Good morning. My name is Marcella. I will be your conference operator today. At this time, I'd like to welcome everyone to the Lucara Diamond Q1 2023 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, press star, then the number two. Thank you. Ms. Eira Thomas, you may begin your conference.
Good morning and good afternoon, everyone, and welcome to Lucara's Q1 2023 conference call. I'm Eira Thomas, Lucara's CEO, and also on the call today from management are Zara Boldt, CFO, Dr. John Armstrong, VP Technical Services, and Chris Schauffele, our Project Manager for the underground expansion project. I'm going to now turn the call over to Zara, who will first take us through a high-level re-review of our first quarterly results. Zara?
Thanks very much, Eira. Just a reminder that we'll be making some forward-looking statements today, please refer to slide two of the presentation for our cautionary statement. Certain financial measures that I will refer to during today's call and which appear in the presentation are non-IFRS financial performance measures. These include Adjusted EBITDA, Adjusted operating earnings, operating cash flow per share, and operating costs per ton of ore processed. Please refer to our MD&A for details on how these measures are calculated. All references are to U.S. dollars unless otherwise stated. Let's begin with some highlights from the first quarter ending March 31, 2023. As anticipated, our first quarter this year delivered lower revenues than in the comparative quarter of 2022 due to the change in ore mix processed and diamond pricing weakness resulting from continued geopolitical and economic uncertainty.
Our operational metrics achieved well against plan, and our outlook for the year remains unchanged as the largest influence on our revenue in Q1, the ore mix, returns to higher contributions of South Lobe ore in subsequent quarters. For the three months ended March 31, 2023, we recognized revenue of $42.8 million, with Adjusted EBITDA of $15.3 million. Cash flow from operations before adjustments for working capital was $20.4 million, and we achieved an operating cost of $26.65 per ton of ore processed. During the first quarter, we recovered 98 diamonds greater than 10.8 carats, which represent 4% specials by weight. These recoveries included two diamonds larger than 100 carats.
Despite a positive longer-term outlook for natural diamonds anchored on improving fundamentals around supply and demand, softer diamond prices observed in the latter half of 2022 continued into 2023 as global economic concerns combined with geopolitical uncertainty, including the ongoing conflict in Ukraine, continue to play out in the market, particularly in North America. Prices are beginning to show signs of stabilization as China begins to open up post-COVID, a trend which is anticipated to continue towards the end of the year. During Q1, we invested a further $30.5 million in the underground expansion at Karowe. Sinking continued in both the production and ventilation shafts, with material improvement to planned sinking rates achieved for the production shaft and mitigations underway in the ventilation shaft to achieve the same.
Water management remains a key focus area. During the first quarter, we successfully completed a first grout cover in both shafts. An update to the schedule and budget for the underground project has been initiated in response to slower than planned ramp up to expected sinking rates and to account for time incurred and anticipated for future grouting programs. We remain on track to complete the results of this analysis before the end of the second quarter. Chris will take us through some of the other highlights on the underground project in just a moment. We ended the first quarter with strong available liquidity, with cash on hand of $31.2 million and working capital of $24.1 million. We had drawn $90 million from the project loan facility as well as $23 million from our $50 million working capital facility.
This facility matures in early September, and it is our intention to seek a renewal from our existing lenders. During the quarter, we contributed $18 million to a cost overrun facility linked to the project loan, and prior to September this year, we will be required to contribute a total of $52.9 million to that facility. We expect to continue to make monthly contributions to the cost overrun facility until the required balance is reached. Let's move to the next slide to review some of our key operating metrics for Q1. As mentioned just a moment ago, mine performance during the first quarter remained consistent with the strong operational results achieved over the past several years. Mining and processing results were on plan during Q1 2023.
For the three months ended March 31, 2023, ore and waste tons mined were 500,000 and 800,000 tons, respectively, and we processed just over 700,000 tons of ore at an average grade of 12.8 CPHT, recovering almost 90,000 carats. 64% of the ore processed was from the North and Center lobes, with the remainder from the South lobe. For the last few years, we've processed South lobe material almost exclusively. 98 specials were recovered, with two diamonds greater than 100 carats, including one diamond greater than 300 carats in weight. Recovered specials equated to 4% of the weight percentage of total recovered carats from ore processed during the 1st quarter.
Recoveries during the quarter were within the expected range of the resource model for the plant feed mix comprised of South, Center, and North lobe material with a greater proportion of Center and North than recent production periods. We sold just over 83,000 carats from the Karowe Mine, generating revenue of $41.3 million. Karowe's operating cash cost for Q1 2023 was $26.65 per ton of ore processed. This is below our annual forecast for 2023, where the range is $32.50-$35.50 per ton processed. The 4% improvement in cost per ton of ore processed reflects the benefit of a comparatively stronger U.S. dollar and a denominator impact of a 5% increase in tons processed, offset by cost inflation predominantly on fuel, power, explosives, and labor in the first quarter.
