NI 43-101 Technical Report on the Preliminary Economic Assessment of the Karowe Diamond Mine Underground Project Effective Date: 31st October 2017 Report Date: 27th November 2017 Prepared For: Lucara Diamond Corp. Suite 2000 885 West Georgia Street Vancouver, BC V6C 3E8 Canada Prepared by: Royal HaskoningDHV Building No 5 Country Club Estate 21 Woodlands Drive Woodmead 2191 Qualified Persons Mr. Guillaume Johannes Oberholzer Pr.Eng, SMSAIEE Royal HaskoningDHV BSc Honours (Min. Tech.), Mr. Norman George Carroll Blackham Royal HaskoningDHV Fellow SAIMM Mr. John Anthony Cox Pr.Eng, ECSA, Fellow SAIMM Royal HaskoningDHV Mr. Jody John Thompson B.Eng, Fellow SAIMM Royal HaskoningDHV BSc Honours, MSc Dr. Kym Lesley Morton KLM Consulting Hydrogeology, PhD, MBA BA Honours, Dr. Markus Tilman Reichardt PhD in Restoration Ecology/ Reichardt & Reichardt Rehabilitation Dr. Tom Nowicki PhD. P.Geo Mineral Services Canada Dr. John Armstrong PhD. P.Geo Lucara Diamond Corporation Table of Contents 1 Summary 11 1.1 Introduction 11 1.2 Property Location and Description 11 1.3 Geology 13 1.4 Mineral Resources 15 1.5 Mineral Reserves 16 1.6 Geotechnical 16 1.7 Hydrogeology 17 1.8 Mining 17 1.9 Processing 20 1.10 Capital and Operating Costs 20 1.10.1 Capital cost estimates 20 1.10.2 Operating cost estimates 21 1.11 Economic Analysis 22 1.12 Conclusions and Recommendations 23 2 Introduction 25 2.1 Scope of Work 25 2.2 Previous Technical Reports 25 2.3 Qualified Persons 26 2.4 Principal Sources of Information 28 3 Reliance on Other Experts 29 4 Property Description and Location 30 4.1 Overview of Botswana 30 4.1.1 Types of mineral licence in Botswana 30 4.1.2 Fiscal regime of Botswana 30 4.2 Issuer’s Title, Location and Demarcation of Mining Licence 30 4.3 Permitting Rights and Agreements Relating to Karowe Mine 34 4.3.1 Surface rights 34 4.3.2 Taxes and royalties 34 4.3.3 Obligations 34 4.3.4 Environmental liabilities 34 4.3.5 Permits 34 5 Accessibility, Climate, Local Resources, Infrastructure and Physiography 37 5.1 Accessibility 37 5.2 Access 37 5.3 Climate 37 5.4 Infrastructure and Local Resources 38 6 History 39 6.1 Early Work: De Beers Prospecting Botswana (Pty) Ltd and De Beers Botswana Mining Company (Pty) Ltd 39 Karowe Underground PEA Royal HaskoningDHV 2 6.2 Debswana Diamond Company (Pty) Ltd. PL17/86 39 6.3 De Beers Prospecting Botswana (Pty) Ltd, PL1/97 39 6.4 De Beers Prospecting Botswana (Pty) Ltd, PL13/2000 40 6.5 The Boteti Joint Venture 40 6.6 Boteti Exploration (Pty) Ltd and Boteti Mining (Pty) Ltd 40 6.6.1 Lucara Diamond Corporation 40 7 Geological Setting and Mineralisation 42 7.1 Local and Regional Geology 42 7.2 Property Geology 43 7.3 Kimberlite Geology 44 7.3.1 Calcretised kimberlite (CKIMB) 47 7.3.2 Weathered kimberlite (WK) 47 7.3.3 Basalt breccia (BBX/KBBX) 47 7.3.4 North Lobe Kimberlite Units 48 7.3.5 Centre Lobe kimberlite units 48 7.3.6 South Lobe kimberlite units 48 8 Deposit Types 50 9 Exploration 52 9.1 Exploration Approach and Methodology 52 9.2 Geophysical Surveys 53 10 Drilling 54 11 Sample Preparation, Analyses and Security 56 11.1 Reverse Circulation, 12¼" Drilling 56 11.2 Reverse Flood, 12¼" Drilling 56 11.3 Trench Samples 57 11.4 Diamond Recovery 57 12 Data Verification 59 12.1 Basis for Geological Model 59 12.2 Drill core Logs 60 12.3 Internal Dilution 60 12.4 Geology Model 60 12.5 Bulk Density Data 61 12.6 LDD Grade Data 61 12.7 Production Data 61 12.7.1 Grade control data 61 12.7.2 Process data 61 12.7.3 Diamond data 62 13 Mineral Processing and Metallurgical Testwork 63 13.1 Comminution Testwork 63 13.2 XRT Testwork 63 Karowe Underground PEA Royal HaskoningDHV 3 13.3 Diamond Breakage Analysis 63 13.4 Further Testwork 63 14 Mineral Resource Estimates 64 14.1 Geology Modelling 65 14.1.1 Geology model update and volume estimates 65 14.1.2 Geological continuity 70 14.1.3 Confidence level of geology model 72 14.1.4 Block model 73 14.2 Bulk Density and Tonnage 74 14.2.1 Bulk density data 74 14.2.2 Bulk density estimation approach 75 14.2.3 Confidence level of bulk density / tonnage model 77 14.3 Diamond Grade 80 14.3.1 LDD sample data 80 14.3.2 Grade estimation approach 83 14.3.3 Adjustment for recoverable grade 87 14.3.4 Confidence level of grade estimates 90 14.4 Size Frequency Distribution (SFD) 90 14.4.1 SFD continuity 92 14.5 Diamond Value 94 14.6 Mineral Resource Statement 95 15 Mineral Reserve Estimates 97 16 Mining Methods 98 16.1 Geotechnical Assessment 98 16.1.1 Data sources and previous study work 98 16.1.2 3D Geological model and geotechnical setting 99 16.1.3 Geotechnical data from the 2016 / 2017 drilling programme 