Executives: Eira Thomas - President and CEO Zara Boldt - CFO John Armstrong - VP, Technical

Services
Analysts: Geordie Mark - Haywood Securities Scott Macdonald - Scotia Capital Kodees Waran - BMO Capital

Markets
Operator: Good morning ladies and gentlemen and welcome to the Lucara Quarter Three 2018 Results Conference Call and Webcast. 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 conference over to your host, Ms.

Eira Thomas, Chief Executive Officer. You may begin your conference.

Eira Thomas: Thank you very much and thank you to everyone for joining Lucara's third quarter operation results call. My name is Eira Thomas and I am the CEO of the company. I will begin with some operational highlights after which I'll be asking Zara Boldt, our CFO to review some financial results for the quarter.

I will then ask Dr. John Armstrong to provide some additional technical commentary and updates on our underground feasibility work. Joining us today on this call as well is our Vice President of Corporate Development, Ayesha Hira. So, operationally in Q3, we really had a strong quarter. The transition to Trollope Mining Services was executed smoothly with limited disruption, and it was completed a full three months ahead of schedule.

Safety has markedly improved, and we are now tracking more than 5 million man-hours without a lost time incident. We've also experienced record production in both ore and waste. And the processing plant has also achieved its highest availability and utilization levels in the history of our operations. We have remained on track to meet guidance with respect ore and waste mined, revenues, and costs. We expect to exceed guidance with respect to carats produced and sold.

This is in part owing to a higher recovery of small diamonds related to the newly commissioned minus eight plus four middles XRT circuit and overall improvements to plant performance and Mr. John Armstrong will talk more about that a little bit later. Though this is very positive with respect to overall revenues, the higher recovery with smalls does have a modest impact to our average revenue dollar per carat prices achieved. Particularly in Q3, as we have seen prices for these smaller goes off as much as 20%. But as our shareholders will appreciate, Lucara enjoys a strong advantage in the market by virtue of the fact that a good proportion of our revenue comes from large diamonds in excess of 10.8 carats in size, and we are generally well insulated some of the volatility that can be impact a small-stone market.

In addition, this quarter, we did announce that we will be commencing our first sales of Lucara later this month. So, we're excited about that, and I'll be talking more about that in a few slides further into the presentation. And we have -- we'll be paying out our Christmas dividend on December 20th and as a reminder that we are paying out a full $0.10 for 2018. A little bit more information and color here on the diamond market, I think overall, we saw strong continued demand and I think the scene really here is stability. As I mentioned earlier, the exception to that would be well we did see some weakness in the small diamond market.

We are anticipating a strong Christmas season in the U.S. and that certainly bodes well going into 2019. We have included a single slide on De Beers Lightbox initiative because we have been getting a lot of questions about this, and this is an initiative by De Beer to really move aiming to the synthetic diamond market, particularly with colored synthetic diamond, and it's an effort to differentiate synthetics from natural diamonds. And we certainly support this. We see these two markets as parallel and synergistic.

And as a reminder, synthetics currently represent less than 5% of the world's rough diamond supply. And we believe that natural diamonds continue to enjoy a strong premium in the market and we'll then continue. And then the supply/demand fundamentals for natural diamonds continues to look strong going forward into 2020 and beyond. In terms of our sales to-date, in the quarter, we sold close to 90,000 carats for revenues of just under $42 million that included five diamonds that sold for more than $1 million each, including two, which sold for in excess of $3 million. For the year-to-date, that brings us to $136 million in revenue or $564 carat, 21 diamonds sold for more than $1 million of which six were sold for in excess of $3 million and a single diamond sold for more than $10 million.

Right now, I'd like to turn it over to Zara Boldt, our CFO to take you through some of our financial and operational highlights.

Zara Boldt: Thanks very much, Eira. Just to remind you that we will be making some forward-looking statements here. At the beginning of the presentation, we've got a very long disclaimer. So, I'd encourage you to lead that at your leisure.

Our operational performance at Karowe for the three months ended September 30th, 2018 exceeded expectations with tons of ore mined and processed and carats recovered all well ahead of plan and higher when compared to the same quarter last year. This is mainly reflection of the performance of the new mining contractor Trollope, who has now assumed all responsibility for ore and waste mining. We are very pleased with how quickly Trollope was able to ramp-up and the production numbers during the third quarter have been excellent. This operational performance combined with increased processing plants availability and utilization, which John will speak to shortly, has been very positive. Waste mining during the quarter was less than in the same quarter last year that is consistent with our expectations and tracking well to achieve our full year guidance.

