As a result, the mine has informed partners - the government of Lesotho, of its intentions to sell diamonds to its mother company, Lucapa Diamond Company for a period five years through a non-tendering process as is the standard at international level. Lucapa owns 70 percent of the high-value Mothae Kimberlite Mine with Government owning the remaining 30 percent shares. That means Mothae wants to sell diamonds to its major shareholder for five years due to struggles in the market.
The government, through the Ministry of Mining is however, yet to respond to the request, labelling it as a new phenomenon altogether. Talks are in progress with relevant stakeholders, including the mine on the possibilities, the ministry has said.“This idea is the first of its kind and therefore a very sensitive matter. So we decided to take our time and discuss the matter with all relevant stakeholders to come up with a proper solution to this,” Minister of Mining Serialong Qoo said during a media briefing on Tuesday.
Mothae has hinted on financial difficulties before, but the situation has obviously been aggravated by the COVID-19 pandemic. The mine had revealed in the Lesotho Diamond Mining Industry Performance Report of 2018 that Mothae was operating at the backdrop of challenging conditions in the global diamond sector, which had put pressure on diamond prices and operating revenues.
“There has been significant pressure on rough diamond prices from the highs of 2013/14. A perceived oversupply of lower value rough diamonds, lack of financing in the mid-stream or manufacturing sector and high polished diamond inventories have led to a reduction in rough diamond demand and therefore rough prices. “This is impacting all diamond miners.
For most companies in the sector, sale prices being achieved are lower than forecast, directly affecting revenues and profit stability. For these reasons, the shareholders of Mothae and the mine management team continue to pursue operational efficiencies and cost reductions to optimize costs,” the mine said in the report.