107 16.1.4 Rock strength and known rockmass parameters 109 16.1.5 Conclusion with regards to the geotechnical database 110 16.1.6 Geotechnical mine design considerations 111 16.1.7 Mine support 111 16.1.8 Gap analysis 112 16.1.9 Forward work plan 113 16.2 Hydrogeology 115 16.2.1 Regional and local hydrogeology 115 16.2.2 Dewatering of the current open pit 118 16.2.3 Dewatering to support open pit and underground 122 16.2.4 Estimate of inflows to the proposed underground mine 126 16.2.5 Recommendations 128 16.2.6 Proposed work for PFS 130 16.3 Open Pit Mining 132 16.3.1 Geological block model used in whittle 132 16.3.2 Whittle runs 133 16.3.3 Observations from the whittle runs 135 16.4 Underground Mining 136 16.4.1 Background 136 Karowe Underground PEA Royal HaskoningDHV 4 16.4.2 Mining method selection 137 16.4.3 Mine design 138 16.4.4 Underground primary access 141 16.4.5 Secondary access 141 16.4.6 Mine planning 141 16.4.7 EPS schedule 143 16.4.8 Draw control strategy and procedure 145 16.4.9 Ground water ingress mitigation 145 16.4.10 Mechanised equipment fleet 145 16.5 Ventilation 146 16.5.1 Introduction 146 16.5.2 Manual calculations for mobile equipment and required ventilation 146 16.5.3 Modelling 147 16.5.4 Considerations 149 16.5.5 Conclusion 150 17 Recovery Methods 151 17.1 Mineral Processing Plant 151 17.1.1 Flowsheet and process description 151 17.1.2 Recommendations 152 18 Project Infrastructure 153 18.1 Surface Infrastructure 153 18.1.1 Roads and air access 153 18.1.2 Portals 153 18.1.3 Workshops 153 18.1.4 Water handling 153 18.1.5 Change house and crush 154 18.1.6 Contractors area 154 18.1.7 Bulk power supply 154 18.2 Underground Infrastructure 154 18.2.1 Underground dewatering 154 18.2.2 Vehicle service and refuelling bays 154 18.2.3 Power and communication 154 18.3 Tailings Storage Facility 155 18.3.1 Background 155 18.3.2 Design Criteria 155 18.3.3 Layout 156 18.3.4 Methodology 156 18.3.5 Infrastructure 158 18.3.6 Cost estimation 159 19 Market Studies and Contracts 160 19.1 Diamond sales 160 19.2 Client Base 160 19.3 Rough Diamond Market Outlook 160 20 Environmental Studies, Permitting and Social or Community Impact 162 20.1 Environmental Studies Completed to Date 162 20.2 Environmental Management 162 Karowe Underground PEA Royal HaskoningDHV 5 20.3 Water Usage and Management 163 20.4 Slimes Dam 163 20.5 Waste Rock Dump 163 20.6 Social and Community 164 20.7 Mine Closure 164 20.8 Recommendations 164 21 Capital and Operating Costs 166 21.1 Capital Cost Estimates 166 21.1.1 Key capital cost estimation parameters 169 21.1.2 Basis of capital estimate 169 21.1.3 Capital cost estimate exclusions 170 21.2 Operating Costs 170 21.2.1 Basis for operating cost estimates 171 22 Economic Analysis 173 22.1 Summary of Results 173 22.2 Key Assumptions and Input Parameters 173 22.3 Mine Production 173 22.4 Taxes, Royalties and Other Interests 178 22.5 Sensitivity Analysis 179 22.6 Results 179 23 Adjacent Properties 180 23.1 Orapa Mine 180 23.2 Letlhakane Mine 181 23.3 Damtshaa Mine 181 23.4 Firestone Diamonds BK11 181 24 Other Relevant Data and Information 183 25 Interpretation and Conclusions 184 25.1 Mineral Resource Estimate 184 25.2 Conclusions 184 25.3 Risks 186 25.4 Opportunities 188 26 Recommendations 189 26.1 Legal and Tenure 189 26.2 Resource 189 26.3 Geotechnical 189 26.4 Geohydrology 189 26.5 Mining 189 26.6 Processing and Tailings Storage Facility 190 26.7 Infrastructure 190 26.8 Environmental, Social and Community 191 Karowe Underground PEA Royal HaskoningDHV 6 26.9 Costs 191 27 References 192 Appendix 1 – Glossary of Terms Appendix 2 - Certificates of Qualified Persons List of Figures Figure 1.1 - Locality Map of the Karowe Diamond Mine ............................................................................................... 12 Figure 1.2 - Geological Model of AK6 Kimberlite .......................................................................................................... 14 Figure 1.3 - NPV Sensitivity .......................................................................................................................................... 23 Figure 4.1 - Locality Map .............................................................................................................................................. 32 Figure 4.2 - Karowe Mine and other diamond mines in the vicinity ............................................................................... 33 Figure 4.3 - Aerial photograph of the Karowe Mine ......................................................................................................