We concluded our first blended tender during the quarter recognizing $41.8 million from the sale of 89,461 carats and an average sales price per carat of $467. We also received $3.9 million from the June tender resulting in total revenue recognized of $45.7 million during the quarter. In the comparative quarter, total revenue of $77.9 million included $53 million from the sale of the exceptional 1,109 carat Lesedi La Rona. Excluding the Lesedi La Rona, our average sales price per carat in the comparative quarter was $389. Our operating margin for the third quarter this year was 59% or $265 a carat.

Looking at operational highlights on slide nine for the nine months ended September 30th, 2018. On a year-to-date basis, tons of ore and waste mined and tons of ore processed are all higher than the comparative nine-month period from 2017 and consistent with our expectations for the current year. Operating expenses have increased by approximately 13% on a year-to-date basis, which is a reflection of the higher cost per ton mined and one-time cost relating to the mining contractor transition mid-year. This results in an operating margin of 63% or $356 per carat. Results in a comparative period are positive affected by the $53 million received from the sale of the Lesedi La Rona.

Moving to slide 10, we have our financial highlights for the nine months ended September 30th. Total revenue was $135.6 million as compared to total revenue of $183.6 million, a difference of $48 million. EBITDA of $55.7 million, net income of $17.8 million and earnings per share of $0.05 were all in line with our expectations but lower than the same period in 2017, again, primarily due to the sale of the Lesedi La Rona in the third quarter of 2017. Year-to-date net income of $17.8 million was significantly impacted by depletion and amortization expense of $20.1 million as compared to depletion and amortization expense of $10.9 million in the comparative period in 2017. Depletion and amortization expense has increased due to a change in reverse base following the mineral resource update mid-year as well as a significant increase in the number of carats recovered this year.

Higher capitalized production stripping and amortization expense on production assets that were commissioned in Q3 2017 also contributed to the higher expense as compared to the same period last year. The Clara achieved $960 a carat for total sales in 2017 or $687 a carat if the Lesedi La Rona is excluded. This compares to total sales of $564 a carat in the current period. During the nine months ended September 30th, 2018, we sold 240,245 carats, an increase of almost 26% from the comparative period in 2017. The increase in the number of carats available for sale follows commissioning at the sub-middles circuit in Q3 2017 and increased efficiency in diamond recovery in the smaller sizes during 2018.

These higher carat recovery rates have a positive impact on our operating costs per carat sold but reduce our average sales price per carat sold. The recovery of a larger number of smaller diamonds does not have a significant impact on our total revenue. Certain diamonds in the one to 15-carat range will be sold on Clara this month and revenue from that sale will be recorded in the fourth quarter. Our operating cost per ton processed was $41.20 in the current period as compared to $32.40 for the same period in 2017. The increase in cost of per ton processed reflects an increase in year-to-date tons mined.

So, this year, 14.8 million tons mined versus just over 12 million tons in the comparative period, and an increase in tons processed so just over 2 million tons this year as compared to 1.7 million tons in the same period last year. This combined with an increase in the cost per ton mined due to the mining-contractor transition, which commenced midyear. Forecast costs for the 2018 fiscal year are still expected to be within guidance albeit at the high-end. Moving to slide 12 of the presentation, we have some updates to our 2018 guidance. We are increasing the 2018 guidance for diamonds recovered and sold from a range of 270,000 to 290,000 carats now to 325,000 to 350,000 carats.

This increase is due to better plant performance resulting in a higher recovery of smaller diamond, which do not contribute materially to the company's revenue. Despite the anticipated increase in carats recovered, revenue's expected to remain in the range of $180 million to $190 million. Our previous guidance was $170 million to $200 million. We are increasing our 2018 forecast for ore mined from 2.5 million to 2.8 million ton now to 2.9 million to 3.1 million ton. The 2018 mine plan was amended following the mineral reserve update midyear and additional lower grade ore is being mined and stockpiled.