Slide 5 sets out several key financial metrics for the quarter. Lucara recognized total revenue of $42.8 million in Q1 2023. As mentioned, this includes $41.3 million from the sale of about 83,000 carats from Karowe, and it also includes top-up payments of $6.6 million, as well as $1.5 million from the sale of third-party goods on the Clara platform. In comparison, we achieved total revenues of $68.2 million in Q1 2022, which included $55.5 million from the sale of about 80,000 carats from Karowe, top-up payments of $11.7 million, and $1 million in revenue from third-party goods sold through the Clara platform.
The change in quarterly revenue was driven by a combination of the planned shift in product mix, with 64% of the carats produced in Q1 2023 recovered from the Center and North lobes, versus 100% of the carats recovered from the South lobe in Q1 2022. It was also affected by the natural variability in the value of specials produced, as well as the softening of the market in Q1 2023 as compared to Q1 2022. Adjusted EBITDA was $15.3 million, with the change compared to Q1 2022 directly attributable to a decrease in revenue. Net income for the three months ended March 31, 2023 was $1 million, with the change from the comparable quarter predominantly related to a decrease in net revenue and lower deferred income tax expense as a result of the change in revenue.
Deferred income tax expense relates to the significant capital expenditures incurred for the Karowe Underground Project development, which were $30.5 million in the quarter. These are tax-deductible in the year that the costs are incurred. It reduces the current tax liability of the company. Depletion and amortization expense, finance expenses, as well as losses related to foreign exchange and the derivative financial instrument also impacted net income in Q1. For the three months ended March 31, 2023, cash flow from operations was $20.4 million before changes of $6.4 million in non-cash working capital. This resulted in an operating cash flow per share of $0.03. Similar to Adjusted EBITDA, the decrease in operating cash flow per share quarter-over-quarter is primarily related to the change in revenue.
The next slide has details about how we sold our diamonds in the first quarter. This slide sets out sales from each of our three sales channels. HB Antwerp for our high-value specials, which are manufactured and sold as polished. Rough diamonds between one and 10 carats in size that meet specific criteria for sale on Clara. The balance of the Karowe production, which is sold through a quarterly tender. Sales of Karowe diamonds continue to generate most of our quarterly revenue. During Q1 2023, we sold 83,374 carats, generating revenue of $34.7 million, before top-up payments of $6.6 million. Our +10.8 carat production accounted for about 57% of the total revenues recognized in the first quarter.
The decrease in revenue in Q1 2023 versus the comparative quarter of 2022 can be attributed primarily to the number of high-value diamonds delivered to HB in the first quarter last year. The revenue achieved in Q1 2023 is comparable to the $24.1 million earned from the HB agreement, inclusive of top-up payments of $3.6 million in the fourth quarter of 2022. As mentioned earlier, diamonds produced from the Center and North lobes have a different profile than the South lobe, which has been the predominant source of ore for the past two years. While higher grade, the Center and North lobes have a finer size distribution than South lobe ore and produce fewer + 10.8 carat diamonds.
Q1 2023 tender sales of $12.9 million reflect a good performance in rough diamond pricing with strength in the small stones. Rough diamond prices had reached a multiyear high point at the time of the Q1 2022 tender. Pricing achieved through the tender in Q1 2023 remained at or above price levels achieved in 2019. Let's wrap up the review of our Q1 results by looking briefly at our 2023 guidance. This slide sets out our expected operating guidance for 2023. We have made no changes to this guidance as of Q1. This concludes my update on our operating and financial results for the first quarter. Thank you very much. I'll now turn the call back to Eira to discuss the diamond market.
Thank you very much, Zara. As Zara stated, in her opening remarks, the market continued to be consistent with its performance in the latter part of 2022. Definitely softer pricing. However, I think it's important to point out that this is coming off significant highs that we experienced in 2021. Our view is that the market continues to remain very healthy. We do feel that prices have now stabilized, and with China opening up post-COVID, we do expect that demand should improve towards the latter part of the year. We continue to be very optimistic about diamond prices longer term as global supply constraints continue to play out in the marketplace.
Moving on to slide number nine, which we include in every one of our quarterly presentations, is really just to reiterate and remind everyone that we do consistently recover large diamonds, and they are an important contributor to our quarterly revenue. Zara has talked at length about the ore mix in Q1, which was considerably different than what we've been processing for the last many, many quarters, which has been largely focused on South Lobe. It's important to reiterate that the resource is performing well, it is performing on plan, and the 4% by weight of specials recovered is very consistent with expectations. Moving on to talk about our sales channels. We continue to realize benefits from our multi-channel approach to sales. As Zara highlighted, we are selling our diamonds basically three ways.
