Lucara Applies for TSX Hardship Exemption to Complete C$165m Private Placement for Karowe UGP
Diamond producer Lucara Diamond Corp has applied to the Toronto Stock Exchange (TSX) for a financial hardship exemption that would allow it to complete a highly dilutive C$165-million private placement without shareholder approval, citing severe liquidity constraints and the risk of disruption to its Karowe Underground Project (UGP) in Botswana.
The application relates to Lucara’s previously announced non-brokered equity private placement, under which the company plans to issue more than one billion new common shares at a price of C$0.16 a share, for gross proceeds of C$165 million.
The issue price represents a discount of approximately 23.57% to the five-day volume-weighted average price (VWAP) ending January 9, and about 22.43% to the five-day VWAP ending January 14, the latter coinciding with the announcement of an upsized transaction.
Lucara said the proceeds are intended to address an immediate liquidity shortfall and enable the company to continue advancing the UGP while it seeks longer-term project financing.
Funds will support shaft equipping, conveyance commissioning, lateral development, extraction and drill horizon development, as well as general working capital and corporate purposes.
The company expects the placement to close in late January, subject to final documentation and regulatory approvals.
Absent the hardship exemption, the transaction would require approval from a majority of disinterested shareholders, as it breaches multiple TSX thresholds related to dilution and insider participation.
Trusts settled by the late Adolf H Lundin, known as the Lundin Family Trusts, are participating in the financing. Nemesia, an entity controlled by the trusts and Lucara’s largest shareholder, is considered both an insider and a related party under TSX rules.
The Lundin Family Trusts are subscribing for more than C$54 million, equivalent to about 56.45% of Lucara’s current market capitalisation, exceeding the TSX threshold that typically triggers shareholder approval for insider participation.
In total, the placement would result in the issuance of shares equal to approximately 225.51% of Lucara’s currently issued and outstanding shares, with insider participation alone exceeding 10% of the existing share count within a six-month period.
Following completion, the Lundin Family Trusts would hold more than 458 million shares, representing about 30.8% of Lucara’s issued share capital on a post-closing basis. The company said the transaction would not create a new control person.
Lucara said it applied for the hardship exemption on the basis that it is in serious financial difficulty and that the private placement represents the only viable financing option available within the required timeframe.
The board has established a special committee of independent directors to assess the company’s financial position and review the exemption request.
The committee unanimously recommended proceeding with the transaction, and the board agreed that Lucara is in serious financial difficulty and that the financing is reasonable under the circumstances.
The company attributed its financial challenges to rising funding requirements and limited access to capital as development of the UGP advances.
On August 8 last year, Lucara initiated a review of the project’s ore extraction methodology, costs and schedule to better understand geomechanical conditions and potential caving scenarios.
The review was completed without disrupting development, and on January 5, the company released an updated feasibility study estimating total UGP costs at $779.2 million.
Lucara said it has historically funded the UGP through cash flow from open-pit operations at the Karowe mine and debt facilities.
To maintain development momentum, it fully drew its project finance facilities and relied on shareholder guarantees.
By December 31, 2025, Lucara had fully drawn a $190-million project facility, a $30-million working capital facility, and a $28-million shareholder standby undertaking.
The company said declining cash flow from processing lower-grade stockpiles, combined with fully drawn facilities and exhausted guarantees, has left it unable to fund ongoing development.
It also disclosed breaches of several covenants under its project facility, resulting in events of default that were waived by lenders on December 30, 2025.
Lucara warned that insufficient liquidity could lead to further defaults and raise going-concern risks.
As a result of the hardship exemption application, Lucara’s shares will be placed under TSX delisting review, which the company noted is standard procedure.
There is no assurance the exemption will be granted or that the shares will remain listed on the TSX, and Lucara said it may need to pursue an alternative listing on the TSX Venture Exchange.
“Lucara’s board and management remain fully committed to protecting long-term shareholder value while advancing the Karowe UGP, one of the world’s most significant high-value diamond developments,” said president and CEO William Lamb.
“The application for the financial hardship exemption is a prudent and temporary step that provides added flexibility during this capital-intensive phase. Importantly, our asset quality, operating discipline and long-term value proposition remain unchanged as we work closely with stakeholders to position the company for sustainable cash flow generation and value creation.”