There are no changes to our 2018 guidance for waste mined, tons of ore processed, and our operating cash cost per ton of ore processed. To wrap-up, the third quarter saw a stabilization of operations at Karowe following a period of underperformance by the previous mining contractor. In addition, improved plant efficiencies have resulted in a larger number of carats recovered. We are increasing guidance for diamonds recovered and sold and for ore tons mined and reiterating our guidance for waste mining, tons of ore processed, and estimated costs. I will now turn the floor to Dr.

John Armstrong to speak to the processed plant improvement and carat recovery. Thank you very much.

John Armstrong: Okay. Thank you, Zara and Eira. Good morning and good afternoon to everyone.

So, we're on slide 13 and we'll -- basically, what I'll touch on here is the steady increase in milled tons, and this is the result of the considered effort by the team at the Karowe diamond mines who improved plant availability and utilization and over the last number of quarters building on and getting back to where we were in previous years. And if you look at the steady increase in milled tons quarter-on-quarter, Q3 2018, we saw 728,000 tons processed through the mill. And in September, we had a record month for the mine at 268,000 tons. This is the highest throughput that we've seen since mining began. Next slide, please.

So, on a positive outcome in improvements seen in the process plant there's an increased in carats recovered. In Q3 of 2018, we had a 127,000 carats recovered, which is the second highest quarterly production since the mine began operations in 2012. This is on the back of the plants improvement. As mentioned previously improvements on diamond recovery from the four to eight circuit as that's been now running for a year, and we're seeing a lot of runtime optimization with that particular circuit and improved recovery and the minus four mm size range due to its efficiencies in or DMS performance. We have also have seen strong performance of the resource, and we've had the opportunity to run some EM/PK(S) through the plants, which is a higher grade portion of the South lobe which recovered grades in the neighborhood of 22 cpht, which has also provided a boost to the overall carats recovered.

We've also seen strong resource performance with respect to the recovery of plus 10.8-carat diamonds referred to as specials. We're tracking this year for one of the better years that we've had since production began, an overall volume of plus 10.8-carats recovered. We're sitting it just shy of 20,000 carats recovered at the end of Q3. During Q3, we have recovered 10 diamonds greater than 100 carats in weight, including two diamonds greater than 300 carats. They were near gem quality diamonds unfortunately, and one of them came in at a weight of 544 carats for that particular diamond.

Again, on near gem quality stone. So, this again -- this is further testament to what the South lobe can produce with respect to the course nature of the size fixed to distribution. Now, we're on slide 15, we're looking at -- this put some numbers to the consistency and recovery specials over the life of mine. And you can see for 2018, we're sitting at year-to-date just shy of seven-weight percent plus 10.8 carats. Next slide, please.

Sorry -- I'm just a little bit out of sync with what's on -- I think, the next slide should be looking at the achieved price per carat over the life of mine from our various sales, which would be a slide -- yes; there you go slide number 16. So this just shows us the average price achieved over the life of mine. And as both, Eira and Zara, indicated through -- for our Q3 sale, we had a larger volumes of smaller diamonds and that part of the diamond market has been under pricing pressure, and we saw some of the lowest prices achieved in the small, especially the poorer quality smalls that we've seen over the last year and a half and that has a significant impact on the average price. Well just -- well actually an overall positive contribution to revenue, but it does hit the average price per carat a little bit. Next slide, please.

I'm now going to shift focus. And I'm going to speak to what's been happening with the underground study and then I'll hand the presentation back to Eira, who will provide an update on Clara. So, with respect to the underground project, since we published the positive PEA in November of last year, we made significant progress on derisking the underground project. This -- the first step in that was the resource update, which we announced in June of this year and then the 42-101 was published in August of this year, which saw the successful conversion of the South lobe from inferred to indicated between 400 and 600 meters below surface, which allows us to continue forward with the feasibility study. And one of the major outcomes of that was the evidence that the EM/PK(S) unit became volumetrically the most significant rock type at depth within the South lobe and EM/PK(S) within the resource model has recoverable grade of 22 cpht, has a demonstrating core size frequency distribution.

And we've seen that come through with some of our recent production runs and I'll touch on that in little bit. We've initiated a series of technical programs and trade-off studies with respect to underground access and overall mining method selection. We have engaged with the Government of Botswana on mining these extensions for the open pits with which we see no issues with respect to that. And an extension to cover the underground mining components and those have been positive interactions and we don't see any roadblocks with proceeding with the -- mining these extension. Next slide, please.

