, there is a number of factors here. But I think it really comes to down to focusing on the available uptime for the process plant. So it’s managing sort of when we have downtime, ensuring that if we are going to do a two-day shutdown for specific work on the mill liners or the inlets, et cetera.

That all of the other maintenance, which we would have then had to do three or four days later is done during that period. And it’s just refining the overall structure of how we run maintenance, the timing of the maintenance and really being ready. So that if something does go down, the guys can get in and they’ve got multiple teams that they can ship out to do things, so we don’t then have to have an extended downtime when we do our regular maintenance.

Craig Johnston: Okay, great. Thanks very much.

I appreciate that.

William Lamb: Okay. John?

John Armstrong: And so far Q3 we are sitting just over 4.08% [ph] specials.

Craig Johnston: Sorry, that was 4.8%, John?

John Armstrong: Just over 4.08%.

Craig Johnston: Okay.

Thanks.

Operator: Your next question comes from the line of Richard Hatch. Your line is open.

Richard Hatch: Thank you. Good morning or afternoon, gents.

Two questions, firstly, on the LDR and MDR, your budget is $15 million to $18 million; you spent about $5 million year-to-date. What’s the - do you expect to spend it all - the balance of it all in Q4, or should we expect to hang over into Q1? I get a feeling there might be hang over into Q1? And then secondly another one, perhaps for Glenn, just on your cash tax for Q4, can you give us some guidance there? Thanks.

William Lamb: Okay. Thanks, Richard. So where we are with the CapEx on the Mega Diamond Recovery, the money they - we most probably expect it to be about a 50-50 split money spent this year and next year, so most probably roundabout $5 million to $6 million that will be spent in 2017 on that project.

And then for the $30 million which we have approved for the sub-middles minus-8, plus-4, we’re looking at the majority of that money being spent in 2017. I think this year, we’re only looking at maybe between one and two to a maximum of three depending on sort of what orders we place of the $30 million being spent in 2016.

Glenn Kondo: Yes, Richard just in terms of cash tax it depends what you’re forecasting for our sales, but and get quite comfortable of using 42% to 44% range, and then assume that roughly 20% will be carried over in terms of payment into Q1 next year.

Richard Hatch: Okay. Thank you, chaps.

Operator: Your next question comes from the line of Ola Södermark. Your line is open.

Ola Södermark: Yes. Hello, I have a follow-up question on the special stones, years to quantify how many special stones have recovered and how many stones are one on the Karowe, and I can’t really find it in the report for third quarter, is it something you can do?

William Lamb: Yes, Ola, the number will actually be in the whole presentation. I have put that together in the most review posted on the website.

I think the number was 478 stones were recovered for - sorry, 178 for the year so far - actually hang on a second. So we had 142 stones in the third quarter, and I don’t have the stats in front of me in terms of the number of plus 100. If we look at where we were mining, we were in an area where again - we do a certain extent stated clear of historical areas which have really put out similar to the Constellation and Lesedi, and just while we’re in the process of selling those. What we have seen and in discussion with the lot of the markets participants, there is a fairly large volume of those stones available in the market. So even though, we’ve got, we’re not going to affect our revenue guidance for the year, but we all being a little bit more prudent in what we actually put out and where we’re mining just to try and control the flow of those diamonds into the market.

Ola Södermark: Okay. And what are you going to try to recover during the fourth quarter or first quarter next year. Is it - if the market going to be better, do we have to wait until the second-half of next year until they’re going to put the stones on the market?

William Lamb: So I think, if we look at what we have there is it - I guess, the one is the 374 carat stone lot of people come in, they pull off to buy that stone. It is most probably it will be the third highest value stone that we’ve ever recovered. And but putting that one out there along with the Constellation and the other stones, which we’ve got.

In Lesedi, it will produce something which is much larger than what we would normally get. But again that sits in that platform of 100 carat polished range which we know that there is a significant number of those stones. I think, as we look into we’re still planning on the two exceptional stone tender for next year, it’s not that we’re sitting on an enormous inventory of diamonds, which we haven’t sold in those size ranges. What we’ve seen is the consistent recovery of those which we had been managing as we sell into the market very similar to what you see with the exceptional stone tender now.

Ola Södermark: Okay.

That’s great. Thank you.

William Lamb: Thanks, Ola.

Operator: [Operator Instructions] Your next question comes from the line of Edward Sterck. Your line is open.

Edward Sterck: Hi, Edward Sterck here the question I got just relates to the Constellation diamond, which is obviously sold into a partnership agreement. I was just wondering what the - if there is any update to the progress in terms of cutting and polishing and the eventual sale of the polished?

William Lamb: Actually - and I met with the guys from Nemesis who acquired that stone. The stone is actually going to be launched in Dubai next week, just the rough again. They have shown me one or two of the possible outcomes from the stone. It is fairly large stone, plus a very large secondary stone, which they are looking at.

Problem with the stone like that is that the number of potential outcome is really based on who they expect to sell the final stone to and they sort of - when I spoke to them, they were very hesitant to give a commitment as to when the stone is going to be polished. I think they are only looking at having the polished stone available for most probably third or fourth quarter next year. When you spent $63 million on a diamond, I think they are sort of just making sure that they understand exactly where the final polish is going to go, and what the based outcome is based on who the potential clients are for that stone.

Edward Sterck: Great. Thanks very much.

Operator: I’m showing no further questions at this time. I would like to turn the conference back over to Mr. Lamb.

William Lamb: Great, thanks, Kelly. So I’d like to thank everybody for attending the Lucara Q3 results.

I think again, we’ve been able to demonstrate the quality of the resource how it continues to add value, the value which we have been able to then drive back for shareholders in terms of both the share price movement as well as what we paid out in dividend. We would like to thank everybody for their ongoing support. Thank you very much, Kelly.

Operator: Ladies and gentlemen, this concludes today’s conference. Thank you for your participation and have a wonderful day.

You may now disconnect.