We are selling them through rough tenders for our diamonds under 10 carats in the lesser qualities and colors. For our high color, high-quality diamonds between one and 10 carats, we're selling them through Clara, our secure web-based digital marketplace. Finally, our high-value polished diamonds are being sold above 10.8 carats, are being sold through a dedicated manufacturing channel with HB. The breakdown for this quarter was around 30% of revenues coming from rough tenders, 12% coming from Clara, and 58% coming from HB. In addition, we do work very collaboratively now with a number of leading jewelry brands around the world. We established a relationship with Louis Vuitton several years ago now, and we are going to be talking about an exciting development for Sewelô in the subsequent slides.
The Sewelô, which was recovered in 2019, represents the largest diamond to have ever been recovered in Botswana, and we entered into a collaboration agreement with HB Antwerp and Louis Vuitton in 2020. After almost two years of touring this diamond around the world, Louis Vuitton offered to purchase the diamond outright from our partnership in an effort to preserve the diamond rather than polishing it, which we think is a terrific outcome. The total value achieved for that diamond between the partners was recognized at $10 million. Importantly, LV has contributed $500,000 towards the construction of our sports complex, which is now underway as part of our sustainability initiatives in the community of Letlhakane in Botswana. Moving on to Clara. Clara continues to ramp up in scale and in terms of volume of diamonds transacted.
We completed 80 sales to date, transacting almost $92 million by value. We continue to drive down our operating costs as the platform has been refactored in recent months. We maintain a buying list or customer list of close to 100 participants, and we are continuing to maintain an active wait list. Importantly, we completed a very successful producer trial in 2022, and we are now in the process of negotiating a longer-term sales contract in relation to that. We continue to target growth not only in the primary producer markets, but also from secondary market sources as well. In Q1, we continued to improve and increase revenues over the comparable period. $5.3 million transacted, and 37% of those diamonds came from third-party sources other than Karowe.
I would now like to turn the presentation over to Chris Schauffele, who will take us through an update on the underground expansion.
Thank you, Eira. During Q1, our project capital spend reached $30.5 million, which is on track with our planned budget for the year. Our shaft sinking activities continued. We are progressing each shaft down to a deeper level. Also a big focus was on the electrical power system and the completion of that upgrade. We are developing a new capital budget and schedule estimate for the shafts, which include delays that have been incurred to date, along with grouting, water management plans, and also our operational improvements that have been implemented as of Q4 2022. In the next slide, we have some details on the shafts. Construction in the production shaft reached a depth of 187 meters below the collar.
We have sunk at the planned rate. That was due to the improvements that were implemented during Q4 2022 and through Q1 2023. In the ventilation shaft, we reached a depth of 213 meters below the surface, while still working on our operational improvements there to increase the cycle times. In each shaft, we have successfully completed grouting programs that are designed to seal out water inflows from the shafts and water management systems to deal with water that has come into the shafts. Other activities we focused on were the electrical power grid, successfully connecting the project site to Botswana's power grid, and also switching over the Karowe Mine to our new transmission line and substations.
On the safety front, we had a very successful quarter with no reportable incidents and have had a very positive onboarding of our behavioral-based safety program. Thank you for the time.
Thanks very much, Chris. I think we have made tremendous progress on the underground this quarter, having successfully come through our first grouting campaigns in the main shaft and production and ventilation shaft, which is really setting us up for success here, as we move forward. Moving on to the last couple of slides. We like to remind everyone of our efforts in country in Botswana. We are very committed to our efforts around sustainability, and we are working very closely with our communities of interest in the government of Botswana to fulfill a number of important sustainability initiatives. The sports complex was one that I just mentioned, but we're also involved in a number of important agricultural initiatives within the country as well. As a reminder, Lucara is certified by the Responsible Jewellery Council
We are compliant with the Kimberley Process and a member of the Natural Diamond Council, and in 2018, we became a UN Global Compact participant and contribute to 10 of the 17 UN Sustainable Development Goals. Just to sum up where we're at, we are basically tracking kind of on plan in terms of our efforts around our continued mining in the open pit in support of our underground expansion program. The diamond market continues to be stable, and our longer-term outlook is optimistic. We are also seeing increased interest and continued scaleup of the Clara platform, which also represents an exciting growth opportunity for your company. With that, I'd like to say thank you very much, and we'd like to open it up now for questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by one on your touch tone phone. You'll hear a three-tone prompt acknowledging your request. If you'd like to withdraw your question, please press star followed by two. If you're using a speakerphone, please lift your handset before pressing any keys. Again, if you'd like to ask a question, please press star followed by one on your touch tone phone. There are no questions at this time. Please proceed.
Okay. Well, thank you very much for participating in Lucara's Q1 call. We look forward to speaking with everyone again next quarter. Thank you very much, everyone. Have a great rest of your day.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you disconnect your lines.