In the third quarter of 2018, we made some significant progress on the technical programs. And overall derisking of the project on the geotechnical drilling program, which is at the end of Q3 set at 66% complete with over 15,000 meters of drilling. This is targeting infrastructure, both surface and underground infrastructure locations. It's giving us more information on the country rock and the kimberlite rock mass models and increasing our overall confidence in rock-type characteristics. There have been no surprises in that geotechnical drilling.

It's just supporting and giving us better insight into any particular ground support that may be required for vertical and/or lateral development underground. Another significant project that was run was the understanding the deep ground water aquifers systems and the overall hydrology at depth at AK6. And the results of that program have been favorable and are much more favorable than original model suggested that we would see. And it's reaffirmed that our current open-pit dewatering strategy is working and we're rationing our mining down into the sandstones. The pit is dry; slope depressurization has gone according to plan and we have a working plan for 2019 to dewater and depressurize at depth in support of any potential underground mining.

In terms of overall upside, we -- as I mentioned earlier, we had the opportunity in February this year and again in the -- at the end of the third quarter and beginning of the fourth quarter to run some focused mining samples at the EM/PK(S) through production plant. This gives us a better insight into the size-frequency distribution and the value distribution of the EM/PK(S) and we're just undertaking the study now to see if there's any potential upside to revising the size for frequency distribution model that we have for the EM/PK(S). With respect to timelines on the underground project, we anticipate seeing the technical packages with the respect to drilling and due technical wrap-up at the beginning of the second quarter of 2019. And we're aiming to have a feasibility study out in the second half of 2019 and potentially seeing some early works toward the underground in the latter part of next year in Q4 of 2019. We're also carrying on with ongoing mining selection methods, scheduling and taking into account the significant derisking that we've done on the project through 2018.

I'll now -- we can go to the next slide and I'll hand this -- the presentation back to Eira to speak on Clara.

Eira Thomas: Thank you very much, John. For those of you who are unfamiliar, Clara is the world's first secured digital rough diamond sales platform to sell diamonds individually based on a customer's specific demand. And it's positioned to completely transform the diamond sales process, creating efficiencies and unlocking significant value for producers and manufacturers, alike. Clara commercialization efforts are now complete, and we are very pleased to be moving forward with our inaugural diamond sale later this month.

Since Q3, Lucara has been setting aside diamonds in the one to 15-carat size range and the better colors and qualities for sale on Clara. And the rough diamonds offered in Clara's first sale will include those diamonds together with the selection of diamonds from aggregated third-party sources and all of that as I mentioned will take place a little bit later this month. Following the incorporation of feedback from this initial sale, we intend to move into continuous sales using qualifying goods from the Karowe diamond mine and thereafter, we will be also inviting other producers and manufacturers to participant on the platform. Moving forward to the next slide, please. I'm talking -- I want to talk a little bit about our strategy with respect to corporate development.

Our near-term growth opportunities consist of the underground, as John has already mentioned, and Clara. But going forward we do see an opportunity for Lucara to look at other opportunities to diversify our asset base and grow our production profile. So, we are very open to the idea of acquiring other mining assets as well as potentially other technology assets, and we have got a very well-defined and focused strategy around evaluating and searching for those types of opportunities. Next slide, please. Going forward into 2018 -- towards the end of 2018 and going into 2019, we see a number of important catalysts.

We are, obviously, very excited to be moving forward with Clara. And you'll hear a lot more about that in the fourth quarter and moving into the early part of 2019. We will also continue with our efforts around the feasibility study, as John has already mentioned. We see a good opportunity to extend the mine life at Karowe from 2026 to 2036 and beyond. We will continue to see the result our revised wonder sales strategy and we are going to be investing in a very disciplined way and some additional Brownfields and Greenfields exploration in and around our mine site in Botswana.

I'd like to thank everybody for participating today and now open up the call to questions and answers. Thank you very much. Operator?

Operator: Thank you. [Operator Instructions] Your first question comes from the line of Geordie Mark from Haywood Securities. Your line is open.

Geordie Mark: Yes, thank you. And thanks for hosting the call this morning. If I can ask a few questions on operations and sales. In terms of -- this may be going on for what John was saying, for processing. So, obviously, some excellent processing rates it's almost 9,000 tons a day in September.

Do you expect that to continue at that rate? Or do you expect that to rattle down a few percent based on sort of normal operational cost for an annualized basis?

Eira Thomas: I'll maybe jump in there and then let John take that. Geordie, we're really striving to do here and I think it's, obviously, very comforting to see the performance in the plants. But I -- and while this is -- it looks very recent, I can tell you it's been part of a very strong continuous effort over the last several quarters. So it is our ambition to try and obviously, maintain this asset utilization and availability and we think we've got a good handle on it. So, can we maintain that pace consistently? We're still in the early days.

But we're feeling very good about some of the changes that have been implemented on site to bring about this change of performance. And we do expect it to expect it to continue. John, you have anything to add to that?

John Armstrong: No, nothing in particular, Eira, rather than I think what we've seen is that recent steady-state with the four to eight circuit. It's been the first time, where we've -- in long-traded time where we haven't been messing with the process circuit, so to speak. So, it's I think the reaching the steady-state.

And as Eira said that it's been a concerted effort to increase availability and utilization of the plants and we're seeing that benefit.

Geordie Mark: Thank you. Okay and on terms of -- I notice a significant proportion of production inventoried in the quarter. And given the sub-middles, I guess, came in sometime during that quarter to full effectiveness? So is there -- if we were to look at a value per carat, almost, stones and inventory versus those that were sold? Are they like-for-like or are we getting a great proportion of the mass proportion of minus four mm fraction, which is in those inventory stands?

John Armstrong: I'll take that question. I think I would look at it as like-for-like.

Geordie, I don't think that the improvement in recovery grade is a function more of some higher grade ore that's been processed, which -- as opposed to improvement in the four to eight and the DMS portion of the circuit. I mean they are making a contribution to the carats, but it would be similar to what we observed in the Q3 sale.

Eira Thomas: It's clear. I just want to clarify here that we are not inventorying stones. Are you talking about ore?

Geordie Mark: No, no.

it's just ultimately, your sales are lower than you're -- than ultimately what you produced. So, it was a net inventory at the end of the quarter build?

Eira Thomas: Right. And that is typically the cutoff and -- that we go through any sales cycle, Geordie. So, they're not inventories specifically that's just the cutoff of goods that were made available for sale in this sale. So, the intention is to sell those all at the next sale.

We're not actually deliberately setting aside certain portions of goods, I guess just to clarify.

Geordie Mark: Yes, I know its normal course of business. And one, one more if I could and then obviously others will come. Obviously, some very large stones coming out, plus 100 carat stone. We see the greater proportion of stones coming out from the smaller side because of their improvements in the recovery circuit.

Should we look at rattling down our weight percent of plus 10.8 carats going forward if we improve our grade perspectives as well as a balance of those two sides of the equation, and that's it for me?

Eira Thomas: Zara let John tackle that one. No, you shouldn't.

John Armstrong: No, I mean, we'll look at it. It's a good question and yes, if we recover more finds then the -- then we the overall percent of large stones decreases, but we have to bear in mind they're not going away, right? So that will be sold in last Q3, and we look forward to selling in Q4. They'll be a large proportion of single stones up for sale.

So, it's the overall weight percent may decrease, but the volume of carats in that plus 10.8 carats size category is steady to increasing, and I think it's well-demonstrated on the 1 slide in the deck where you can see where our almost 20,000 carats over plus 10.8 year-to-date.

Geordie Mark: That's clear. Thank you.

Operator: [Operator Instructions] Your next question comes from the line of Scott Macdonald from Scotiabank. Your line is open.

Scott Macdonald: Hi good morning guys. Thanks for hosting the call. Maybe I'll just start with a couple of questions about the operating cost. Zara, could you give us what your mining cost per ton moved were in the quarter? And also how -- you mentioned a one-time cost factor during the transition. Could you quantify that for us?

Zara Boldt: Sure.

I mean, I think, Scott to answer that, we're trending towards $3.50 per ton mined for the year. Actually the one-time cost have not been as significant as expected. There sort of in the $1.5 million to $2 million range, and yes.

Scott Macdonald: So, $3.5 per ton for the year, but it's -- as if I understood it was going up under the new contractor, so it would be higher than $3.5 in Q3 and going forward?

Zara Boldt: No, sorry. We are expecting to end the year at about $3.50 per ton.

Scott Macdonald: Okay, so not for the full year, but that's the run rate.

Zara Boldt: Yes. Sorry didn't answer that well.

Scott Macdonald: And so that would be sort of around your expectations going into 2019 and beyond?

Zara Boldt: I think -- what we're seeing with the $3.50 a ton is a blend between a lower rate from the underperforming mining contractor and a higher rate from the mining contractor that is currently performing. So, you'll remember that transition happened in the mid-year.

So, I would that our expect mining costs per ton mined will be closer to about $4 a ton going forward. What we were seeing is about a 25% to 30% increase in rates with the new mining contractor. And again, we feel that's reflective of the current market and really, we been probably where the contractor should have been.

Eira Thomas: And of course, Scott, the other piece of that is that we've been in this major period of weight stripping to expose the South lobe for the next six years open-pit mining. So, as we trend into 2019, we're now through that bottleneck and the amount of waste that more moving is going to start to come down.

And that obviously, will have an impact on cost as well.

Scott Macdonald: Right, of course. But just looking at Q3 versus Q2, it seems like your -- and correct me if I'm wrong here, but it seems like your operating costs went up by about $0.50 -- 50% with a similar level of mining and processing activity. So, I'm just trying to get my head around what's driving that increase? So, It sounds like a portion was one-time cost, but it seems as though there's more to it there.

Zara Boldt: I think the other thing that's probably driving that, Scott is that we had quite a high level of ore mining in the quarter as well.

And as that we expect to drop off into the fourth quarter. So, I think it's a combination of a higher number of tons mined, a higher unit rate for mining and the impact of one-time cost in the quarter.

Scott Macdonald: Okay, by -- I mean, I think the total tons mined was similar to last quarter but anyways. Maybe moving on to, just as you mentioned, there was higher ore tons mined from the North lobe. Is that kind of just a one-off for Q3? Or has there been more substantial changes to the mine plan going forward as compared to that tech report you put out recently?

John Armstrong: No, the mining in the -- for the North lobe was anticipated.

And basically, we've done a split shell to protect access to South lobe ore during interactions with the previous mining contractor. And now we're mining waste toward the north portion of the pit. And therefore, we have to take some of the North lobe ore as we dropped down and the bulk of that is going to stockpile.

Scott Macdonald: Okay. But this is why the ore ton mines -- or the ore tons mined guidance was increased, I presume? Was this versus North lobe ore?

Eira Thomas: Yes.

John Armstrong: Yes, and overall we had the opportunity to take some ore out of the South lobe and that also accelerated ore mining.

Scott Macdonald: Okay. Maybe moving off that, just looking at -- so you've obviously increased your -- you've increased your grade and your production guidance for the year but really just kind of narrowed the revenue guidance. Is there -- and how much of that increased production is from the resource grade performance versus sort of additional liberation of the smaller low-value diamonds just trying to understand how there can be such a large increase to the production guidance, without an increase to the revenue guidance?

John Armstrong: So, the -- I guess, I'll answer that question as best I can. Scott, I think that the -- in terms of the revenue guidance, we're getting ready to do our next tender in about a month's time.

So, we have a pretty good eye of what we're going to be able to offer for tender, which is in part influenced by production through the third quarter, which has a component of an increase in fine diamonds, which we know to be under pressure in the market. So, that's sort of leading the overall guidance on revenue. With respect to the resource performance, it's a combination, and I couldn't really give you a breakdown of -- it's a combination of better recovery of the finer diamonds, which is making a contribution of a certain extent, but also we've run into some better resource performance in terms of -- within the South lobe we're seeing an increasing grade over what we anticipated in the resource model. So that could be a function of a number of factors, including what -- how we apply our recoverable grade model to the resource and improved plant efficiencies. So there's a few things that are stacking up to help with the carats.

Scott Macdonald: Okay. That's helpful. Thanks. I do have a couple more questions, but I'll get back in the queue. Thanks.

Operator: [Operator Instructions] Your next question comes from the line of Kodees Waran from Bank of Montreal. Your line is open.

Kodees Waran: Thank you. Good morning everybody. At the production guidance now you are looking around 325,000 to 350,000 carats.

Actually if you look at year-to-date performance around 284,000 carats, it actually implies only 40,000 to 65,000 carats in Q4, which is actually much lower than Q3 production of 127,000 carats. Why is that such a huge variation on production even though now you are recovering more smaller diamonds?

John Armstrong: Do you want to -- Eira -- would you like me to answer the question, Eira?

Eira Thomas: Sure, sure. Surely, John, go ahead. Sorry, we were on mute here. Go ahead.

John Armstrong: So, I think that with respect to ore mining, I mean, we may also -- because we're moving toward the final kind of big push on waste that the production of ore through the plant may drop off and I think the guidance is being a little bit prudent. We are coming into a period where we're going to have an extended shutdown on the plant, which is part of an overall plant maintenance. So, there'll be a number of days of lost production, which we've also built into the guidance.

Kodees Waran: All right, okay, great. Thank you very much.

Maybe on the similar area of maybe into -- so now you are recovering more smaller diamond, it's actually now -- you have published your technical report in August? Is that technical report numbers, for example, the sales prices and production numbers reflect this increased diamond liberation? Or is it just before these things that you have incorporated?

John Armstrong: That's a good question. And I would say that the improvements in plants efficiencies and things like that are relatively new. And what was incorporated into the recoverable grade model and the 43-101 was reflective of past plant performance. And that is something that we're looking at and we'll have an opportunity to update with the feasibility study if we're going to make changes to the recoverable grade model and things of that nature, which would impact the resource.

Kodees Waran: All right.

Okay. Thank you very much. And then one more thing maybe, if I can. So, during Q3, you have recovered around -- you have recovered 10 stones in excess of 100 carats. And then you also highlighted that you have -- keeping some or retailing some diamonds for the Clara sale.

Actually I have for you two questions. One is actually, how many 100 plus or 100-plus carats you sold during the quarter? And the second one is if you include those withheld diamonds that is actually a huge amount for Clara, what could be your relaunch prices?

Eira Thomas: John, do you want to start? And then I'll just end.

John Armstrong: Yes, I guess, when it comes to the plus 100 carat diamonds sold, I can -- I don't have the number at my fingertips, but the number sold isn't necessarily reflective of what we recover in the quarter because the cutoff for the Q3 sale occurs before the end of the third quarter. So, they -- those numbers will never bounce. With respect to the potential or the impact of the -- on the average price for carats for the goods that were taken away for Clara, we have an idea internally what that impact is, but I don't think we're -- we don't want to message anything about what -- with respect to that at the moment.

I think it's something that we have an idea of the impact and come the fourth quarter when we realize the sale through Clara then we'll back calculate that into the third quarter average price per carat.

Kodees Waran: All right, Okay. Maybe one last question. Actually during the quarter the depreciation number is significantly higher than, I mean, historical quarters. Are there anything to note on that?

Zara Boldt: Yes, we do expect that to maintain at a fairly similar level going forward.

The reason for the change, it's resulting from a change in the reserve base. In this quarter, we always said a significant increase in the number of carats recovered. And then last year, we bought inter-servicing number of production asset, so they're fully in play. And they are being amortized on a go-forward basis. So, it's a combination of the depletion and amortization.

We've come through a fairly large waste stripping campaign. And -- so we expect the run rate I think around depletion and amortization to continue to be fairly high over the next couple of years at least.

Kodees Waran: Okay. Thank you very much.

John Armstrong: So, I can answer the plus 100 carat diamond question.

So, in the third quarter sale, we sold two individual stones in excess of 100 carats. One weigh in at 267 carats and the other weigh in at 320 carats. Any other plus 100 carats stones that were sold would have been in the near gem and sold in a basket. So, we had two single stones over a 100-carat -- well they're actually both over 200 carats.

Kodees Waran: Okay.

Thank you very much.

Operator: [Operator Instructions] And there are no further questions. I would now like to turn the conference over to Ms. Eira Thomas for closing remarks.

Eira Thomas: Okay, well, I just would like to thank everyone for participating in our third quarter call today and wish everyone a great rest of your day.

Thank you very much.

Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.